Question

The Wall Street Wizard Co. sold a stock market investing plan through the mail that made it appear easy to make money through the stock market. While the advice provided in the plan was generally accepted in the industry as sound, Wall Street Wizard Co. knew that most investors who followed this plan would not in fact make any money by following the plan. Can Wall Street Wizard Co. be prosecuted for mail fraud for making false claims, or are the claims really just puffery about the system which is not a crime?

Answer 1

Wall Street Wizard Co cannot be prosecuted for mail fraud for making false claims because, in order to prove fraud, misrepresentation of a material fact must occur. Here they provided advice generally accepted as sound in the industry and hence cannot be considered as misrepresentation of material fact. Moreover, the investing plan provides a prediction on the future and statements of opinion and predictions are generally not subject to claims of fraud. The investors are expected to exercise care and judgment while buying the plan. The advice provided in the plan would be recognized as statements of opinion as few of the investors are making money out of the plan, even though not many of them. The investors should not rely on them identifying the plan as a statement of opinion and not fact. Sellers are allowed to use puffery to sell their products. Wall Street Wizard has exaggerated their claim regarding the success of the investment plan and hence the claims are just puffery about the system which is not a crime.