Looking for a legal term

[ffutures]

Is there a technical name for the type of fraud we see in the film / play The Producers? Specifically, overselling shares in the profits of some venture, then ensuring that the venture fails and there are no profits, so the overselling never becomes apparent?

The example I'll be using involves selling shares in the profit of a space expedition, then sabotaging the ship.

Comments

[daveon.livejournal.com]

Technically it's a securities fraud. Before the 20s it technically wasn't illegal (if memory serves) and the rules were brought in because of the crash.

Interestingly, the US is going back to allowing this type of behaviour on a more Caveat Emptor basis.

[jordan179.livejournal.com]

I do believe it would still have been criminal fraud even before 1929, though it would have been harder to prove under the laxer reporting regime of that time. Several real-life stock manipulators did some variant of this before the Crash of `29, and mostly got away with it. It's an especially bold variant of "selling watered stock," and it's been illegal since at least the chartering of the first joint stock companies in the 17th century. Though as I said, good luck proving it!

[ffutures.livejournal.com]

Thanks to you both - watered stock and securities fraud may be the phrase I'm looking for.