Offering fraud generally occurs when an individual (or group of individuals) makes misrepresentations and/or omissions of material fact to potential investors in a new company.
An example of this type of fraud is when individuals will contact potential investors and attempt to induce them into investing in a new, unknown company, by making false claims about the company. Another common type of offering fraud is a Ponzi scheme, where investors are paid returns from their own money or from the money invested by subsequent investors, rather than from any actual profit earned. The operator of the scheme induces new investors by paying unusually consistent or abnormally high returns to older investors. Pyramid schemes are also an example of offering fraud.