Is there a possibility of fraudulent activity in valuations?

Valuation fraud describes the manipulation or misrepresentation of asset values, often to deceive investors, regulatory bodies, or other stakeholders. Such scams can take various forms, including overvaluing assets, falsifying financial statements, or using complex financial instruments to mask the true worth of a company’s assets or liabilities. They often aim to secure investment, inflate stock prices, or achieve favorable terms on loans or other financial agreements. To mitigate these risks, due diligence is crucial—this means scrutinizing financial statements, seeking third-party appraisals, and being wary of overly complex or non-transparent valuation processes. Awareness and vigilance, along with regulatory oversight, help maintain integrity and trust in financial markets.