Federal Charges Against Financial Advisors
Welcome to Spodek Law Group. Our goal is to give you the reality of federal prosecution for financial advisors - not the sanitized version compliance departments present, not the reassuring fiction that following regulations protects you, but the actual truth about what happens when the government decides your career is over. And heres the thing most advisors discover too late: the meticulous records you kept to protect yourself become the roadmap prosecutors use to convict you.
If your reading this at 2am because something feels wrong - a subpoena arrived, a regulator asked questions, a client made noise - what you do in the next few days determines whether you spend years in federal prison or walk away with your life intact.
The federal conviction rate for financial crimes sits at 90 percent. That number isn't a typo. IRS Criminal Investigation only brings cases they're certain to win, and by the time they contact you, they've already decided you're guilty. The trial is ceremony. The outcome was determined months or years before you knew anything was happening.
The Parallel Proceedings Trap Nobody Warns You About
Most financial advisors belive the SEC is a civil regulator. Administrative penalties. Fines. Maybe a suspension. Uncomfortable but survivable. Wrong.
The SEC Division of Enforcement works hand-in-hand with the Department of Justice. Not occasionally. Constantly. Every interview you give, every document you produce, every explanation you offer to SEC investigators gets shared with federal prosecutors who are building your criminal case in a seperate proceeding you dont even know exists.
This is the parallel proceedings nightmare. Your securities lawyer tells you to cooperate with the SEC - show good faith, maybe negotiate a settlement, keep your license. Sound advice for civil matters. Catastrophic for criminal exposure.
Because heres were financial advisors destroy themselves: they talk.
They explain. They clarify. They provide context. Every word becomes a sworn statement to federal investigators. Every document you hand over gets cross-referenced against your Form ADV, your emails, your client files. Discrepancies emerge. Not fraud necessarily - just inconsistencies. Human error. Memory failures. The kind of minor variations that exist in every business.
In civil court, inconsistencies get explained away. In federal criminal court, inconsistencies become "false statements" under 18 U.S.C. 1001. Five years in prison. Per statement.
The SEC interview you thought would clear things up just handed prosecutors five additional felony counts.
At Spodek Law Group, we've seen this pattern destroy careers that could have been saved. Todd Spodek explains it to clients facing this exact situation: the cooperation that helps your civil case is often the testimony that convicts you criminaly. You need counsel who understands both proceedings before you say a single word.
How Your Compliance File Becomes Their Case File
You did everything right. Or you thought you did. Filed your Form ADV on time. Updated disclosures. Documented client conversations. Kept meticulous records because thats what they taught you in compliance training.
Heres the trap nobody mentions.
Form ADV is signed under penalty of perjury. Every disclosure. Every attestation. Every box you checked. You swore to a federal agency that this information was accurate and complete. The moment investigators find an omission - an unreported customer complaint, an inaccurate AUM figure, a disclosure you forgot to update - you havent committed a compliance violation.
You've committed a federal crime.
18 U.S.C. 1001 makes it illegal to make false statements to federal agencies. The SEC is a federal agency. Every form you've ever filed is a sworn statement. Prosecutors dont need to prove you defrauded clients. They just need to prove you made inaccurate statements on federal forms.
Think about how many forms you've filed in your career. Think about every attestation, every update, every annual renewal. How confident are you that everything was perfect? Becuase prosecutors have unlimited resources to find discrepancies, and they only need one.
Shawn Edward Good worked at Morgan Stanley in Wilmington. Registered representative. Investment advisor. From 2012 to 2022 he ran what prosecutors called a Ponzi scheme. Sentence: 87 months federal prison. More then seven years.
But heres the detail that matters: Morgan Stanley cooperated with prosecutors. The firms compliance records, the supervision documents, the emails and trading records - all provided to build the case against their own advisor.
Your employer is not your ally. Your compliance department exists to protect the firm from you. Not for you.
The Numbers That Should Terrify Every Financial Advisor
Stop. Read these numbers slowly.
90 percent federal conviction rate for financial crimes investigated by IRS Criminal Investigation.
38 months average sentence for securities and investment fraud in fiscal year 2024 according to the US Sentencing Commission.
25 years maximum sentence per count under 18 U.S.C. 1348.
178 securities fraud cases in fiscal year 2024 - up 25.4 percent since 2020. The government is prosecuting more aggressivley than ever.
93.3 percent of defendants are men. Average age: 51 years old. Peak career. Peak earning years. Peak family responsibilities. This isn't random - this is the profile prosecutors target. Established advisors with assets to seize, clients to question, and records stretching back decades.
And the sentancing enhancements that apply specificaly to you: 18 percent enhancement for being an investment adviser or broker. 13.4 percent enhancement for leadership role. 11.8 percent enhancement for abuse of position of trust. 9 percent enhancement for obstruction.
Stack those enhancements. An advisor with supervisory responsibilities who makes a single misstatement during investigation faces enhancements that can double the base sentence before trial even begins.
Paul Ricky Mata. California financial advisor. Lengthy disciplinary history documented by FINRA. Real estate investment fraud targeting elderly clients. Losses over 12 million dollars.
Sentence: 168 months. Fourteen years federal prison.
Rodriguez de la Cruz. Morgan Stanley advisor in El Paso. Multi-million dollar fraud scheme. Morgan Stanley loss: $5,554,968.10.
Sentence: 144 months. Twelve years.
William P. Carlson Jr. Chicago financial planner. Signature-forging scheme over five years. Single client defrauded of $911,000.
Sentence: 54 months. Four and a half years.
These arent outliers. This is what federal court looks like for financial advisors. Not fines. Not suspensions. Prison. Real prison. For years. The judges who sentence in these cases see advisors as people who violated sacred trust. Fiduciary duty isn't just a compliance concept - it's a moral framework that makes prosecutors and judges view these cases as fundamentaly different from ordinary theft.
What "Intent" Actually Means in Federal Court
Most financial advisors assume good intentions matter. They didn't mean to harm anyone. Clients lost money but markets are volatile. Recommendations made sense at the time. They followed their training.
The legal standard doesn't care about your intentions to help.
United States v. Tagliaferri established the precedent that still governs federal prosecutions of financial advisors. The court ruled that intent to deceive - not intent to harm - is sufficent for conviction. The defense argued prosecutors had to prove the advisor intended to hurt clients.
The court rejected that argument completly.
If you made statements to clients that werent entirely accurate, if you ommitted material information, if you represented something that wasnt quite true - thats enough. Prosecutors dont need to prove you wanted clients to lose money. They just need to prove you deceived them.
Think about every client conversation youve ever had. Every reassurance. Every projection. Every "dont worry about it." How many of those statements were technicaly, perfectly, literally accurate in every detail?
Thats the standard your facing.
And heres what makes it worse: client complaints arent even necessary. The SEC can pursue charges without any victim cooperation. No angry client needed. Just regulators who decided to look at your file.
When Your Firm Turns Against You
This is the part nobody prepares you for. The moment you become a problem, you become alone.
Different issue. Back up.
That broker-dealer you've represented for years? The compliance department that reviewed your work? The supervisors who approved your recommendations? The moment SEC investigators come calling, the firm has one priority: protect the institution.
Not protect you.
Morgan Stanley cooperated in the Shawn Good prosecution. Provided records. Provided testimony. Helped build the case against their own advisor. This isnt betrayal - this is standard operating procedure.
Your employers compliance records document your activities for years. Emails are preserved. Trading records are archived. Supervision notes exist. Client contact logs are maintained. All of this was created to protect the firm from regulatory scrutiny.
When that scrutiny arrives, those same records become prosecution exhibits. The firm's attorneys coordinate with federal prosecutors. Your Form U5 - the termination filing - includes allegations that follow you permanantly, filed before youve been charged with anything.
Spodek Law Group has represented financial advisors who discovered this betrayal in real-time. One day your on the team. The next day your the liability the team is distancing from. Your access gets revoked. Your files get reviewed. Your former collegues are told not to communicate with you.
And everything youve ever documented at that firm - every email, every note, every compliance form - is now available to prosecutors building their case.
The Timeline You Don't Control
Grand jury empaneled. Witnesses contacted. Cooperators identified. Plea offers drafted.
This is happening while you still think everything is fine.
Federal investigations into financial advisors run 2-3 years before the target is contacted. The government doesn't investigate and then decide whether to prosecute. They investigate because they've already decided. The investigation is evidence gathering, not fact-finding.
Consider the mechanics of how these cases develop. A suspicious activity report gets filed by a bank. Or FINRA notices a pattern in your client complaints. Or the SEC's data analytics flag unusual trading patterns. Nobody tells you this happened. Nobody contacts you for explanation. The file gets opened, assigned to an investigator, and the process begins.
For the next 18 to 36 months, federal agents are pulling records. Subpoenaing your broker-dealer. Interviewing former clients. Building timelines. Cross-referencing your statements against documentary evidence. Looking for the inconsistency that becomes their case theory.
By the time you recieve a target letter, by the time SEC enforcement sends a Wells notice, by the time FBI agents show up at your door - the case is essentially complete. They know what they think you did. They have the documents. They've interviewed witnesses. They've built their timeline.
You have weeks to respond to a case they've been building for years.
Parallel investigation. State charges too. Civil suits pending. Administrative proceedings. Professional discipline. License suspension. FINRA bars.
All at once. Multiple fronts. Seperate sovereigns means double jeopardy doesn't apply - federal and state can both prosecute for the same conduct. Each agency runs independant proceedings. No coordination between them means no way to resolve everything with one agreement.
You can't fight on every front simultaniously. Strategic decisions made in one proceeding affect outcomes in others. Settlements become admissions. Statements become evidence. The clock is running on every proceeding at once, and each one has different rules, different timelines, and different consequences.
What you say in the first 48 hours after learning of an investigation determines your options for the next decade.
What Every Financial Advisor Gets Wrong About Their Defense
TV gets this wrong. Movies lie about this. The dramatic courtroom revelation. The surprise witness. The last-minute evidence that exonerates the falsely accused.
Thats not how federal court works.
Not here. Not at this level.
93 percent of federal cases end in guilty pleas. Most defendants never see a courtroom for trial. The overwhelming resource disparity - unlimited government investigators versus whatever savings you have left after asset freezes - makes trial a losing proposition for almost everyone.
Federal prosecutors have entire teams dedicated to your case. Forensic accountants who spend months analyzing your transactions. Paralegals who organize thousands of documents into timeline exhibits. Expert witnesses on retainer. And they've been building this case while you were still taking client meetings, unaware that your career was already over.
What do you have? Whatever you can afford after the government freezes your assets. After your employer terminates you. After your legal bills consume your savings. The assymetry is staggering, and prosecutors know it.
Plea negotations begin the moment charges are filed. Often before. The government offers what they call "cooperation" - plead guilty, provide information about others, accept responsibility, and maybe recieve a sentancing reduction under Section 5K1.1.
Maybe.
Cooperation isn't guaranteed to help. Substantial assistance has to actually be substantial. Information you provide has to lead somewhere the government couldn't go without you. And even then, the prosecutor decides whether to file the motion recommending reduced sentence. Not your lawyer. Not the judge. The prosecutor.
Acceptance of responsibility - another potential reduction - vanishes if you challenge anything too aggressively. Go to trial and lose? Kiss that three-level reduction goodbye. The guidelines are structured to punish defendants who make the government prove its case.
The system rewards surrender. Early surrender. Complete surrender.
Todd Spodek has navigated this terrain for clients who came to him before making fatal mistakes. The difference between outcomes isn't always innocence versus guilt. Its often timing. Clients who engaged defense counsel before talking to investigators, before producing documents, before cooperating themselves into federal prison. The advisor who calls us the day after receiving a subpoena has options the advisor who calls six months later doesn't have.
The Professional Destruction That Happens Before Conviction
Securities license gone. FINRA bar. Can't work in the industry while investigation pending. The career you built over decades ends the day charges are announced.
Background check permanent. Future employers search your name, find news coverage of charges. Not conviction - just charges. The presumption of innocence doesn't apply to employment decisions. Every interview begins with explaining the worst day of your life to strangers deciding whether to trust you.
Professional license at risk. CPA? At risk. Insurance licenses? At risk. Any state-regulated credential requires disclosure of federal charges. Your ability to earn a living in any regulated profession depends on licensing boards that will judge you based on pending allegations.
Banking prohibition possible. If convicted of certain offenses, your barred from working at any FDIC-insured institution. Permanantly. That means not just banks - credit unions, savings associations, any financial institution that takes deposits. The entire financial services industry becomes off-limits.
Travel restrictions. Passport issues. Some countries ban entry for people with federal convictions. Canada, for instance, requires special permission for anyone with a criminal record to cross the border. Business travel becomes a legal consultation every time.
And all of this begins with charges, not conviction. The arrest. The press release from the US Attorney's office announcing the indictment. Your name, your photo, the allegations - all public record. Searchable forever. PACER makes every federal court document available online. Anyone who Googles your name for the rest of your life finds the indictment before they find your LinkedIn profile.
Your reputation is destroyed before the first hearing.
The financial advisor who builds a defense assumes they're defending against prison. They're actually defending against career extinction, family devastation, and permanent unemployability. Even acquittal - which happens in roughly 1% of federal cases - leaves you with years of legal fees, destroyed relationships, and Google results that define you forever. The news covered your arrest. Nobody covers an acquittal.
What Happens Now
The clock started when you learned about this. Not when you decide to act. The clock is already running.
If investigators have contacted you - don't talk without counsel present. Anything you say becomes evidence. Even denials. Even confusion. Even innocent mistakes in recollection. The agent seems friendly. The questions seem routine. And every answer you give is being documented for prosecutors who will use your words against you.
If you've received a Wells notice from SEC enforcement - you have limited time to respond. This is your opportunity to present your case before charges are filed. Waste this window and you've lost leverage you'll never get back. The Wells submission is one of the few moments where you can shape the narrative before it calcifies into an indictment.
If you suspect investigation but havent been contacted - this is the optimal window. Engage counsel who can assess your exposure, position defensive arguments, and potentially intervene before criminal referral. This is the moment when intervention actually works. Once the case file transfers from SEC to DOJ, your options narrow dramatically.
The difference between outcomes in these cases often comes down to a single factor: when you engaged experienced federal criminal defense counsel.
Not securities compliance attorneys. Not your employers legal department. Not the lawyer who handled your house closing. Someone who understands federal prosecution, parallel proceedings, and the specific dynamics of financial advisor cases. Someone who knows what prosecutors in your district prioritize. Someone who has navigated these exact waters before.
At Spodek Law Group, we've represented financial advisors through exactly these situations. We understand the interplay between SEC enforcement and DOJ prosecution. We know how to coordinate strategy across parallel proceedings without sacrificing criminal defense for civil convenience. We understand that what looks like cooperation to a securities lawyer often looks like confession to a federal judge.
The meticulous records you kept to protect yourself have become the roadmap they're using to prosecute you. The compliance training you followed documented your activities for investigators. The forms you filed under penalty of perjury created the false statement charges they're building.
The next decision you make determines whether your looking at a difficult chapter in your career or the end of everything you've built.
Call us at 212-300-5196. The consultation is confidential. The window is closing. And they've been preparing for this conversation longer then you have.
