You got a letter from the SEC. Maybe a formal subpoena requesting documents. Maybe a Wells Notice indicating they're considering an enforcement action. Your first thought - the thought almost every investment advisor has - is that this is civil, not criminal. A regulatory matter. Worst case, you're looking at fines, maybe disgorgement, possibly an industry bar. Unpleasant, but not prison.
You may be wrong.
The SEC doesn't have to tell you about the criminal investigation running alongside the civil one. More than one in four SEC enforcement actions involve a parallel DOJ investigation. Research shows an average SEC enforcement action involves 0.56 criminal filings - meaning for every two SEC cases, there's a criminal component lurking somewhere. You could be answering civil questions right now while unknowingly building a federal prison case against yourself.
Welcome to Spodek Law Group. We handle federal securities defense for investment advisors facing SEC investigations, DOJ criminal exposure, and the dangerous territory where civil and criminal overlap. If you're under investigation - or if you're concerned you might be - this article explains what you're actually facing and what options exist before it's too late.
The Investigation You Don't Know About
Parallel proceedings - where a civil SEC investigation and criminal DOJ investigation run simultaneously on the same conduct - are "entirely appropriate under the law." The Supreme Court has said so. The agencies coordinate. They share information. And here's the part most investment advisors don't understand until its too late:
The SEC is legally allowed to not disclose the parallel criminal investigation.
You sit in a conference room answering questions from SEC staff. Maybe you're even cooperating. Your lawyer told you that cooperation often leads to better outcomes in civil matters. Thats generally true. But what you don't know is that DOJ prosecutors are watching. There reviewing the same documents. Every answer you give in the civil proceeding can be used in the criminal one.
According to practitioner research, the average SEC enforcement action involves 0.56 criminal filings. That means more then one in four cases have a criminal component. And the triggers for criminal referral are specific: willfulness matters most. Did you know what you were doing was wrong and do it anyway? Evidence of deliberate fraud - falsified documents, intentional misrepresentations, schemes designed to decieve - these trigger criminal referrals. Negligence or mistakes generaly stay civil. Intentional wrongdoing goes criminal.
Scale matters too. A small violation affecting a few people might stay civil. A massive fraud affecting thousands of investors with millions in losses gets DOJ attention imediately. The bigger the harm, the more likely criminal charges.
The problem is you often won't know which category you're in until its too late.
How Fiduciary Duty Becomes a Federal Weapon
The Investment Advisers Act of 1940 imposes a fiduciary duty on investment advisors. The Supreme Court, in SEC v. Capital Gains Research Bureau, held that this creates both a duty of care and a duty of loyalty. You're supposed to avoid conflicts of interest. You're supposed to act in your clients' best interests. Most investment advisors understand this as a regulatory obligation.
What most don't understand is that this same fiduciary duty becomes the basis for criminal prosecution.
Federal prosecutors don't typically charge violations of the Investment Advisers Act alone - the maximum is only 5 years. Instead, they stack charges. One act of investment advisor fraud triggers multiple federal crimes:
- Wire Fraud (18 U.S.C. § 1343) - up to 20 years per count
- Securities Fraud (18 U.S.C. § 1348) - up to 25 years per count
- Money Laundering (18 U.S.C. § 1956) - up to 20 years
- Aggravated Identity Theft (18 U.S.C. § 1028A) - mandatory +2 years consecutive
Scott Mason, an investment advisor in Pennsylvania, faces charges for misappropriating $17 million from clients through his firm Rubicon Wealth Management. The theoretical maximum exposure: 80 years imprisonment and a $6.76 million fine. Wire fraud, securities fraud, investment adviser fraud, false tax returns. All from the same underlying conduct.
And heres something prosecutors particularly focus on: the abuse of trust enhancement.
Mason "targeted clients with whom he had a longstanding relationship and who trusted him implicitly, including longtime friends and family members." That trust - the same trust that made clients comfortable giving him there money - becomes a sentencing enhancement. The closer the relationship, the higher the sentence. The fiduciary duty that was supposed to protect your clients becomes the weapon prosecutors use to destroy you.
What the Sentencing Data Actually Shows
According to the U.S. Sentencing Commission, fiscal year 2024 saw 178 securities and investment fraud cases - a 25.4% increase since 2020. This isn't slowing down. Its accelerating.
The average sentence was 38 months. The average guideline minimum was 61 months. The statutory maximum is 25 years per count. Nearly 60% of defendants recieved sentences below the guideline range - but "below guidelines" still meant federal prison. The question wasn't whether defendants went to prison. The question was for how long.
Demographics tell part of the story: 93.3% of defendants were men. Average age: 51 years. These aren't young people making impulsive mistakes. These are experienced professionals - people who built careers, who had reputations, who had clients who trusted them.
Real sentences from 2024-2025:
- Sanjay Singh (Coral Springs, FL): $160 million scheme - 23 years federal prison
- Mathew Muratori (Clearwater, FL): Multi-million fraud - 20 years
- Francius Marganda (Brooklyn): $24.5 million Ponzi scheme - 18 years
- Rodriguez de la Cruz (Texas): $20 million misappropriated - 12 years
- William Jack Berg (Iowa): Multi-million fraud - 9 years
- Michael P. Raineri (Seattle): $531,000 stolen - 32 months
There is no "too small to matter" threshold. Raineri stole half a million from a single client's trust account over six years. He still went to federal prison for nearly three years.
The 60% who recieved below-guideline sentences didn't get there by accident. The most common reason for downward departure was prosecutorial motion based on cooperation with authorities. Cooperation strategy - done correctly, with experienced counsel - can be the difference between a decade in prison and something less devastating.
But cooperation done wrong? That becomes its own problem.
What to Do If Your Under Investigation
The single most important rule for any investment advisor facing SEC scrutiny:
Never talk to investigators - civil or criminal - without counsel present.
This sounds obvious. It is not. Investment advisors are professionals. They're used to handling complex situations. They're used to explaining themselves clearly. The instinct is to cooperate, to be helpful, to assume that clearing up the misunderstanding will make everything go away.
That instinct gets people additional charges.
People who talked to investigators without counsel have ended up charged with obstruction or making false statements to federal agents - charges that didn't exist until they tried to "help." The 60% of defendants who got below-guideline sentences through cooperation did so with experienced counsel guiding every word. Cooperation without counsel isn't cooperation. It's self-incrimination.
If you're under investigation or concerned you might be:
- Assume a parallel criminal investigation is running even if no one has told you about it
- Don't destroy any documents - document destruction is a separate federal charge
- Don't discuss the matter with colleagues, clients, or anyone else who might be involved
- Get counsel before any testimony, interview, or document production
- Understand the cooperation calculus early - not after you've already talked
Todd Spodek has handled SEC investigations involving potential criminal exposure. He understands when cases are purely civil and when there's serious risk of DOJ referral. More importantly, he understands how to protect clients during the dangerous overlap between regulatory investigation and criminal jeopardy.
When Your Ready
If you're an investment advisor facing SEC investigation - or if you've recieved a Wells Notice, a subpoena, or any indication that federal authorities are looking at your conduct - Spodek Law Group can help you understand where you stand.
The consultation is free. Theirs no obligation.
What you'll get is an honest assessment. Is this purely civil or is there criminal exposure? What triggers would push this toward a DOJ referral? What's the cooperation strategy that actually works? What are realistic outcomes based on how these cases play out in federal court?
Call us at 212-300-5196. The SEC has time. The statute of limitations on securities fraud is five years. But once they move, things accelerate fast. The earlier you have counsel, the more options exist.
Don't assume civil means safe.
Were here when you need us.
