Federal Sentencing Guidelines for Securities Fraud

Securities fraud sounds like a gentleman's charge. White collar. Sophisticated. The kind of crime where defendants wear nice suits and eventually pay a fine. That perception is dangerously wrong. Federal sentencing for securities fraud uses USSG 2B1.1 - the exact same loss table that applies to bank fraud, wire fraud, and theft schemes. A $10 million securities scheme produces the same base offense level as a $10 million armed robbery. Welcome to Spodek Law Group. Our goal is to explain how securities fraud sentencing actually works, because the reality is far harsher than most people expect when they hear the term "white collar crime."

Here's what nobody explains until you're staring at sentencing guidelines: securities fraud doesn't get special treatment. There's no "securities fraud guideline" that's more lenient because the crime involved stock certificates instead of cash. The federal sentencing system treats a dollar stolen through securities fraud exactly the same as a dollar stolen any other way. The loss table is the loss table. And that loss table was designed to scale punishment with harm, regardless of how sophisticated or "white collar" the scheme appears.

The mathematics get brutal fast. Start with base offense level 7. Add levels based on the loss amount using the standard table. A $10 million loss adds 22 levels, creating level 29 before any enhancements. But securities cases almost always trigger multiple enhancements: 10 or more victims adds 4 levels (250 or more adds 6). "Sophisticated means" adds 2 levels - and securities fraud, by definition, involves complex schemes. Securities industry employee adds 4 levels. Abuse of position of trust adds 2 more. That's potentially 12-14 enhancement levels stacking on top of the loss table. The "white collar" label disappears when you see the guideline calculation.

The Same Loss Table That Punishes Bank Fraud

OK so heres the thing most people miss about federal sentencing. The loss table dosent care what kind of fraud you committed. Theres no special category for securities fraud. USSG 2B1.1 covers fraud and theft across the board - bank fraud, wire fraud, mail fraud, healthcare fraud, and yes, securities fraud. The sentencing commission treats all fraud the same way: calculate the loss, add enhancements, determine the range. The type of fraud dosent matter. Only the dollar amount and the circumstances.

The loss table works like this. Base offense level is 7. Then you add levels based on the loss amount:

• Loss more then $6,500: add 2 levels
• Loss more then $15,000: add 4 levels
• Loss more then $250,000: add 10 levels
• Loss more then $1 million: add 16 levels
• Loss more then $9.5 million: add 22 levels
• Loss more then $25 million: add 24 levels
• Loss more then $550 million: add 30 levels

A $15 million securities fraud starts at level 7, adds 22 levels for the loss amount, creating level 29 before ANY enhancements. Level 29 with no criminal history means 87-108 months. Thats 7-9 years as the baseline. And thats before the enhancements that almost always apply in securities cases start stacking. Let that sink in. Seven to nine years is were you START for a $15 million fraud.

Heres were it gets worse. Heres the part nobody wants to talk about. The "loss" in securities fraud isnt just what you personally stole or profited. Its the total loss to all victims. If investors lost $50 million because stock prices collapsed after your fraud was exposed - even if you only pocketed $2 million - the loss calculation uses $50 million. The guidelines look at harm, not personal gain. Todd Spodek tells every client facing these charges: the loss number is were the case is won or lost.

Four Enhancements That Stack to Add a Decade

Securities fraud cases almost always trigger multiple enhancements that stack on top of the loss table. This is were the "white collar" perception collapses completly. Each enhancement adds levels. The levels compound. By the time your done calculating, the guideline range looks like a violent crime sentence.

Enhancement #1: Number of Victims (+4 to +6 levels)

Heres the first trap. Securities fraud basicly guarantees this enhancement. Sell fraudulent securities to 15 investors? Thats +4 levels. Run a scheme affecting 100 shareholders? Still +4 levels. Hit 250 or more victims? Now its +6 levels. In securities cases involving public companies, the victim count can include every shareholder who held stock during the fraud period. Thousands of victims. Maybe tens of thousands. The enhancement maxes at +6, but its almost impossible to commit securities fraud without triggering at least +4.

Enhancement #2: Sophisticated Means (+2 levels)

Heres the trap. "Sophisticated means" is defined as "especially complex or intricate offense conduct pertaining to the execution or concealment of an offense." Securities fraud, by its nature, involves complex schemes. Creating fake financial statements? Sophisticated. Using shell companies to hide transactions? Sophisticated. Coordinating trades to manipulate prices? Sophisticated. Its extremly difficult to commit securities fraud in a way that DOSENT qualify as sophisticated means. The charge itself triggers the enhancement.

Enhancement #3: Securities Industry Employee (+4 levels)

Heres were it gets realy brutal. If you work in the securities industry - broker, investment advisor, registered representative, compliance officer - this enhancement applies automaticaly. Section 2B1.1(b)(19)(A) adds 4 levels if the defendant was "an officer or a director of a publicly traded company" or "a registered broker or dealer, investment adviser, or person associated with either." The people most likely to commit securities fraud are the people who trigger the harshest enhancement for committing it.

Enhancement #4: Abuse of Position of Trust (+2 levels)

This one can stack with the securities industry enhancement. If you used a position of trust to facilitate the offense - CFO signing off on false financials, auditor approving fraudulent statements - thats an additional +2 levels under Section 3B1.3. Weve seen cases at Spodek Law Group were defendants got hit with BOTH the securities industry enhancement AND the abuse of trust enhancement. Thats +6 levels from position alone, before looking at victims or sophistication.

Add them up. A securities industry professional commits a $15 million fraud affecting 300 investors using complex trading strategies:

• Base level: 7
• Loss ($15M): +22 levels = 29
• Victims (300+): +6 levels = 35
• Sophisticated means: +2 levels = 37
• Securities employee: +4 levels = 41
• Abuse of trust: +2 levels = 43

Level 43 with no criminal history: 360 months to life. Thirty years to life. For a "white collar" crime. Think about that. A securities professional who commits fraud faces guideline calculations that exceed many violent crime sentences. Thats the system. Thats how it was designed to work.

Elizabeth Holmes Got 11 Years - And That Was Lenient

The Theranos case shows exactaly how securities fraud sentencing works in practice. Elizabeth Holmes was convicted of defrauding investors out of hundreds of millions of dollars through false claims about Theranos blood-testing technology. Her sentence: 135 months. Eleven years and three months. Many legal observers considered this sentence lenient given the guideline calculation.

Think about that for a second. Eleven years in federal prison is considered LENIENT for a securities fraud case. Holmes had significant mitigating factors - no prior criminal history, young children, genuine belief (arguably) in her technology. She also got credit for her charitable work and letters of support. Even with all that mitigation, the judge still imposed over a decade in federal prison. Thats the reality of securities fraud sentencing in the federal system.

Bernie Madoff represents the other extreme. His $64.8 billion Ponzi scheme - the largest in history - resulted in a 150-year sentence. Obviously he would never serve that time. He died in prison in 2021 at age 82. But the sentence demonstrates what maximum exposure looks like when loss amounts reach the billions and victim counts reach the tens of thousands. Madoff wasnt sentenced to 150 years becuase the judge wanted to be dramatic. He was sentenced to 150 years becuase thats what the guidelines produced when you calculate $64.8 billion in losses with maximum enhancements.

Allen Stanford got 110 years for his $8 billion Ponzi scheme involving fraudulent certificates of deposit. Raj Rajaratnam, the hedge fund manager convicted of insider trading, received 11 years. Jeff Skilling, the Enron CEO, was initialy sentenced to 24 years before his sentence was reduced to 14 years on appeal. These arent anomalies. There what happens when federal sentencing guidelines are applied to securities fraud mechanicaly.

At Spodek Law Group, we explain to clients that securities fraud sentencing isnt about who you are or how you present yourself. Its about numbers. Loss amount. Victim count. Enhancement applicability. The guidelines are designed to produce harsh sentences for large-scale fraud regardless of wheather the defendant wore a suit or carried a weapon.

The "Intended Loss" Trap

OK so heres something that catches almost every securities fraud defendant off guard. The sentencing guidelines dont just look at actual loss - they look at "intended loss" or "reasonably foreseeable loss," whichever is greater.

What does this mean in practice? Suppose you set up a securities fraud scheme designed to steal $50 million from investors. The scheme gets discovered early. Actual losses are only $3 million becuase you got caught before reaching full scale. Under the guidelines, you can still be sentenced based on the $50 million you INTENDED to steal, not the $3 million you actualy did steal. The difference is enormous: $3 million loss = level 25, while $50 million intended loss = level 31. Thats 6 levels of difference - potentially years of additional prison time.

The application notes to USSG 2B1.1 state: "Loss is the greater of actual loss or intended loss." Prosecutors argue for intended loss calculations constantaly in securities cases becuase the intended scope of fraud schemes often exceeds what was actualy accomplished. If your business plan projected defrauding investors of $100 million over five years, but you got caught in year two with only $20 million in losses, the government will argue you should be sentenced on the $100 million.

This creates an absurd situation were defendants who failed at fraud can be sentenced more harshly then defendants who succeeded. A scheme that collapsed early with minimal actual losses might produce higher guidelines then a scheme that ran its course and caused the harm it was designed to cause. Read that again. You can be punished more severely for a failed fraud then a successful one. Todd Spodek has handled cases were the intended loss calculation was the primary battleground - becuase the difference between actual and intended loss can mean decades of prison time.

Theres also the "relevant conduct" problem. Securities fraud charges often include wire fraud counts. Each wire transmission in furtherance of the scheme can be a seperate count. The government might charge you with securities fraud AND 15 counts of wire fraud. Each wire fraud count carries up to 20 years. Even though the underlying conduct is the same, the charge stacking creates massive exposure. Your negotiating a plea while looking at 20 years per count on dozens of counts. The plea leverage is overwhelming.

Fighting the Number That Determines Everything

In securities fraud cases, the loss calculation is were most of the defense work happens. If the government says the loss was $50 million and you can argue it was $25 million, thats 4 levels of guideline difference. Four levels can mean 3-5 years of prison time. Every dollar you can subtract from the loss calculation directly reduces your exposure.

Heres the thing about defense work in securities fraud cases. Defense strategies for challenging loss calculations include:

Arguing for actual vs. intended loss: If your scheme never reached its projected scale, fight the intended loss calculation. The guidelines say "greater of actual or intended," but courts have discretion. If actual loss is significantely lower, present evidence that the intended scope was exaggerated or speculative.

Accounting for recovered funds: Loss calculations should subtract amounts returned to victims. If investors recovered money through bankruptcy proceedings, insurance, or direct restitution, those amounts reduce the loss figure. Document every dollar that went back to victims.

Challenging victim counting: The government will try to maximize victim counts for the enhancement. Challenge weather every claimed victim actualy suffered a loss. Some "victims" may have profited overall or suffered no actual harm from the specific fraud alleged.

Disputing causation: Not every investor loss is caused by the fraud. If stock prices fell becuase of market conditions unrelated to the fraud, those losses shouldnt be attributed to the defendant. This requires expert testimony and economic analysis, but it can significantely reduce the loss calculation.

Cooperation credit: Under Section 5K1.1, substantial assistance to the government can result in a departure below the guideline range. In securities fraud cases involving multiple defendants, early cooperation can dramatically reduce exposure. The first person to cooperate often gets the best deal. Thats not cynicism - thats the system working exactly as designed. Prosecutors want information. There willing to trade sentence reductions for it.

Spodek Law Group approaches every securities fraud case with the loss calculation as the primary focus. Yes, we fight the charges. Yes, we challenge the evidence. But we also recognize that in federal court, with 93%+ conviction rates, the sentencing phase often matters more then the guilt phase. Knowing how to fight the numbers can mean the difference between a decade in prison and half that.

What This Means for Your Case

Federal securities fraud sentencing uses USSG 2B1.1 - the same loss table applied to every other fraud. The "white collar" label dosent provide protection. A $10 million securities scheme starts at offense level 29, and the enhancements that almost always apply in securities cases stack to add potentially 12+ more levels. Elizabeth Holmes got 11 years. Bernie Madoff got 150. Allen Stanford got 110. These sentences reflect the guidelines, not judicial overreach.

If your facing securities fraud charges or investigation, understand that your dealing with a system designed to produce harsh sentences for financial crimes. The DOJ dosent view securities fraud as somehow less serious then other fraud. The sentencing commission treats a dollar stolen through stock manipulation the same as a dollar stolen any other way. And the enhancement structure means securities professionals - the people most likely to commit these crimes - face the harshest calculations.

Call Spodek Law Group at 212-300-5196. We handle federal securities fraud cases from our office in the Woolworth Building in Manhattan, and we represent clients nationwide. The consultation is free. The mistake of assuming "white collar" means light sentence - thats not free. Securities fraud sentencing is were careers and decades of life are lost. The loss calculation drives everything. The enhancements stack relentlessly. The guidelines produce sentences that rival violent crime. Dont face these charges without counsel who understands exactly how federal sentencing works and were the fights that matter actualy happen.

The federal system isnt designed to give white collar defendants a pass. It was designed - especialy after Enron and Sarbanes-Oxley - to punish financial crime with sentences that reflect the harm to victims. The loss tables ensure that harm translates directly into prison time. The enhancement structure ensures that the circumstances of securities fraud - multiple victims, sophisticated schemes, industry insiders abusing trust - add years to the baseline. The intended loss doctrine ensures that even failed schemes get punished at scale. Every element of the system points toward harsh outcomes. Understanding that reality is the first step toward fighting it effectivly.

The SEC investigation often preceeds criminal charges. That civil investigation becomes the roadmap for DOJ prosecutors. The documents you produced to the SEC, the testimony you gave under oath, the depositions were you thought you were dealing with a regulatory matter - all of that becomes evidence in your criminal case. By the time you realize criminal charges are coming, youve already given them everything they need. Thats why early intervention matters. Thats why having counsel who understands both the SEC process and federal criminal sentencing is critical. The mistake of treating securities fraud as "just civil" or "just regulatory" - that mistake can cost decades of freedom.