Federal Wire Fraud vs. Securities Fraud: Key Differences and Overlap
Federal white-collar crimes can be incredibly complicated and can carry significant penalties. A clear example of this is found with two similar types of white-collar crimes: wire fraud and securities fraud. While there is a lot of overlap between these two crimes, they are distinct offenses that carry their own elements and can be charged together.
Get in Touch with Spodek Law Group
The experienced white-collar defense lawyers at Spodek Law Group have a long history of helping defendants accused of or being investigated for securities or wire fraud. With our legal advice and representation, numerous clients have protected their legal rights and secured the outcome that they need, such as a dismissal, acquittal, or a favorable plea deal. Many of these clients have been prominent corporate executives or the very companies that were facing investigation for corporate wrongdoing.
If you have been charged for one or both of these financial crimes and want a better idea of what you are facing, call our law office at 212-300-5196 or contact us online for a free and confidential consultation.
Understanding Securities Fraud
Securities fraud is a federal crime that carries a sentence of up to 25 years in prison per count. It is outlined at 18 U.S.C. § 1348 and prohibits two forms of fraud in relation to publicly traded securities:
- Knowingly executing, or attempting to execute, a “scheme or artifice” that is intended to “defraud any person in connection with” securities, or
- Knowingly executing, or attempting to execute, a “scheme or artifice” that is intended to obtain money or property by means of “false or fraudulent pretenses, representations, or promises” in connection with securities.
The statute applies to:
- All securities that are registered under Section 12 of the Securities Exchange Act of 1934
- All securities that are required to be filed with the Securities and Exchange Commission (SEC) under Section 15(d) of the Securities Exchange Act of 1934
- Any securities, including options, that are listed on a national securities exchange
Understanding Wire Fraud
Wire fraud is a federal crime that carries up to 20 years in prison per count. If the fraud involved a financial institution or a presidentially declared disaster or emergency, the potential prison sentence increases to 30 years. The statute prohibiting wire fraud is 18 U.S.C. § 1343, which forbids the following actions:
- Using wire communications
- For the purpose of executing a scheme or artifice to defraud or obtain money or property by false pretenses
- With the intent to defraud
Wire fraud is one of the most commonly charged forms of fraud because of how broad the statute is. The elements of a wire fraud offense only require that the defendant uses a wire communication, like a phone or the internet, to further a scheme to defraud. Wire fraud does not require the defendant to complete the fraud. It does not even require the defendant to use the wire communication to further the fraud; it is enough that their conduct foreseeably caused a wire communication to be used to further the fraud.
How They Can Overlap
Wire fraud and securities fraud have a lot of overlap in that they are both white-collar offenses that involve a type of fraud. Many securities fraud offenses can also be charged as wire fraud.
However, securities fraud is narrower than wire fraud. Securities fraud offenses must be connected to a public security or an option. They must also be connected to one of the specific types of fraudulent schemes that the securities fraud statute covers. If there is no connection to the securities market or if the fraudulent activity is not one that falls within the types of fraud that the securities fraud statute covers, then you cannot be charged for securities fraud. However, you could still face a wire fraud charge.
Wire fraud is broader than securities fraud. Because it covers all forms of fraud and only requires that the fraud be furthered by a wire communication, it covers many different types of fraudulent conduct. If the fraudulent scheme is one that is found in the securities fraud statute and involves a publicly traded security, then you can face both wire fraud and securities fraud charges for the same conduct.
For example, imagine that a company’s chief executive officer (CEO) issues a press release stating that the company has a new product that has been approved by the Food and Drug Administration (FDA) and that is expected to increase the company’s revenue by 50 percent in the coming year. Investors buy stock in the company, increasing its value. However, the press release was an exaggeration. The product was not approved by the FDA and is not expected to be as profitable as the CEO stated. The CEO sells her stock in the company before the truth comes out. The CEO could face a securities fraud charge for misleading investors and could also face a wire fraud charge for issuing the press release, as that uses wire communications to further the fraudulent conduct.
Frequently Asked Questions About Spodek Law Group, Securities Fraud, and Wire Fraud
What Do White-Collar Defense Lawyers Do?
White-collar defense lawyers defend people who have been accused of white-collar crimes. These are generally non-violent offenses that are often connected to the business world or to finances. Securities fraud and wire fraud are two of the most common types of white-collar crimes that white-collar defense lawyers take on.
If you are under investigation for securities fraud, wire fraud, or any other type of white-collar crime, or if you have been charged with one of these offenses, a white-collar defense lawyer from Spodek Law Group can provide you with the legal advice and representation that you need to invoke your rights and protect your freedom. Some of the services that our attorneys provide include:
- Conducting an internal investigation into what happened to detect and correct any mistakes that have been made
- Communicating with law enforcement and prosecutors on your behalf to insulate you from the risks of talking with them on your own
- Representing you in court from the arraignment to the trial, if it goes that far
- Negotiating with prosecutors a plea deal that is in your best interests
What Sets Spodek Law Group Apart from Other White-Collar Defense Firms?
There are several things that set Spodek Law Group apart from other similar defense firms in the country. The big one is that Spodek Law Group is a national law firm. We have local legal teams in or near the cities where there is generally the most need for our legal services, including:
- New York, New York
- Miami, Florida
- Chicago, Illinois
- Dallas, Texas
- Los Angeles, California
Another is that Spodek Law Group is staffed by only senior-level defense lawyers. Many other firms have a few senior attorneys and lots of junior lawyers and paralegals. When you have a question or a concern about your case, it will be handled by a senior lawyer with decades of experience in white-collar defense.
How are Wire Fraud and Securities Fraud Charges Different from Other Types of Fraud?
Securities fraud is a very specific type of fraud, as it has to be connected to the trading of publicly traded stocks or options and fit within the types of fraud found in the statute that covers it. These limitations on securities fraud charges make many of them inapplicable to other situations.
Wire fraud, on the other hand, is the most general form of fraud. It can be used to cover virtually any type of fraudulent conduct, so long as a wire communication is used to further the fraud. Because wire fraud can cover so many types of fraudulent conduct, it is often charged by prosecutors when they think that one of the more specific types of fraud may be difficult to prove. It is also frequently charged alongside those other types of fraud as a backup plan to ensure at least a conviction for something.
What are Some Examples of Securities Fraud?
Securities fraud charges can be laid against a wide variety of types of conduct, including:
- Insider trading
- High yield investment fraud
- Retirement scams
- Ponzi and pyramid schemes
- Churning
- Falsifying company assets
- Giving misleading or inaccurate information to investors
- Theft or misappropriation of a client’s funds
In many cases, securities fraud charges are laid against corporate executives or the companies that they run. However, private individuals can also be charged for their unlawful conduct in the securities market.
What are the Penalties of a Securities or Wire Fraud Conviction?
Both securities fraud and wire fraud are felonies, so if you are convicted for one of these offenses you can face huge fines as well as time in prison. Securities fraud carries up to 25 years in prison per count, while wire fraud carries up to 20 years per count, or up to 30 years if the fraud involved a financial institution or a presidentially declared emergency.
However, both securities fraud and wire fraud are very general allegations of wrongdoing. They can be charged for a wide array of conduct, and the potential penalties are not always a good indication of the actual penalties that you would face if you were convicted or if you pled guilty to the offense.
This is one of the many reasons why it is crucially important to have an experienced white-collar defense lawyer on your side if you have been charged with either wire fraud or with securities fraud. They can work to raise your legal defenses while also advocating for a more lenient sentence, should you get convicted.
