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.

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. Section 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. Section 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.

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.

Contact Spodek Law Group for Effective White-Collar Defense

Securities fraud and wire fraud are two very similar allegations of corporate wrongdoing. Because of their similarities, it is not uncommon for people and companies to face both charges at the same time, though generally it is more likely for securities fraud allegations to be accompanied by a wire fraud charge rather than the other way around. This can make it extremely important to have a white-collar defense lawyer on your side to protect your interests and your future.

Call Spodek Law Group at 212-300-5196 or contact us online if you are under investigation for either securities or wire fraud.