How to Defend Against Securities Fraud Charges
- Securities fraud defense is high-stakes, complex, and demands an integrated federal litigation strategy.
- The government will use digital forensics, cooperating witnesses, and your own records to prove intent and materiality.
- Most cases are built years before you learn you’re a target – by then, prosecutors may already have trading data, emails, and witness testimony.
- Defenses that work for general fraud (lack of intent, honest mistake) rarely succeed; you must attack the government’s narrative and challenge their evidence at every stage.
- Early intervention is critical; the right counsel can often limit exposure long before charges are filed.
How to Defend Against Securities Fraud Charges – Federal White Collar Defense
Allegations of securities fraud can destroy careers, wipe out assets, and land executives in federal prison. Unlike other white-collar prosecutions, these cases are built on years of digital forensics, trading data analysis, and insider cooperation. By the time you receive a target letter or subpoena, the government’s case may already be meticulously constructed.
Securities fraud defense requires far more than a generic white-collar strategy. The law distinguishes between civil and criminal violations, but the evidence often overlaps. You’re not just facing the Department of Justice (DOJ); the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) can pursue parallel actions, leaving you exposed on multiple fronts.
Defending against securities fraud demands a sophisticated understanding of markets, regulatory compliance, and federal criminal procedure. It’s about dismantling the government’s narrative before it solidifies, challenging their interpretation of trading patterns, and neutralizing cooperating witnesses. Most importantly, it’s about acting immediately – because the government likely started years ago.
Federal Securities Fraud Defense Attorneys
Securities fraud cases often begin with a grand jury subpoena, an SEC Wells Notice, or an unannounced visit from federal agents. At this stage, your actions and statements are critical. The SEC and DOJ work closely, sharing information and coordinating parallel civil-criminal investigations. Anything you say can and will be used to build a criminal case.
Federal prosecutors rely on specific statutes to charge securities fraud, each carrying severe penalties:
- Prohibits any manipulative or deceptive device in connection with the purchase or sale of a security.
- Covers insider trading, misrepresentation, and fraudulent schemes.
- Most common tool for federal securities fraud charges.
- Direct criminal prohibition of securities fraud.
- Does not require proof of an actual purchase or sale.
- Violation carries up to 25 years in prison per count.
- Used to prosecute securities fraud schemes involving interstate communications.
- Each communication (email, phone call) can be charged as a separate count.
When building a defense, you must focus on three critical areas:
- Materiality: Was the information allegedly misrepresented or omitted truly material to investors’ decisions?
- Intent: Did you knowingly or willfully engage in a scheme to defraud?
- Reliance: Did investors actually rely on the alleged misrepresentation?
The government will use trading data, emails, text messages, and cooperating witnesses to prove you acted with intent. They’ll attempt to show your actions were part of a pattern designed to manipulate the market or deceive investors. Your defense must confront each element head-on.
Insider Trading: The Most Common Federal Securities Fraud Charge
Insider trading is prosecuted under both civil and criminal statutes. While many believe insider trading requires you to be an executive or board member, federal law is much broader. If you trade securities based on material, non-public information obtained from anyone in a position of trust, you can be charged.
The DOJ must prove you knowingly used confidential information to gain an unfair market advantage. Defenses often focus on the timing and source of information, challenging the government’s proof that the information was material and non-public at the time of the trade.
Securities Fraud Cases Under Federal Investigation
Most SEC investigations are civil, focusing on fines, disgorgement, and injunctions. However, the SEC routinely refers cases to the DOJ for criminal prosecution. When this happens, the stakes increase dramatically. Federal prosecutors can compel testimony, convene grand juries, and seek significant prison time.
Federal investigations often target the following individuals and entities:
- Corporate executives
- Financial advisors
- Broker-dealers
- Investment funds
- Boards of directors
The DOJ and SEC use sophisticated data analysis tools to identify suspicious trading patterns, market manipulation, and false public filings. Once a pattern is detected, they’ll use subpoenas, search warrants, and witness interviews to build their case. By the time you receive contact, the government may already have months or years of evidence.
What to Do If Your Company Is Under Investigation for Securities Fraud
Immediately engage experienced federal securities fraud defense counsel. The first 72 hours are critical. Never speak to agents or investigators without legal representation. Everything you say will be documented and used to build their case. Preserve all records and instruct employees not to destroy any documents.
Your counsel should initiate contact with investigating agencies, assess the scope of the investigation, and develop a strategy that addresses both civil and criminal exposure. A coordinated defense can often limit the scope of the probe and prevent additional charges from being filed.
Federal Securities Fraud Charges
If you are charged, it will likely be under one of the following statutes:
- Securities Fraud (18 U.S.C. § 1348)
- Mail Fraud (18 U.S.C. § 1341)
- Wire Fraud (18 U.S.C. § 1343)
Each charge carries severe penalties, including up to 25 years in prison per count for securities fraud alone. The government often charges multiple counts, using each communication or transaction as a separate violation. This can result in exposure to decades in prison if convicted.
Penalties for a Federal Securities Fraud Conviction
Federal securities fraud convictions typically result in:
- Up to 25 years in prison per count
- Substantial financial penalties (often in the millions)
- Disgorgement of profits
- Restitution to victims
- SEC civil penalties
- Permanent bar from serving as an officer or director of a public company
These penalties can destroy careers, bankrupt individuals, and leave families with nothing. The government will also aggressively pursue asset forfeiture, freezing and seizing assets believed to be connected to the alleged fraud.
Defending Against Federal Securities Fraud Charges
Securities fraud defense is about far more than denying wrongdoing. The government often has years of data, documents, and witness testimony before charges are filed. You’re not starting from scratch; you’re responding to an existing, well-built case.
Coordinate Civil and Criminal Defense
The SEC and DOJ often pursue parallel investigations. Statements made in a civil deposition can be used in a criminal case. Your defense must be coordinated to avoid self-incrimination across both fronts.
Challenge Materiality
Prove the alleged misrepresentation or omission was not material to investors’ decisions. Demonstrate that the information at issue was already known to the market or was not significant enough to influence a reasonable investor.
Attack Intent
Most securities fraud statutes require the government to prove you acted “knowingly” or “willfully.” Show that any misstatement was accidental, based on a misunderstanding, or made without the intent to deceive.
Question Reliance
If investors did not actually rely on the alleged misrepresentation, the government’s case is significantly weakened. Demonstrate that investors made decisions based on other factors or had access to the true information.
Forensic Data Analysis
Use forensic accountants, market analysts, and data scientists to challenge the government’s interpretation of trading patterns, financial statements, and digital communications. Prove that the trading activity or financial reporting was legitimate and compliant with industry standards.
Hiring a Federal Securities Fraud Defense Attorney
Securities fraud defense requires attorneys with experience in federal court, white-collar criminal defense, and securities regulation. Your attorney should have a track record of success in defending clients against complex federal charges, as well as a deep understanding of financial markets and corporate compliance.
The right attorney can make the difference between a prison sentence and a favorable resolution. They can negotiate with prosecutors, coordinate with regulators, and present a compelling defense in court.
Securities Fraud Defense at Spodek Law Group
Spodek Law Group is a national law firm with a dedicated team of attorneys focused on federal securities fraud defense. Our legal team includes former federal prosecutors, SEC enforcement attorneys, and white-collar defense lawyers with extensive experience in complex financial litigation.
We understand the intricacies of securities regulation, market dynamics, and federal criminal procedure. Our goal is to protect your reputation, your freedom, and your financial future.
Let Us Help You Protect Your Company Against a Federal Securities Fraud Investigation
If you or your company is under investigation for securities fraud, contact Spodek Law Group immediately. Early intervention is critical. Our legal team can assess your risk, develop a defense strategy, and help you navigate the complex intersection of civil and criminal enforcement.
For a free consultation and case assessment, call Spodek Law Group at 212-300-5196 or contact us online. We represent clients nationwide, and our team is ready to help you defend your business and your future.
