Securities Fraud

Securities fraud is an offense relating to deceptive conduct in the stock or commodities markets, involving schemes that convince people to put forward money or something else of value. The downfall of Enron in 2001 was a well-publicised securities fraud scandal, in which the American energy company was discovered to have used fraudulent accounting to keep millions of dollars of debt off its books.

The then-current and former CEOs Kenneth Lay and Jeffrey Skilling were charged with numerous counts of securities fraud, as well as wire fraud, money laundering, conspiracy, and insider trading. When the scandal was initially discovered, the company’s stock price plummeted from around $90, to a very low $0.26. Skilling received the strictest sentence of anyone involved, with an initial sentence of 17 and a half years in Federal prison.

Securities fraud is a serious crime, and when carried out on a large scale it can involve heavy penalties and long periods of imprisonment. If you have been accused of this crime, contact a criminal defense attorney immediately to help you with your case. 

What is Securities Fraud?

Securities fraud is defined in 18 U.S. Code § 3301 as the violation of one of several laws relating to investments, including:

  • Securities Exchange Act of 1934
  • Securities Act of 1933
  • Investment Advisers Act of 1940
  • Investment Company Act of 1940
  • Trust Indenture Act of 1939

These laws all contain rules about how investments and the management of securities should be carried out. Violating them is a Federal offense, captured by 18 U.S. Code § 1348. This section states that a person commits securities fraud if they:

  1. Knowingly;
  2. Execute a “scheme or artifice”;
    1. To defraud any person in connection with the purchase or sale of commodities, options, or securities; or
    2. To obtain “by means of false or fraudulent pretenses, representations, or promises, any money or property” in connection with the purchase or sale of commodities, options, or securities.

It’s important to note that this is a relatively broadly-defined law, and it can capture many different kinds of “fraudulent” activity. There are many different kinds of securities fraud, including:

  • The purchase and sale of penny stocks, made fraudulent by mass purchase to artificially inflate the price, then dumping the stock.
  • Accounting fraud in financial institutions, deceiving investors as to the true state of the institution’s health.
  • Insider trading i.e. trading based on information not known to the public. 
  • Lack of appropriate licenses for those dealing in securities, defrauding investors as to the qualifications or licenses of the broker or dealer.
  • Brokerage of unauthorized or knowingly unsuitable investments.
  • Ponzi schemes and Pyramid schemes. These schemes involve fraudulent investment management services inducing money from people for investment, without an investment actually existing. The funds from new investors are used to pay existing investors.

The penalties for securities fraud can include fines, or sentences of imprisonment of up to 25 years. This is a serious crime and should be taken very seriously. 

Steps to Take if You Are Accused of Securities Fraud

If you have been accused of securities fraud, there are several steps that you should take before you continue speaking to or dealing with Federal agents handling your case.

  1. Contact a defense attorney immediately. 
  2. Gather evidence to show that you did not knowingly or intentionally commit a fraudulent act, or that you did not execute some kind of scheme to defraud victims. There must be proof that you intended to defraud victims, and showing lack of intent can help your case.
  3. If you have any evidence or documents that can show that the accusers did not rely upon any misleading information, this can also help you.
  4. Finally, any information that can show that any statements you made or omissions that were made were not misleading in fact, can support your case. Alternatively, if you made an omission or a statement that was misleading in fact, you need to show that you did not know it was misleading, or show that the omission was not material in nature.

Call Stechschulte Nell For Help

If you have been charged with securities fraud, mail and wire fraud, bank fraud, or any related crimes, the law office of Stechschulte Nell can advise you. Don’t wait. Call our top-rated Florida law firm at (813) 280-1244 to speak to an experienced federal defense attorney. We’re available 24/7 to take your call.

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