Securities fraud occurs when someone lies or steals an investment for their personal financial gain. To be a crime, it must be intentional and the person committing the act must stand to gain from it.
Stockbrokers most often face securities fraud charges, but organizations and investment firms can be convicted, too. It is a federal White Collar crime that involves all types of investments, including stocks, bonds, commodities, and banknotes.
The most common types of security fraud crimes include:
- Hedge fund fraud
- Ponzi schemes
- Pyramid schemes
- Late-day trading
- Failure to disclose a material fact
What Entity is Responsible for Investigating This Crime?
Securities fraud is a federal crime. The Federal Bureau of Investigation (FBI) investigates whether or not this crime occurred. The Bureau takes accusations of fraud very seriously and conducts all suspicions or reports of it occurring.
Should an FBI investigation reveal that securities fraud occurred, the Securities and Exchange Commission will usually prosecute the case against the individual, organization, or business.
The penalties for a successful securities fraud conviction can be significant. It is a Class C felony and carries with it large fines and prison sentences. Someone convicted could serve up to 20 years in prison. On average, a person convicted of securities fraud serves five years for each offense. Fines can be up to $5 million.
Securities fraud can also be prosecuted by the State of Colorado. Usually, these prosecutions are done by the Office of the Attorney General, and any violation of the State’s securities act can form the basis of a criminal prosecution. Frequently the Attorney General will begin with a civil case, or a regulatory request for documents. You should not engage with the Attorney Generals office without first consulting with an experienced criminal defense attorney.
In addition to the financial and prison penalties associated with the conviction, restitution is also a possibility. Victims of crimes receive restitution to make up for what they lost as a result of the crime.
Cornell Law School provides more information about potential securities fraud penalties here.
Are You Facing Accusations of Securities Fraud?
Facing an investigation or accusation of securities fraud can be devastating. It can end your career, ruin your reputation, take your freedom, and result in bankrupting you.
To convict someone, the prosecution must show that you intended to commit the act. If you were acting in good faith and did not believe you were deceiving the other party or you were unaware that a crime was taking place, you cannot be convicted.
Additionally, there might have been issues with the FBI’s investigation of your case. The FBI cannot use anything obtained via an illegal search or seizure against you in court.
Building a strong defense requires an understanding of legal investigations and the defendant’s role in the crime, if a crime indeed occurred. Working with an attorney who understands security fraud crimes and knows how the legal system works is an important part of defending yourself.
If you believe you are under investigation for securities fraud or you have been charged with this crime, you must speak to an attorney immediately. For more information or to schedule a consultation to discuss your case, contact David Lindsey to schedule a free consultation.