Federal Securities Fraud
A conviction for Securities Fraud will carry a lengthy prison sentence.
Securities Fraud covers a wide range of illegal activities that involve the deception of investors or the manipulation of financial markets. The most commonly prosecuted acts of Securities Fraud include insider trading, broker misrepresentation, stock churning, and Ponzi schemes.
Definition of Federal Securities Fraud
Under the Securities Act of 1933 and the Securities Exchange Act of 1934, Securities Fraud is defined as willfully engaging in deceptive practices intended to manipulate financial markets or induce investors to make financial investment decisions based on deceptive or false information.
“Securities” are broadly defined as any form of investment, such as stocks, bonds, bank notes, commodities, investment contracts, and options.
Conspiracy to Commit Securities Fraud
Conspiracy to Commit Securities Fraud occurs when two or more people work together to engage in the manipulation of financial markets or fraudulently induce investors to makes financial decisions.
Importantly, Conspiracy to Commit Securities Fraud can, and usually is, charged against minor participants in securities fraud scheme.
The government charges minor participants with Conspiracy to Commit Securities Fraud because under 18 U.S.C. § 371, the penalties for Conspiracy to Commit Securities Fraud are the same as actual Securities Fraud, which results in minor participants cutting deals to testify against major participants in order to avoid the severe penalties Securities Fraud carries.
Penalties for Securities Fraud
Under federal law, the crime of Securities Fraud is a Class C felony, punishable by up to twenty years in prison, three years of supervised release, and $5 million in fines. Additionally, disgorgement of any profits will be ordered and any property obtained from the proceeds of the offense can be confiscated.
Under the United States Sentencing Commission, Guidelines Manual, §2B1, a person convicted of Securities Fraud would be assigned a base offense level between 6-36, which carries a guideline range of probation up to 33 months in prison before taking into account any aggravating or mitigating circumstances.
Importantly, probation is rarely given in federal cases and the amount of loss or aggravating offense characteristics associated with a particular Securities Fraud case can result in a significantly greater prison sentence than 33 months in prison.
As of 2018, the average federal sentence imposed for Securities Fraud fell between 20-24 months in prison. [1]
Defenses to Securities Fraud
In addition to the pretrial defenses and trial defenses that can be raised in any criminal case, common defenses to the federal crime of Securities Fraud include:
Good Faith Belief
It is a defense to the federal crime of Securities Fraud if a defendant honestly and in good faith believed the deceptive statements or promises made as part of the scheme were true. [2]
However, a defendant cannot engage in willful blindness by ignoring the truth of the statements. Nor is it a defense if the defendant intends to deceive but feels the victim will ultimately profit or be unharmed.
No Knowledge
Commonly called the No Knowledge Defense, section 32(a) of the Securities Exchange Act of 1934 provides that “no person shall be subject to imprisonment for the violation of any securities rule or regulation if the person proves to have no knowledge of such securities rule or regulation.”
The No Knowledge Defense is a unique, post conviction, affirmative defense, whereby the defendant must prove by a preponderance of the evidence the defendant was unaware of the existence of the SEC rule or regulation that prohibited the illegal conduct constituting the charged Securities Fraud. [3]
If the No Knowledge Defense is successfully asserted, a court would be required to sentence a defendant to straight probation.
Substantial Assistance
While not technically a defense, Substantial Assistance is the most commonly utilized method to avoid the severe penalties the crime of Securities Fraud carries.
The prosecutor is authorized by statute to ask the court to reduce or suspend a sentence of any person who is convicted of Securities fraud when the person provides substantial assistance in the identification, arrest, or conviction of any other person engaged in the scheme to defraud.
Unlawful Search and Seizure
Often, law enforcement exceed the scope of their authority and require people to submit to a vehicle, home, or property searched when they otherwise would not be required to, coerce people into agreeing to a search, arrest people without probable cause, or obtain search warrants in bad faith.
If any of these can be proven through the filing of a Motion to Suppress, the courts will suppress the resulting evidence as having been unlawfully obtained in violation of the Fourth Amendment of the United States; which can lead to an outright dismissal of the case or reduced charges.
Contact Federal Defense Lawyer Richard Hornsby
If the Federal government is prosecuting you for the crime of Securities Fraud in federal court, contact Orlando Federal Criminal Defense Lawyer Richard Hornsby today.
The initial consultation is free and I am always available to advise you on the proper course of action that can be taken.