Person Signing Document Paper

Securities and Investment Fraud Defense Strategy

The world of securities trading is complex and challenging, but people continue to delve into the markets in hopes of gaining a significant return on their investment. Before investing in any security or commodity, one must be aware of rules and regulations to avoid 18 U.S.C. § 1348 federal securities fraud charges as well as other federal criminal charges.

Anyone can be convicted of this and other federal crimes, which carry steep punishments for those proven guilty. Depending on the facts of the case and the charges, perpetrators may be sentenced to up to 20 years in prison per count or slapped with fines as high as $5 million

What is Securities and Investment Fraud?

Securities fraud is a white-collar crime that refers to a number of fraudulent activities often investigated by the Securities and Exchange Commission (SEC). Each type of fraud is different, but all involve the use of deceptive or fraudulent practices with the goal of obtaining money from someone else.

The SEC is the primary federal agency that initiates securities fraud investigations. It is authorized to access financial and trading information during a federal securities fraud investigation. If it determines that fraud was indeed committed, it may refer the matter to the Department of Justice to prosecute the individuals involved.

Federal Laws Governing Civil Securities and Investment Fraud

  • The Securities Act of 1933: Focuses on the registration of statements relating to securities within public companies.
  • The Securities Exchange Act of 1934 (15 USC 78 et. seq.): This law established the SEC, the agency governing the trading of stocks and bonds across the United States.
  • The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Aims to enhance consumer protection, regulate financial products, and increase corporate governance, disclosure, and transparency.
  • Sarbanes-Oxley Act of 2002: This law was passed soon after the Enron scandal to create reforms encouraging corporate responsibility, improve financial reporting accuracy, intensify punishments for manipulating or fabricating financial reports, and increase the accountability of auditing firms. 
  • Investment Company Act of 1940: Reduces conflicts of interest between corporations whose shares are offered for public sale and whose business is trading in securities. 
  • The Trust Indenture Act of 1939: The provisions of this act cover securities offered for public sale. Unless a bond issuer and bondholder have a formal agreement, securities cannot be sold to the public.

What is an Initial Public Offering?

An initial public offering or IPO happens when a private company offers its shares to the public for the first time. This significant step allows a corporation to raise equity capital with the help of public investors, giving it a greater ability to grow. 

Transitioning to a public company is often seen as an important time for investors to realize the full profit from their private investment.

Common Examples of Securities Fraud Schemes

There are many types of investment fraud, but the following are the most prosecuted:


Churning happens when a broker buys and sells an excessive amount of securities in a customer’s account without regard for the client’s investment objectives. The primary goal for doing so is to earn higher commissions.


The pump-and-dump tactic is a form of securities fraud involving individuals spreading false or misleading information about a stock to convince more people to buy, thereby “pumping” up the stock price. Once a certain stock price is reached, these individuals then “dump” shares of the stock by selling their own shares at the inflated price, resulting in lower demand and price and, ultimately, losses for innocent investors. 

Insider trading

Insider trading happens when an individual privy to company information not yet public buys or sells a stock or security based on such material inside information. 

Ponzi schemes

Ponzi schemes are investment scams that involve selling investments in an enterprise that either does not exist or about which false representations are made. New investment funds raised are used to pay earlier investors who seek to withdraw funds. Those engaging in this type of fraud will divert investment funds to their own purposes. Additionally, there will be falsified accounts statements inaccurately portraying the investment as liquid and profitable. Perpetrators of this fraud often promise potential investors high returns in a short amount of time to influence investment decisions.

Signs You Are Under Investigation for Securities Fraud

Federal investigations are usually conducted as discreetly as possible initially. It is far easier for an agent to gather evidence if the target of the investigation does not know that he or she is being investigated. Federal agents may utilize tools such as subpoenas, complaints tips, or computer forensics to start an investigation into alleged securities fraud cases. 

There are three key categories of people involved in a federal case:

  1. Witness: A person who might have pertinent information. Usually, the government does not believe this individual is involved in the crime. 
  2. Subject: Evidence shows this person might have been involved in the crime and is therefore included in the scope of the federal investigation. 
  3. Target: There is strong evidence that this person committed a crime, making him or her a focal point of the investigation.  

If federal agents or Securities and Exchange Commission investigators approach you, you have the right to firmly but politely decline an interview until you have spoken with your attorney. A skilled federal securities fraud defense attorney can help you prepare and guide you through the process, especially regarding any possible statements to investigators. 

Possible Defenses to Securities Fraud Charges

If you are accused of securities fraud, here are some potential securities fraud defenses your lawyer could use:

  1. The statements were not fraudulent: The government must be able to prove that the information was knowingly false.
  2. Lack of intent: A federal prosecutor must be able to prove that the defendant made the representation with the purpose of committing fraud.
  3. Insufficient evidence: The evidence proving the fraud must be legally satisfactory. Any reasonable doubt raised at trial or failure of the government to prove an element of the offense could lead to acquittal or dismissal of the case..
  4. Entrapment: This is an affirmative defense in which the defendant offers compelling evidence that the government induced a law abiding person to undertake the criminal activity. 
  5. Lack of Intent/Knowledge: The government fails to meet its burden to establish the element of intent or knowledge. 

Why You Need an Experienced Federal Securities Fraud Criminal Defense Attorney

You should speak with an attorney immediately if you are involved in any way in a federal securities fraud investigation. 

Facing fraud allegations and charges poses various risks. These include potential criminal prosecution and civil actions such as civil litigation, enforcement actions, and the potential for administrative and civil penalties. With such dire consequences, you need an experienced securities and commodities fraud defense lawyer on your side. 

The Serafini Law Office can provide you with the best representation possible. Our team will work tirelessly to protect your freedom, rights, and reputation.

Mr. Richard A. Serafini is a federal criminal defense lawyer who has been practicing law for over 40 years. With his vast knowledge and experience in securities litigation and securities fraud matters, he is just the person you need to formulate an aggressive defense strategy to help you achieve the best results.

Our law firm offers representation in securities investigations throughout the United States and on a range of legal services to the following cities and states: Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Florida, Pennsylvania, and New York. 

Contact us at (754) 223-4718 for a free consultation. 

Leave a Comment

Your email address will not be published. Required fields are marked *