Federal Securities Fraud Defense Attorney

There’s no shortage of ways to make money in the world of securities trading, but if you do get involved in the markets, it’s important to carefully follow federal regulations.

If you fail to do so, you could be charged with securities fraud.

“Securities fraud” is an umbrella term, which refers to a number of crimes that are usually investigated by the U.S. Securities and Exchange Commission. While each type of securities fraud is different, one trait they all have in common is the use of deceptive or fraudulent practices to obtain money from someone who is attempting to make an investment.

While we think that only financial officers within corporations or professional traders can be guilty of securities fraud, the truth is that anyone can be convicted.

Securities fraud may involve civil SEC enforcement, criminal prosecution or both. Criminal penalties depend on the statute: 18 U.S.C. 1348 provides up to 25 years, while willful violations covered by 15 U.S.C. 78ff(a) can carry up to 20 years and, for an individual, a fine up to $5 million. These are statutory maxima, not predictions for a particular defendant.

What is securities fraud?

Stocks and bonds are familiar securities, but the legal definition also covers specified instruments and qualifying investment contracts. A label such as “token” or “loan” does not settle whether an instrument is a security. Counsel must examine the instrument and the statute at issue.

Here are some of the most common examples of securities fraud:

• “Pump and dump” or “Short and distort”, Taking a position in a security and then spreading deceptive information published via email, chat, blogging, etc to influence others to follow. As the price changes, the fraudster closes their position at a profit.
• Insider trading, Trading securities based on non-public information about a company.
• Boiler rooms, Use of high-pressure and deceptive sales tactics to sell so-called “penny stocks” or other low value investments.
• Ponzi schemes, Selling investors equity stakes in a non-existent company, and then using funds from future investments to fund returns for earlier investors.
• Dummy corporations, Creating a false company and selling nonexistent equity stakes to investors.

Brokers must also be careful to avoid any suspicion of securities fraud. This might include situations such as:

• Unauthorized trades, Making trades without the client’s permission (unless explicitly allowed per a written contract or agreement).
• Unsuitability, Making investments that are not right for the client’s particular needs, or making investments without informing the client of the risk involved.
• Churning, Selling or purchasing securities to gain excess commission.
• Over-concentration, Placing a vast majority of a client’s funds in one investment.
• Creating illegal accounts, Creating a fake account or putting a client’s funds into one’s own account.

How do I know if I’m under investigation for securities fraud?

Federal investigations usually begin in secret. After all, it’s easiest for a federal agent to collect evidence if the target of their case doesn’t suspect that they’re under investigation. Federal agents use tools like wiretaps, subpoenas and computer forensics to initially investigate suspected cases of securities fraud.

After this phase is complete, if the agents still believe that a crime was committed, they might execute a search of an office or someone’s home, or they might begin interviewing people. This is usually when most people find out that they are involved in a federal investigation. 

There are three types of involvement in federal cases:

• Witness, Someone who might have important information. Usually, the government does not believe this person was involved in committing the crime under investigation.
• Subject, There is evidence that this person might have been involved in committing a federal crime, so they are included in the scope of investigation.
• Target, There is substantial evidence that this person committed a federal crime, and this person is a focal point for the investigation.

One thing to keep in mind is that, as government agents begin conducting interviews or executing search warrants, they have already gathered substantial evidence in the case.

Investigators typically don’t reveal all of the information they know, instead using tactics to extract it from the people that they are interviewing. This can lead to a common pitfall for people who fall in the “witness” or “subject” categories. 

A witness can face separate issues if they knowingly and willfully make a materially false statement in a matter within federal jurisdiction. An honest memory error alone does not establish an offense under 18 U.S.C. 1001. Counsel can help distinguish uncertainty from a statement of fact and respond accurately to a request.

Even if you know that you weren’t involved in any fraudulent activity, if you are approached by federal investigators at any time, you are fully within your rights to firmly but politely inform them that you would love to do an interview, after speaking with your attorney. Your attorney can help you prepare, telling you what to say and what not to say, and help guide you through this.

Defenses against securities fraud charges

If you believe that your or someone you know is involved in a federal securities fraud investigation, it’s important to speak with an attorney as soon as possible.

“Mr. Helfend absolutely saved my bacon. After finding myself charged with fraud, I was terrified. I have never been introduced to the legal system from this side before, and it was unsettling. However, Robert was able to calm me down and help me figure out my situation. He even got the case dropped before trial! I don’t want to be in another situation where I need a criminal defense lawyer, but if I ever am, I know who I will call!”

Pete, CA

The SEC, DOJ and other agencies can obtain extensive records through their respective processes. The SEC brings civil enforcement actions; criminal charges are prosecuted by the Department of Justice. Their inquiries can overlap but involve different powers, standards and consequences.

Because of this, the federal government has a natural advantage. By the time you find out you are involved in a federal investigation, it has already developed a plan of attack and a strategy toward prosecuting its case.

By speaking with an attorney, you can better understand your options, and if you are involved as a subject or target, you can begin formulating your defense. Even with all of its investigative firepower, the government still has to prove beyond a reasonable doubt that you were guilty of committing securities fraud. A skilled federal criminal defense attorney can comb through the evidence in your case and expose flaws in the government’s arguments.

Robert M. Helfend has practiced criminal defense since 1984. His professional profile reports more than 4,000 criminal cases and Super Lawyers selection for 2020-2023. Call 800-834-6434 for a free case evaluation.

Separate the civil allegation from the criminal charge

A suitability complaint, unauthorized trade or investment loss does not automatically establish criminal securities fraud. Identify who sent the notice, the statute or rule cited and the alleged false statement or trading conduct. Civil negligence theories and criminal intent requirements should not be described as interchangeable.

Preserve the version of the pitch or disclosure used at the time, trade confirmations, account authorizations, internal compliance messages and evidence of when information became public. A dated disclosure timeline can show what the investor was told and what the accused knew when the transaction occurred. Keep original files and communications; later explanations do not replace contemporaneous evidence.

Sources and legal standards

• 18 U.S.C. 1348: securities and commodities fraud
• 15 U.S.C. 78ff: criminal penalties
• 18 U.S.C. 1001: material false statements
• SEC: enforcement process

Legal information checked October 10, 2026. The charge, evidence and applicable version of the law control the analysis of an individual case.

References

1. United States Code, 15 U.S.C. § 78j. https://www.law.cornell.edu/uscode/text/15/78j
2. Code of Federal Regulations, 17 C.F.R. § 240.10b-5. https://www.law.cornell.edu/cfr/text/17/240.10b-5
3. United States Code, 18 U.S.C. § 1341. https://www.law.cornell.edu/uscode/text/18/1341
4. United States Code, 18 U.S.C. § 1343. https://www.law.cornell.edu/uscode/text/18/1343