Criminal Defense Lawyers

How Securities Fraud Charges Are Prosecuted in Queens

How Securities Fraud Charges Are Prosecuted in Queens

Securities fraud is a white collar crime that involves deceiving investors by manipulating the stock market. This type of fraud is often complex and can result in serious criminal charges at both the state and federal level. In Queens, New York, securities fraud cases are typically prosecuted by the Queens County District Attorney’s Office.

Overview of Securities Fraud

Securities fraud encompasses a wide range of illegal activities, such as Ponzi schemes, insider trading, making false statements on financial reports, pump and dump schemes, and improperly influencing stock prices through manipulative trading practices.Some common examples of securities fraud include:

• Accounting fraud: Falsifying financial statements and reports to misrepresent a company’s financial health. This is done to boost stock prices or hide losses from investors.
• Insider trading: Buying or selling stocks based on non-public information that is expected to impact a stock’s price once it becomes public. This undermines fairness in the markets.
• Pump and dump schemes: Artificially inflating a stock’s price through false promotions, then selling shares for a profit before the price drops. This tricks investors into overpaying.
• Churning: When a broker excessively trades in a client’s account to generate high commissions rather than act in the client’s best interest.

Investigating and Building a Securities Fraud Case

Securities fraud cases are complex white collar crime investigations that require financial forensics and analysis of documents like bank records, phone records, emails, and financial statements. Prosecutors in Queens typically pursue these cases in collaboration with regulatory agencies like the SEC and FINRA.To build a securities fraud case, prosecutors go through various steps such as:

• Receiving a referral: Securities fraud cases often begin with a complaint or referral from a regulatory body that detected suspicious activity. Tips also come from investors, employees, and other sources.
• Launching an investigation: Subpoenas are issued to obtain documents, communications, and testimony. Financial forensics analyze bank records, phone records, trading data, etc.
• Establishing intent and materiality: Prosecutors must prove the accused knowingly intended to defraud investors and that misrepresentations or omissions of fact would impact an investor’s decisions.
• Identifying victims and calculating losses: The scope of the fraud, number of victims, and amount of investment losses are quantified.
• Assembling documentary and testimonial evidence: Records, data, communications, confessions, and witness testimony are compiled to corroborate findings.
• Seeking charges: Securities fraud can lead to both federal charges (SEC, DOJ) and state felony charges levied by the DA’s Office.

Securities Fraud Charges in Queens

In New York, securities fraud constitutes a Class E felony under Article 178 of the New York Penal Code. This covers illegal practices like falsifying business records, false statements, schemes to defraud, and using manipulative devices.Specific charges applied in Queens securities fraud cases include:

• Scheme to Defraud in the First Degree: Defrauding 10+ persons of over $1 million in aggregate. This is a Class E felony.
• Scheme to Defraud in the Second Degree: Defrauding 1 or more persons of over $50,000. Also a Class E felony.
• Securities Fraud: Intentionally engaging in practices to defraud securities investors. Class E felony.
• Grand Larceny in the First/Second Degree: Stealing property exceeding $1 million or $50,000, respectively. Class B and C felonies.
• Falsifying Business Records: Knowingly entering false information on financial records. Class E felony.

The above charges can lead to prison time up to 4 years per charge in addition to paying substantial restitution.

The Securities Fraud Trial Process in Queens

If arrested and charged with securities fraud in Queens, the case must go through various pre-trial procedures and hearings, including:

• Arraignment: The defendant appears in court to face formal charges and enter a plea of guilty or not guilty. Bail may be set at this hearing.
• Preliminary Hearing: Occurs before a judge so prosecutors can establish reasonable cause for the case to proceed towards trial. Evidence and witness testimony is presented.
• Pre-Trial Motions: Defense attorneys may file motions to dismiss certain charges, suppress evidence, or otherwise challenge aspects of the prosecution’s case.
• Plea Bargaining: Many securities fraud cases end with a negotiated plea deal rather than a trial. The defendant pleads guilty in return for reduced charges or a lighter sentence.
• Trial: If no plea deal is reached, the case proceeds to a jury trial. Prosecutors present evidence and witnesses to establish guilt beyond a reasonable doubt.

In preparation for trial, prosecutors will identify and prepare key witnesses, including investigators, fraud examiners, analysts, cooperating conspirators, and victims who can explain complex aspects of the fraud scheme. Expert testimony is often used in securities fraud trials to help juries understand sophisticated financial crimes.

Defense Strategies in Securities Fraud Cases

Skilled white collar criminal defense attorneys have various strategies to combat securities fraud charges, such as:

• Attacking flaws or lack of evidence in the prosecution’s case
• Suppressing questionable evidence or statements
• Retaining defense experts to rebuke the analysis or conclusions of prosecution experts
• Gathering evidence and witnesses to support alternative explanations
• Claiming a defendant’s reliance on professionals like accountants or lawyers
• Making credibility arguments against cooperating witnesses who cut deals
• Presenting mitigating circumstances to reduce culpability

An experienced securities fraud defense lawyer can identify weaknesses in the prosecution’s legal theories and technical analyses while positioning their client as an unknowing participant. Though risky, some securities fraud cases do go to trial when a conviction seems uncertain or an acceptable plea deal cannot be reached.

Sentencing and Appeals

For those found or pleading guilty, punishments for securities fraud in New York can include:

• Prison time: From 1 to 4+ years per felony charge. First-time offenders may get lower sentences.
• Fines: Penalties up to double the amount gained from the fraud. Individual fines up to $5,000 per charge.
• Restitution: Repayment provided to victims for investment losses tied to the fraud.
• Probation: Up to 5 years of court-ordered supervision in lieu of prison.

Convicted defendants can appeal by claiming violations of due process, insufficient evidence, improper rulings by the judge, and other reversible errors. However, appeals in state cases have a low success rate.Securities fraud is a theft of investor money that erodes public trust in capital markets. These complex cases require skilled prosecutors and regulators willing to unravel webs of deceit. Though the Queens DA’s Office takes such financial crimes seriously, they remain prevalent and challenging to detect. For those facing prosecution, an experienced defense attorney is indispensable.

Resources

• Detailed overview of securities fraud laws in New York (PDF) from the SEC
• Video on pump and dump schemes from the U.S. Securities and Exchange Commission