Criminal Defense Lawyers

What are the Penalties for Criminal Securities Fraud Convictions?

Penalties for Criminal Securities Fraud Convictions

Getting convicted of securities fraud can really mess up your life. The penalties are super harsh, both criminally and civilly. Let’s break it down so you understand just how bad it can get if your convicted.

First off, criminal penalties. If your convicted of securities fraud charges, your looking at some serious jail time. The max sentence is up to 25 years in federal prison under federal law[1]. That’s basically life in prison for a white collar crime, which is insane if you think about it.

Federal prosecutors throw the book at people for securities fraud because they say it “victimizes innocent investors and undermines the integrity of our public markets” [1]. So their going to punish you harshly as an example to deter other people from doing it.

Now 25 years is the absolute max sentence. More typical sentences for securities fraud seem to be in the 5-10 year range based on cases I found. But that’s still crazy long when you think about it. Here’s some examples:

• • A former securities attorney got 6 years in prison for a $1.3 million penny stock scheme [3].
  • Some dude got 5 years for a pump and dump stock manipulation scheme

.

• An investment fund manager got 7 years for defrauding investors out of $54 million .

So yea, your looking at a long time behind bars if convicted of securities fraud. The sentences can vary based on how much money was involved and other factors. But federal prosecutors and judges take this stuff super seriously.

Other Criminal Penalties

Prison time isn’t the only criminal penalty you’ll face if convicted of securities fraud. There’s other punishments too:

• Fines – The court can impose hefty fines in addition to jail time. These can be hundereds of thousands or even millions of dollars [1].
• Probation – The court may impose a probation period after you get out of jail where your monitored and can’t commit more crimes.
• Restitution – The court will likely order you to pay restitution to reimburse investors who lost money because of your fraud.
• Forfeiture – You may have to forfeit property or proceeds that came from the securities fraud scheme.

So in addition to years in prison, your also looking at losing a ton of money and having your finances destroyed through fines, restitution, and forfeiture. The criminal penalties for securities fraud are no joke.

Loss of Licenses and Certifications

If your convicted of securities fraud, you can kiss your professional licenses and certifications goodbye. Industry regulators will revoke any securities licenses you have, like being a registered broker-dealer or investment advisor [2].

You’ll also lose relevant professional certifications like a CFA charter or certified financial planner (CFP) designation. These organizations don’t mess around when it comes to ethics violations. A fraud conviction means your certs are gone.

Losing licenses and certifications destroys your ability to work in finance and many other professional fields. It can totally derail your career if that stuff is important for your work.

Barriers to Future Employment

Beyond losing specific licenses and certifications, a securities fraud conviction makes it really hard to get hired for any decent job. Employers don’t want to touch people with fraud records.

Finance jobs are obviously off limits due to losing licenses. But any professional job that requires a clean record will be tough to get too. Forget about working for the government or at a bank. Even non-finance companies shy away from hiring people with fraud convictions.

You may have to start your own business if you want a decent job after a securities fraud conviction. Getting hired by a reputable company will be really tough. Your options for employment get destroyed.

Reputational Damage

A securities fraud conviction does major damage to both your professional reputation and personal relationships. People lose trust in you after you’ve been convicted of lying and cheating investors.

Professionally, a fraud conviction makes you toxic. Colleagues don’t want to associate with you anymore. Businesses don’t want to partner with you. You become a liability that people want to avoid.

Personally, friends and family will look at you differently too. People assume if your willing the cheat strangers for money, your also willing to screw over people close to you. Relationships get ruined over the reputational damage.

The stigma of being a convicted fraudster is hard to shake. Your reputation takes a major hit both professionally and personally that’s tough to recover from. People never look at you the same again.

Financial Difficulties

A securities fraud conviction also leads to major financial problems in your personal life. It becomes really hard to get loans, credit cards, mortgages, and other financing after you’ve been convicted of fraud.

Lenders don’t want to trust you with money anymore. They see you as too risky and untrustworthy. Even if you still have assets, lenders will be very hesitant to do business with you.

You may also have trouble finding investors for any new business ventures. Angel investors and venture capitalists won’t want to invest in a company run by someone convicted of securities fraud. Your criminal record scares away potential investors.

So the fraud conviction ends up limiting your professional options even more by making it hard to get funding needed to start new businesses or projects. The fraud conviction haunts your finances.

Possible Civil Penalties

Now we’ve focused on the criminal penalties so far. But your not off the hook civilly either if convicted of securities fraud. Investors can still sue you civilly to try and recover their losses.

And civil penalties can be just as harsh as criminal ones. You face massive judgements that can drain you financially through civil lawsuits.

The SEC or CFTC can also pursue civil fines against you for violations of securities laws. These civil fines can be hundreds of thousands or even millions of dollars per violation .

So your still on the hook financially in a big way through potential civil lawsuits and fines. Don’t think you get off easy civilly if convicted criminally. The civil penalties can be just as bad.

Possible Defenses

Now I don’t wanna scare you too much. There are possible defenses in securities fraud cases that a good lawyer might be able to argue. Here’s some common ones:

• Good faith belief – If you honestly believed the statements you made were true, you may be able to argue you acted in good faith without intent to defraud [4].
• Reliance on professionals – If you relied on advice of lawyers, accountants, or other professionals that later turned out to be wrong, you may be able to avoid liability.
• Lack of materiality – If the misstatements weren’t important enough to influence investor decisions, you may be able to argue they weren’t material to the fraud.

So all hope isn’t lost if charged with securities fraud. An experienced white collar defense attorney may be able to raise some arguments to avoid liability or lower penalties. But your still in a tough spot with lots of risk.

Bottom Line

The bottom line is that securities fraud convictions come with severe criminal penalties, including years in federal prison. You also face major civil liability, loss of professional licenses, financial difficulties, and reputational damage.

Securities fraud is one of the most serious white collar crimes that can totally upend your life if convicted. The penalties are no joke. So don’t commit securities fraud kids! It’s not worth it.