How Long Can You Go to Jail for Securities Fraud??

I cannot get more than 25 years, right?

• Can more than 25 years in prison, such as in a life sentence or decades of incarceration, be imposed for securities fraud?
• Does the SEC prosecute these crimes?
• Will the SEC or Justice Department pursue federal criminal charges?
• Can an SEC investigation lead to charges?
• If we negotiated an SEC settlement, will that resolve our civil case?
• Does the Justice Department generally proceed against defendants prosecuted by the SEC?
• Will DOJ prosecutors and SEC attorneys pursue investigations over identical conduct at the same time?

Q: Can a federal securities-fraud conviction for a violation of 18 U.S.C. Section 1348 lead to a sentence of more than 25 years in prison?

While Section 1348 authorizes a sentence of up to 25 years’ imprisonment per offense, federal prison sentences are far from uniform. Many variables determine what actual time, if any, will be served.

Here, too, we break down the primary factors to consider:

Q: Are federal prison sentences for multiple counts of securities fraud often imposed consecutively?

The answer is sometimes, but federal law generally favors concurrent sentences for multiple counts imposed at the same time. When convicted of multiple charges, defendants are eligible for cumulative sentencing. Here, too, we take an individual approach to determining our defense strategy, as the potential exposure resulting from a defendant’s criminal acts will play a key role in how we resolve the criminal allegations.

Q: Can the SEC prosecute criminal charges and impose prison sentences?

No. Federal securities law and the U.S. Code authorize criminal prosecution of certain offenses. However, the authority to prosecute these offenses and impose federal criminal penalties, including fines and imprisonment, rests solely with the federal Justice Department.

The SEC can refer conduct to the Justice Department, but a referral is not an indictment, and referral alone does not warrant an immediate criminal defense.

Q: Can federal prosecutors and SEC attorneys investigate the same alleged violations concurrently?

Yes, they can. A criminal investigation by the Justice Department and a parallel civil investigation by the SEC can proceed concurrently.

Q: Which securities fraud charge determines the maximum sentence?

Under 18 U.S.C. Section 1348, a criminal conviction for securities fraud carries a statutory maximum of 25 years of federal incarceration. However, securities fraud is usually not the only charge in a federal criminal prosecution. Wire fraud is often included as well, and this criminal offense carries a 20-year maximum. In securities fraud criminal cases, the charges filed by federal prosecutors typically determine the defendant’s potential maximum sentence.

There are several other federal securities-related offenses as well. Under 18 U.S.C. § 1349, enacted as part of the Sarbanes-Oxley Act of 2002, attempts and conspiracies to commit securities fraud and commodities fraud are subject to the same criminal penalties as the completed offense. In some cases, a defendant may face multiple charges arising out of one scheme; in such cases, prosecutors have the discretion to seek the statutory maximum under any applicable federal securities law, and multiple convictions can lead to cumulative exposure.

Additional federal laws implicated in criminal enforcement of securities fraud include the Securities Exchange Act. For Exchange Act criminal liability under 15 U.S.C. § 78ff(a), there is a maximum criminal sentence of 20 years in federal prison, and the relevant charge generally must involve a willful violation, or a willful and knowing false or misleading statement of material fact. Similarly, wire fraud requires specific intent to defraud (though not willfully). 18 U.S.C. Section 1348 covers both securities fraud and commodities fraud; and this is a broad and sweeping provision that reaches knowing attempts to commit fraudulent conduct in the securities and commodities markets, even if investors lose nothing.

Q: Which section of the U.S. Code covers federal criminal prosecution for securities fraud?

The federal statute that covers criminal prosecution for securities fraud is 18 U.S.C. Section 1348. It is a provision of the Sarbanes-Oxley Act, and it was enacted to supplement existing criminal securities laws. Section 1348 also allows federal judges to impose fines and order restitution.

18 U.S.C. Section 1348 provides:

Q: What is the average prison sentence for securities fraud?

There is no single average sentence that covers every fraud offense. Instead, there are various averages for individual types of white-collar offenses. A report on federal securities fraud offenses from the U.S. Sentencing Commission provides more specific data.

According to the Commission’s 2020 report:

• Of all offenses that fell under its review, the average sentence was 46 months’ imprisonment.
• Securities offenders accounted for 6.8% of all fraud offenses.
• 86.6% of securities offenders received prison sentences.

Of course, statistics about “averages” do not predict a defendant’s individual sentence. Even with the data available, there are too many variables to account for when developing a defendant-specific prediction.

Q: What is the average prison sentence for securities fraud based on high-profile cases in the news?

High-profile cases will often get the most news coverage, but these cases have little bearing on how a defendant’s case will play out. High-profile convictions often (but not always) involve significant losses to investors, while many other cases involve a small number of losses.

The high-profile cases that received news coverage in the following report received significant prison sentences:

• Bernie Madoff (2009), 150 years federal prison sentence
• Sam Bankman-Fried (2024), 25 years federal prison sentence
• Elizabeth Holmes (2022), 11-year federal prison sentence plus fines and restitution

While these high-profile cases are notable, they are very different from the cases that result in lighter sentences. For example, investors lost millions in all three of these cases. However, they are far from unique in these respects. Here, too, we take the same custom, individualized approach to defense; with this approach, we can develop a realistic prediction of your potential prison exposure.

Q: Can a securities-fraud conviction for an Exchange Act offense be committed and a sentence of probation imposed?

A sentence of probation is possible. In fact, probation will be imposed as often as prison sentences in some cases, and in others even more often. When a court determines that no federal prison time is warranted, it may impose a prison sentence of zero months, with or without a probation period. In some cases, a fine, restitution, and loss of rights may be imposed instead.

Q: How do federal judges calculate a securities fraud prison sentence?

The federal sentencing system is complex. There are various federal statutes, regulations, and case law to consider. The U.S. Sentencing Guidelines (USSG) offer an advisory, not binding, range based on the defendant’s prior record and a number of mitigating and aggravating factors. However, under 18 U.S.C. Section 3553(a), judges are required to consider various factors in addition to the sentencing guidelines.

Although U.S.S.G. Section 5G1.2 is among the guiding principles of criminal sentencing, federal judges are not tied to it. Rather, judges look at the U.S.S.G. Recommendations and use them as a starting point in order to determine the final sentence.

Ultimately, the guidelines are advisory, but their guidance is still very important. Judges must apply a valid criminal charge and consider the sentencing guidelines, along with the statutory factors, to determine the sentence.

To calculate a defendant’s advisory sentence under the federal sentencing guidelines, judges look at the guidelines’ provisions for “criminal history” and “offense level.” Then, judges use the federal sentencing guidelines’ table to calculate the guideline sentence. The guidelines, however, are not all judges ever use. Under 18 U.S.C. Section 3553(a), judges must consider a range of factors when determining what is a “just sentence.”

Q: What factors are relevant to determining a sentencing guideline for securities fraud?

In securities fraud criminal cases, a number of factors can affect a defendant’s sentencing guidelines:

• Financial loss, This factor typically drives the range of a sentencing guideline. For most offenses, the guideline loss is the greater of a defendant’s actual loss or a defendant’s intended loss.
• Victim count, This factor measures how many victims suffered harm.
• Number of transactions, This factor looks at the number of securities-fraud transactions involved in the case.
• Obstruction of justice, This factor is an aggravating factor that may lead to a higher federal sentence.
• Sophisticated means, This factor looks at the use of complex methods in perpetrating securities fraud.

These factors are considered aggravating or mitigating factors. If a defendant’s sentencing range includes a number of aggravating factors, that defendant’s sentencing range will be in the guidelines’ upper end. If the range includes a number of mitigating factors, it will be in the lower end.

Our defense team will use all available information to advocate for your case. This includes mitigating factors like financial loss and loss calculations, victim count, and a defendant’s prior record to potentially lower your sentencing guidelines.

Q: Can federal judges determine a sentence outside of the advisory range?

Yes, federal judges can. According to the U.S. Sentencing Commission’s current securities-and-investment-fraud data, sentences below the guideline range are imposed in many cases through departures or variances. When sentencing departs from the guidelines, it can be either upwards or downwards. A judge will need to make a factual finding that supports such a departure from the sentencing guidelines.

In these cases, federal judges rely on statutory factors under 18 U.S.C. Section 3553(a). These factors include:

• The nature and circumstances of the offense, defendant’s history and characteristics, and the goals of sentencing
• The extent of the prior record’s relation to the alleged offense, and other related factors
• The defendant’s grounds for recidivism risk assessment, the criminal record, and the need for deterrence and protection of the public
• The recommendations given by sentencing guidelines

Once a federal judge computes the advisory guideline range, then the judge uses 18 U.S.C. Section 3553(a) as an additional step to determine the final sentence. As a result, these factors can result in a sentence above or below the sentencing guideline.

• U.S.S.G. Chapter 4 (Criminal History) If you are facing this situation, Spodek Law Group handles federal criminal defense matters nationwide, from offices in New York and Los Angeles.

Q: Do multiple federal prison sentences run at the same time?

Generally, federal prison sentences imposed in the same criminal proceeding run concurrently. However, federal courts can impose consecutive sentences when deemed appropriate. If a federal court determines that the defendant deserves a particular amount of time in prison, then it will set that amount based on the individual counts. If the counts result in several sentences, the federal judge will then determine whether to run those sentences either at the same time, and impose the number of months he or she deems appropriate.

However, when multiple terms of imprisonment are imposed at different times, they generally run consecutively unless the court orders them to run concurrently. In such cases, under 18 U.S.C. Section 3584, the federal judge which is sentencing a defendant can order the sentence run either either consecutively or concurrently. The federal sentencing guideline, USSG Section 5G1.2(B) also recommends consecutive prison sentences, provided these sentences are warranted.

Under U.S.S.G. Section 3D1.2, multiple counts for the same or substantially the same conduct do not multiply the loss amount. For other types of offenses, multiple offenses involving the same type of harm are grouped together and may be assigned an offense level equivalent to the offense level of the most serious offense.

In addition, multiple federal prison sentences for the same criminal proceeding run concurrently or consecutively. When judges impose multiple federal supervised-release terms, they run concurrently with probation, parole, or another term of supervised release under 18 U.S.C. § 3624(e).

Q: How can I avoid receiving consecutive prison sentences for multiple counts of fraud?

U.S.S.G. Chapter 3, Section 3D1.2, can be used to group counts together when warranted. Often, multiple charges arise out of a single act or are substantially similar. In these cases, this is a common strategy used by defense attorneys.

Additional strategies to reduce sentencing guidelines include arguing that some of the claims are not warranted, seeking a reduction in fine and prison sentence, and arguing against the application of specific aggravating factors. If these arguments result in a lower federal sentencing guideline range, then the resulting sentence may be below the advisory range. Our law firm can help clients understand potential exposure to make an informed decision about accepting an unfavorable settlement offer or plea bargain.

Q: What will help reduce my sentencing exposure if I am convicted of a federal securities-fraud crime?

If you are convicted of a federal securities-fraud crime, then a number of factors can help to reduce your sentencing exposure. These include:

• Acceptance of responsibility, Under U.S.S.G. Section 3E1.1, defendants who take responsibility can get up to three offense-level reductions. A guilty plea and a sentencing statement can be considered as taking responsibility, but this is a determination for the judge.
• Substantial assistance, Defendants who provide substantial assistance can have their sentencing guidelines lowered (or fully avoided). However, substantial assistance must qualify under U.S.S.G. Section 5K1.1 and be supported by a government motion.
• Restitution, Under 18 U.S.C. Section 3663A, defendants who commit securities fraud under the Sarbanes-Oxley Act must pay restitution for their criminal conduct in addition to their federal prison sentences. If a defendant pays restitution in full, then this can either be deemed acceptance of responsibility under U.S.S.G. Section 3E1.1 or as substantial assistance under U.S.S.G. Section 5K1.1.

Q: Will receiving a reduction for acceptance of responsibility or substantial assistance reduce the amount of restitution you need to pay?

No. A reduction in your sentence can result in a shorter prison sentence; but restitution is separate from imprisonment, and this can include civil penalties and other conditions on a defendant’s supervised release.

Q: Can the government file civil penalties on top of sentencing the defendant in a criminal case?

Yes, civil penalties can be assessed by the SEC in civil enforcement proceedings that run parallel to the Department of Justice’s criminal prosecution in many cases.

Additional benefits of federal securities-fraud criminal cases can include probation and super-vised release in some cases, if the judge finds these a just and reasonable sentence for the crime.

Q: How can I avoid restitution and other sentencing fines in securities fraud criminal cases?

Restitution is mandatory upon conviction for federal fraud offenses under 18 U.S.C. § 3663A, so going to trial rather than pleading guilty does not by itself avoid restitution, fines, or a prison sentence.

Q: What can I do if I am facing a criminal securities-fraud sentence?

Our defense team works closely with our criminal defense lawyers to minimize our clients’ sentencing exposure and defend them in white-collar fraud cases. We’re able to help our clients negotiate just sentences to avoid prison terms when appropriate.

A securities-fraud criminal case is a matter of the law; however, it is a matter of the law in which many personal, professional, and mitigating circumstances will be taken into account. You do not want to let an inexperienced attorney work your case, and you do not want to bet your life on the skills of someone else.

Q: How much of a federal fraud sentence will actually be served?

In the federal system, the term “parole” refers to the release of an incarcerated person before the end of their sentence. However, federal parole is generally unavailable, and federal prison inmates must serve their full sentence unless an individual qualifies for early release.

That said, federal inmates that qualify for “good-conduct time” or “good-conduct credit” can shorten the time they serve. Under 18 U.S.C. Section 3583, a person convicted under Section 1348 can be sentenced to up to five years of supervised release following their prison term. The conditions of their supervised release will be the same as those they are subject to before release.

If these conditions are violated, the defendant’s supervised release may be revoked, resulting in more custody. Additional benefits for inmates that qualify for federal sentencing credits include:

• Good conduct time, Inmates in the federal system that qualify to receive federal sentencing credits are eligible to earn up to 54 days a year under 18 U.S.C. Section 3624(b).
• Presentence detention credit, Under 18 U.S.C. Section 3585(b), all defendants who are eligible to be credited for presentence detention time that is served can count this credit against a later federal prison sentence.
• First Step Act, Inmates that qualify under the First Step Act can receive an early release. The First Step Act allows eligible prisoners to enter prerelease custody and then enter supervised release.
• Federal home confinement, Inmates who are nearing the end of their federal prison term can qualify for home confinement under 18 U.S.C. Section 3624(c). In such cases, defendants get to reside in their homes or an approved residence during their home confinement period, which is subject to conditions like adhering to curfew, not commuting, and check-in with a probation officer.

Q: If I received a suspended sentence, what does it mean?

A suspended sentence is when a judge does not impose a prison sentence at the time of sentencing, but is instead given to the defendant as a deferred prosecution. This can also mean a sentence given to the defendant given that they have took a plea deal and fulfilled the conditions of the agreement. In most cases, suspended sentences are given when a defendant has no criminal record and the federal judge believes that he or she is at low risk to commit a crime. However, a suspended sentence can still be executed, as if a judge determines that the conditions of the agreement have been breached.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 212-300-5196.