How serious is pump and dump stock fraud?

| by Max Soni

How serious is pump and dump stock fraud?

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek – with over 40 years of combined experience defending clients in federal criminal cases. You’ve probably seen our name if you followed the Anna Delvey case that became a Netflix series, or the Ghislaine Maxwell juror misconduct situation, or when we handled the Alec Baldwin stalking allegations. Those cases got headlines because they were complicated – and many attorneys said they were unwinnable. That’s what we do.

This article covers how serious pump and dump stock fraud really is. We’re talking about federal prison exposure, asset forfeiture that wipes out everything you own, and why the government treats these cases like organized crime. If you’re reading this, you probably already know someone got indicted or the SEC froze accounts – so we’ll focus on what actually happens when federal prosecutors build a securities fraud case, what the sentencing looks like, and why these investigations move so fast once they start.

Federal prosecutors treat pump and dump schemes like drug trafficking

Pump and dump stock fraud isn’t some civil regulatory slap on the wrist. The Department of Justice prosecutes these cases under 18 U.S.C. § 1348 – securities fraud – which carries up to 25 years in federal prison per count. Wire fraud charges stack on top, another 20 years per count. In March 2025, seven defendants were indicted in Chicago for allegedly running a pump and dump scheme involving China Liberal Education Holdings. Federal agents seized $214 million. All seven defendants face multiple counts of securities fraud and wire fraud – that’s decades of prison exposure if convicted on all charges.

The government doesn’t care if you were “just the promoter” or “just helped with social media.” Everyone in the scheme gets charged. The Chicago case involved defendants in Malaysia, Taiwan, China – prosecutors don’t care about borders when they’re building a conspiracy case. If you touched the scheme, you’re in the indictment.

Here’s what separates pump and dump cases from other white collar prosecutions: the government seizes everything before you even know there’s an investigation. Bank accounts frozen. Brokerage accounts locked. Real estate seized. The $214 million forfeiture in the Chicago case happened before trial – a federal judge granted the government’s motion to permanently forfeit the money in May 2025. Victims might get some back, but defendants? You’re fighting the case with a public defender because all your assets are gone.

Prison sentences are real and they’re long

Andrew Coldicutt, a San Diego attorney, got 85 months – that’s just over seven years – for running pump and dump schemes. The judge also hit him with a $100,000 fine and ordered him to forfeit $42,000. Coldicutt wasn’t some street criminal, he was a licensed attorney who thought he could structure these deals cleverly enough to avoid prosecution. He was wrong.

Federal sentencing guidelines for securities fraud start with the amount of loss to victims. The larger the fraud, the higher your offense level climbs. A $214 million scheme – like the Chicago case – puts defendants in a sentencing range that assumes decades in prison if convicted. Even cooperating with the government only gets you so much reduction. You’re still looking at years in federal prison, not months.

And federal prison isn’t like state prison. You serve 85% of your sentence minimum. Seven-year sentence means you’re doing at least six years. No parole. No early release for good behavior beyond the 15% reduction. Federal judges can’t shave time off your sentence because they feel bad for your family.

The other problem – these cases involve multiple defendants, which means someone’s cooperating. The government offers the first person who flips a 5K1.1 motion for substantial assistance. Everyone else? You’re getting the full guideline sentence or close to it. We’ve seen defendants wait too long to cooperate, thinking they could fight the case, then watch someone else get the cooperation deal while they’re stuck facing 15 or 20 years.

The SEC and DOJ work together and they move fast

Securities fraud investigations aren’t random. The SEC monitors trading patterns, social media pump campaigns, and suspicious volume spikes in microcap stocks. Once they identify a potential pump and dump scheme, they refer it to federal prosecutors. At that point, you’ve got both civil and criminal investigations running simultaneously.

The SEC files civil complaints seeking injunctions, asset freezes, and disgorgement of profits. In April 2025, the SEC filed a complaint against Albert Golusin, Peter Jacobs, and John Scuderi for orchestrating a multi-year pump and dump scheme involving American Green, Inc. The complaint detailed how they converted insider-friendly debentures, removed transfer restrictions fraudulently, hired stock promoters, disseminated deceptive press releases, and flooded investor message boards with bullish posts while denying their insider roles. That level of detail means the SEC had been watching for months or years before filing.

Meanwhile, the DOJ is building the criminal case. Grand jury subpoenas go out to brokerage firms, banks, and anyone who touched the transactions. Email accounts get searched. Phone records pulled. Text messages from encrypted apps – prosecutors get those too. By the time you’re indicted, the government has everything. They know who bought what shares when, who promoted the stock where, who got paid how much. The indictment reads like a detailed timeline because they’ve already built the entire case before charging you.

The speed of these investigations surprises defendants. You think you’re operating quietly, then suddenly there’s a target letter or an indictment. In the China Liberal Education case, the alleged scheme ran from November 2024 to February 2025 – by March 2025, seven people were indicted and $214 million was seized. That’s four months from start to indictment. Federal prosecutors don’t wait around once they have probable cause.

Who actually gets prosecuted

Everyone involved in the scheme. The people who control the company and issue the discounted shares. The promoters who send out the emails and social media posts. The traders who execute the coordinated buying and selling. The attorneys or consultants who help structure the deals or remove transfer restrictions on shares. If you knowingly participated in any part of the fraud – you’re getting charged.

Federal prosecutors love conspiracy charges because they don’t need to prove you personally made false statements to investors. They just need to prove you knowingly joined an agreement to commit securities fraud and someone in the conspiracy took an overt act. That’s it. You can be convicted of conspiracy even if you never talked to a single investor, as long as you knew the scheme was fraudulent and you helped it succeed.

The other thing – you don’t need to profit from the scheme to get charged. If you were paid to promote a stock and you knew or should have known the promotions were based on false information, that’s enough. “I was just doing what they paid me to do” isn’t a defense. Federal prosecutors will argue you had a duty to verify the information or at least not lie to investors, and your knowing participation in the fraud makes you part of the conspiracy.

Why defending these cases is different from other federal charges

Most federal criminal cases involve one or two defendants. Pump and dump schemes involve five, ten, sometimes twenty defendants across multiple states or countries. The paper trail is massive – thousands of trades, hundreds of promotional emails, bank records for dozens of accounts. The government’s case relies on documentary evidence that’s hard to challenge. You can’t cross-examine a brokerage statement showing you sold shares at the peak of the pump.

The defense strategy has to focus on what you knew and when you knew it. Did you know the promotional materials were false? Did you know the company’s financial statements were fabricated? Did you know the insiders were dumping shares while telling investors to buy? If you can show you were misled too – that you believed the company was legitimate – you might have a defense. But that’s tough when the government shows emails or texts where you discussed the scheme with co-conspirators.

At Spodek Law Group – we’ve defended securities fraud cases where the prosecution looked overwhelming until we dug into the details. Sometimes the government lumps together people who had very different levels of involvement and knowledge. The person who controlled the company and orchestrated the fraud isn’t the same as the person who promoted the stock based on information they were given. Sentencing can vary wildly depending on your role and whether you profited. Our job is to separate you from the worst actors in the case and show the judge you weren’t the mastermind.

The other thing – many pump and dump cases involve foreign defendants or offshore accounts, which adds complexity. If you’re charged in the United States but you live abroad, extradition becomes an issue. Some defendants choose to fight extradition and stay out of the country. Others come back and fight the case. That decision depends on the strength of the government’s evidence, your ties to the United States, and whether you can realistically win at trial or negotiate a reasonable plea. We’ve handled cases where clients were overseas when they were indicted – the strategy changes completely when you’re not in custody and the government is trying to bring you back.

What happens if you’re under investigation but not charged yet

If you receive a grand jury subpoena or a target letter from federal prosecutors, don’t talk to the government without a lawyer. The worst mistake we see is defendants trying to “explain” the situation to investigators, thinking they can talk their way out of charges. You can’t. Anything you say gets used against you at trial. If you lie or misremember details, they’ll charge you with false statements under 18 U.S.C. § 1001 – that’s five more years in prison.

The time to hire a lawyer is before you’re indicted, not after. Once charges are filed, your options narrow dramatically. Before indictment, an experienced attorney can sometimes persuade prosecutors that you weren’t a knowing participant in the fraud, or that your role was minimal, or that the evidence against you is weak. Sometimes we can negotiate a cooperation agreement where you provide information about other participants in exchange for lesser charges or immunity. After indictment – you’re fighting the case or taking a plea deal, and the plea deals get worse as the case gets closer to trial.

If the SEC contacts you for testimony or documents, same rule applies – don’t cooperate without a lawyer. The SEC shares everything with DOJ prosecutors. Your “voluntary” cooperation with the SEC becomes evidence in the criminal case. We’ve had clients who thought they were just clearing things up with the SEC, then found out the criminal prosecutors were sitting in on the interviews. By the time they called us, they’d already given statements that hurt their defense.

International prosecutions are increasing

In September 2025, the SEC launched a new task force focused on fraud involving foreign-based companies. The task force specifically targets pump and dump schemes involving Chinese and other foreign issuers. This isn’t theoretical – the Chicago case involved defendants from Malaysia, Taiwan, and China. The American Green case involved international components. Federal prosecutors are working with foreign law enforcement agencies to track down defendants and freeze assets overseas.

This creates unique problems if you’re outside the United States. Some countries have extradition treaties with the U.S., others don’t. Even with a treaty, extradition takes time and you might be able to fight it. But living overseas while under federal indictment means you can never return to the United States without getting arrested. You can’t travel to countries with extradition treaties. Your U.S. assets are frozen or forfeited. Your life becomes very limited very quickly.

The other risk – foreign prosecutors might charge you in their country for the same conduct. If you’re in Canada running a pump and dump scheme targeting U.S. investors, you could face charges in both countries. Canadian anti-fraud authorities reported that losses from investment scams involving social media contact jumped 12% in 2024, reaching $128 million. They’re cooperating with U.S. authorities to prosecute cross-border schemes.

What you should do if you’re involved in a pump and dump investigation

Stop participating in any activity related to the scheme immediately. Stop promoting the stock, stop trading the shares, stop communicating with co-conspirators about the scheme. Everything you do from this point forward will be used against you – the government will argue that continued participation shows consciousness of guilt.

Hire an attorney who handles federal securities fraud cases regularly. This isn’t the time for your business lawyer or your DUI attorney. Federal securities fraud prosecutions are specialized – the attorney needs to understand how the SEC and DOJ work together, how to negotiate cooperation agreements, how to challenge trading pattern evidence, and how to handle cases with multiple defendants.

Don’t destroy evidence. Deleting emails or texts is obstruction of justice – that’s a separate federal felony. If the government proves you destroyed evidence after learning about the investigation, you’re facing additional charges and the judge will hammer you at sentencing for obstruction. Preserve everything and let your attorney decide what’s relevant.

Understand your exposure realistically. If you were a minor participant – you promoted the stock a few times, you didn’t control the company, you didn’t profit much – your sentencing exposure might be manageable with a cooperation agreement. If you were central to the scheme, you’re looking at serious prison time unless you can provide substantial assistance against bigger targets. Todd Spodek and our attorneys will give you an honest assessment of where you stand and what outcomes are realistic given the government’s evidence.

At Spodek Law Group – we’ve handled securities fraud cases, wire fraud cases, and complex multi-defendant conspiracies. We understand how federal prosecutors build these cases and where the weaknesses are. If you’re under investigation or you’ve been charged, the time to act is now – not after the government has finished building their case against you.