What is securities fraud?

| by Max Soni

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek – who has many, many, years of experience as a seasoned criminal defense attorney. Our team has over 40 years of combined experience handling the kinds of cases that make headlines. You might know us from the Netflix series about Anna Delvey, or from our work on the Ghislaine Maxwell juror misconduct case – or from representing clients in the Alec Baldwin stalking matter. These are the cases that others said were unwinnable, and that’s exactly why clients choose us.

If you’re reading this, someone’s probably mentioned securities fraud charges to you – or worse, you’re already indicted. Securities fraud isn’t some abstract white-collar term. It means federal prosecutors think you lied to investors, manipulated stock prices, ran a Ponzi scheme, or traded on inside information. And they’re building a case that could send you to prison for decades.

Securities fraud is deceptive conduct in stock or commodities markets that tricks investors into making decisions based on false information. That’s the simple version. The reality – it covers everything from CEOs lying in quarterly reports to stockbrokers cooking the books to day traders coordinating pump-and-dump schemes on message boards. The SEC and federal prosecutors treat all of it as serious crime, not just bad business.

Federal law attacks securities fraud from multiple angles. Section 10(b) of the Securities Exchange Act and Rule 10b-5 form the backbone – they prohibit any manipulative or deceptive device in connection with buying or selling securities. Then there’s 18 U.S.C. § 1348, added by Sarbanes-Oxley after the Enron collapse, which makes it a separate crime to knowingly execute any scheme to defraud in connection with securities. The Securities Act of 1933 adds Section 17(a) for fraud in the offer or sale of securities. Prosecutors love having options.

What makes something securities fraud? The government has to prove specific elements, and this is where cases get won or lost. For criminal prosecution, they need to show you made a material misrepresentation or omission – meaning you lied about something important, or you stayed silent when you had a duty to speak. They need to prove scienter, which is a legal term for intent. You didn’t just make a mistake. You knew what you were doing was wrong, and you did it anyway. That’s willfulness in criminal cases – a high bar, but prosecutors meet it more often than you’d think.

Here’s what trips people up. You don’t have to be a Wall Street executive to face securities fraud charges. We’ve seen cases against startup founders who overstated revenue projections to attract investors. Corporate controllers who buried losses in footnotes. Financial advisors who churned accounts for commissions. Even retail investors who coordinated trades to artificially inflate penny stock prices on Reddit or Discord channels. If you’re dealing with securities – stocks, bonds, options, cryptocurrency tokens that qualify as securities – and you’re being deceptive, you’re in the crosshairs.

The SEC brought enforcement actions in March 2025 against a German national and Singaporean national for international insider trading that generated over $17.5 million in illegal profits. In April 2025, they went after executives at a publicly traded cannabis company for accounting fraud. June 2025 saw a jury conviction in San Diego for a defendant who violated both the Securities Act and Exchange Act. The SEC’s 2025 enforcement priorities focus on insider trading, accounting fraud, market manipulation, and breaches of fiduciary duty – exactly what they’ve always cared about, but with renewed intensity.

Penalties are brutal. Securities fraud under Sarbanes-Oxley carries up to 25 years in federal prison. Exchange Act violations go up to 20 years. Fines reach $5 million for individuals, $25 million for corporations. Courts routinely order forfeiture of profits and restitution to victims – which can mean you’re bankrupt even if you avoid prison. Federal sentencing data shows average sentences between 20-24 months for securities fraud, but high-dollar cases or cases involving many victims push sentences much higher. The judge also considers criminal history, acceptance of responsibility, cooperation with investigators.

The statute of limitations runs five years from the date of the fraud under federal law. That sounds like a lot of time, but it’s not. The SEC and DOJ often don’t discover fraud until years after it happens – whistleblowers come forward, audits uncover irregularities, trading patterns trigger algorithmic flags. By the time investigators show up, they’re already deep into the five-year window, and they move fast.

People think securities fraud means Ponzi schemes or insider trading, and those are classic examples – Bernie Madoff, Martha Stewart, the Enron executives. But prosecutors charge securities fraud in situations most people wouldn’t recognize as fraud. A CEO who’s overly optimistic in a press release about a product launch. An analyst who doesn’t disclose a conflict of interest. A trader who front-runs client orders by milliseconds. Materiality is subjective. Intent is inferred from circumstantial evidence. What you thought was aggressive salesmanship or puffery, prosecutors call fraud.

Unlike state court charges, federal securities fraud means you’re up against the full resources of the United States government. Former prosecutors work these cases – they know the playbook because they wrote it. They use cooperating witnesses, wiretaps, email forensics, trading records, bank account analysis. They flip co-defendants early in the investigation. By the time you’re indicted, they’ve already built most of their case. The conviction rate in federal court exceeds 90% – not because everyone’s guilty, but because prosecutors don’t indict unless they think they can win.

At Spodek Law Group, we’ve defended clients in high-stakes securities fraud investigations and prosecutions. We know how federal prosecutors build these cases because we’ve worked with former federal prosecutors who understand the government’s strategy. We challenge the materiality of alleged misrepresentations. We attack scienter by showing the defendant acted on advice of counsel or accountants, or reasonably believed the statements were true. We negotiate cooperation agreements when that’s the right move, and we fight at trial when it’s not. Every case is different – some involve parallel civil and criminal proceedings, some hinge on a single email, some turn on expert testimony about accounting standards.

The worst thing you can do is talk to investigators without a lawyer present. The second worst thing – wait to get a lawyer until after you’re indicted. If the SEC or FBI contacts you, if your company receives a subpoena, if you hear investigators are asking questions about you, that’s when you call us. Early intervention changes outcomes. We’ve kept clients from being charged at all by presenting evidence to prosecutors before indictment. We’ve secured non-prosecution agreements. We’ve negotiated plea deals that avoid prison time when prison seemed certain.

Securities fraud charges put your freedom, your career, your reputation, and your financial future at risk. You can’t go through this alone. We’re available 24/7, we handle cases nationwide, and we’ve represented clients in some of the most challenging federal criminal matters in recent years. If you’re facing a securities fraud investigation or charges, call Spodek Law Group. We’ll review your case, explain your options in clear terms, and fight for the best possible outcome.