What Constitutes Securities Fraud?
In 2023, over 64,000 cases of securities and investment fraud were reported. Securities fraud can involve a broker, investment firm, or publicly traded company that deceives a person or entity into trading stocks based on false information. With billions of dollars stolen from individuals and businesses each year, the government has employed various resources to thoroughly investigate any accusations of securities fraud. If you are facing allegations of securities fraud, do not hesitate to contact the Greenville, SC, white-collar criminal defense attorneys at Ryan Beasley Law today.
Securities Fraud Examples
Defrauding someone of a commodity or stock can result in a federal securities fraud charge. Fraud occurs when someone provides false information regarding an investment in order to buy or sell a stock. A commodity is a good that is sold on the open market, so someone may invest in a commodity being supplied with information that is simply too good to be true.
Common examples of securities fraud that our Greenville white-collar criminal defense attorneys would like to highlight include:
Ponzi Schemes
A Ponzi scheme is an investment scheme that promises returns to investors by placing money in stocks that will have a high return with little or no risk. The scheme is shaped like a pyramid, relying on new investors to pay existing investors, with no money actually being invested. The product or service being offered is most often not real, with the organizers even using the money for their own financial gain. Unlike a pyramid scheme, investors in a Ponzi scheme do not actively recruit new investors but rather invest their money and wait for a return.
Insider Trading
Insider trading is the buying or selling of a security (stock or bond) based on nonpublic information about a corporation. Additionally, an industry “insider” who shares nonpublic information about a company that could impact a stock’s share price (known as “tipping”) is also guilty of insider trading. Insider trading is one of the most common forms of securities fraud, with executives, accountants, board members, and company lawyers being common culprits.
Market Manipulation
Market manipulation constitutes anything that interrupts the regular flow of the stock market. A person or entity that spreads rumors about a company’s performance or an upcoming acquisition has committed market manipulation.
Accounting Fraud
An insider who misrepresents a company’s financial situation by inflating revenue, concealing debts, or taking advantage of tax deductions (or any combination of these) has committed accounting fraud. Sometimes referred to as “cooking the books,” accounting fraud deceives investors and creditors to increase profits. One of the most famous accounting fraud schemes was the Enron Scandal. Company executives committed several questionable financial practices. One of these is mark-to-market accounting, which involves including profits from future contracts as realized gains, thereby hiding their financial troubles and deceiving shareholders.
Misappropriating Assets
A broker or investment advisor who steals or places funds into unauthorized accounts has misappropriated assets. This may be part of a Ponzi scheme or other scheme to gain a financial advantage.
Hedge Fund Fraud
A type of actively managed account is a hedge fund manager that invests money from accredited investors in a variety of assets. Generally, a hedge fund uses complex strategies for investors to generate the highest return on their money. While a hedge fund is by no means illegal, when a hedge fund manager misrepresents the risk profile or investment strategy of the account, this is. In some hedge fund fraud cases, hedge fund managers may even embezzle investments.
Penalties for Securities and Commodities Fraud
If you are charged with securities and commodities fraud, you may be facing federal or state charges. At the federal level, the Securities and Exchange Commission (SEC), FBI, and Commodities Futures Trading Commission (CFTC) may investigate your matter. If you have been charged by the state of South Carolina, the Attorney General’s Office will oversee your case.
Under federal law (18 U.S.C. §1348), securities and commodities fraud is punishable by 25 years in prison and a fine. Under South Carolina law, your punishment will depend on the amount of mishandled funds. In cases in which the investor lost less than $1,000, you could be sentenced to up to three years in prison and fined $30,000. When losses exceed $20,000, you could be sentenced to a maximum of ten years in prison and fined as much as $50,000.
Given the severity of the penalties you may face, it is essential to hire a legal advocate who can gather exculpatory evidence to prevent you from spending time behind bars. This is the kind of representation you will find when you work with our white-collar defense attorneys. We understand what is on the line and are willing to pursue different avenues to preserve your reputation and freedom.
Speak with Our Greenville, SC Securities Fraud Attorneys Today
If there is any suspicion that you have misrepresented the price of a commodity, manipulated a stock, or provided false information on a financial statement, you could be charged with securities fraud. The government has ample resources to investigate any accusation of securities fraud, which is why you need dependable counsel by your side. At Ryan Beasley Law, we have helped individuals facing securities fraud allegations get reduced sentences and even avoid jail time entirely. To learn how we can be of assistance to you, contact us online or give us a call at (864) 756-4204.