DC Federal Securities Fraud Attorney

Securities fraud, investment fraud, and stock market fraud can take many forms. No matter what investment scheme is used to perpetuate the crime, however, securities fraud is a white-collar crime punishable in federal court by fines, prison, and civil penalties. If you have been charged with federal securities fraud in Washington, DC, or if you believe you may be the subject of an investigation, you will need to retain a qualified, DC federal securities fraud lawyer as soon as possible to discuss your case and the various steps you can take to build a strong defense.

When World War I ended in 1919, it ushered in a post-war era of prosperity. The booming economy, however, was based in part upon a thriving stock market that turned out to be built on speculation and ultimately undermined by decreasing production, rising unemployment, low wages, and a great accumulation of debt. In October 1929, the stock market collapsed, closing out the Roaring ‘20s and signaling the beginning of The Great Depression.

During that devastating financial collapse, investors lost billions of dollars and the general public lost faith in the U.S. stock market and the nation’s economy. Within a few years of the stock market collapse, the federal government enacted two laws to reform the market and restore investors’ faith in the market.  The Securities Act of 1933 and the Securities Exchange Act of 1934 set out the rules and regulations for honest dealings with the purchase and sale of securities. The Securities Exchange Act of 1934 also developed the United States Securities and Exchange Commission, charged with the oversight of the securities industry and enforcement of federal securities laws. Click here for a pdf copy of the 1934 Act, and here for a copy of the 1933 Act.

Since that time, the U.S. stock market has again become a leader in the global market. However, in an attempt to gain a financial advantage, some of those involved in the financial industry perpetrate stock market fraud against investors and otherwise manipulate the market for personal gain.

Securities Fraud Schemes

According to the Securities and Exchange Commission (SEC), in order to maintain a stable market, companies that offer public securities and the brokers, dealers, and exchangers that sell and trade securities must be honest about the benefits and risks of the investment, and they must hold the investors’ best interests in the forefront of all dealings.

Federal Securities Fraud Lawyer - Jason Kalafat Defense Attorney

When a company or broker intentionally lies or misleads the investor about the nature of the investment, that person or entity commits securities fraud. Following are common types of stock fraud or investment fraud:

  • Ponzi schemes and pyramid schemes in which there is no legitimate investment, and returns are paid to early investors by the investments of newer investors. Ponzi schemes always collapse when there are not enough new investors to continue to pay the returns to early investors.
  • High yield investment fraud in which an investor is promised huge returns with little to no risk.
  • Insider trading in which “insider information,” or non-public information about the company is used to buy or sell the stock in the company.  This can occur when a company stakeholder trades his or her own stock, when a company insider shares non-public information with others, or when a person misappropriates non-public information through a breach of duty or a violation of confidence.
  • Stock option fraud in which the employee or officer of a company backdates his or her stock options to a time when the option price was lower than the current market value in order to ensure immediate profitability of the stock.

Most securities fraud involves false statements, omissions, and other material misrepresentations that persuade an investor to make an investment based upon fraudulent and deceptive information. Use of fraud, false claims, and misrepresentation in buying or selling any security is a violation of Rule 10b of the Securities Exchange Act of 1934.

Federal Securities Fraud Statute

While there are a number of regulations and acts of legislation that pertain to U.S. securities, investments, commodities, and the stock market, the criminal penalties for securities fraud are described in 18 U.S.C. Section 1348. Under this statute, it is a felony to:

  • Defraud anyone in connection with any commodity or security
  • Obtain money or property in connection with the purchase or sale of any commodity or security by means of false pretense or misrepresentation

A person convicted of securities fraud in federal court faces the possibility of up to 25 years in prison as well as fines, restitution, and the forfeiture of assets obtained through the deception.

The Benefits of DC Federal Securities Fraud Attorney

While some people may set out to use deception and fraud to swindle others for their own financial gain, a good number of people who have been charged with securities fraud simply failed to understand U.S. securities laws and, in some cases, may have unknowingly violated federal securities regulations and laws. Some start out with the best intentions, but fall prey to misrepresentation when they find their companies in financial difficulty. Regardless of the motives of a person suspected of investment fraud, it is necessary to obtain wise legal counsel and skillful defense representation. Call Defense Attorney Jason Kalafat to schedule a consultation and learn more about protecting your rights if you have been charged with federal securities fraud violations in Washington, DC.