securities fraud
US federal fraud connected with securities, punishable by up to 25 years in prison
Securities fraud is, in US federal law, the term for fraud connected with securities — including stocks, bonds and other exchange-traded financial instruments. The statutory basis is 18 U.S.C. § 1348, which criminalises knowingly executing or attempting to execute a fraudulent scheme either to defraud in connection with a security, or to obtain money or property by false or misleading representations in connection with the purchase or sale of a security.
The concept covers a wide range of conduct. It may involve spreading false information about a company's finances in order to influence the share price, concealing material information from investors, running a Ponzi scheme that displays fictitious returns, or manipulating trading in securities in a way that misleads the market. Common to all variants is that the perpetrator knowingly attempts to deceive those who buy or sell securities.
In the cases covered by Krimidex, the term appears in very different forms. Bernard Madoff's decades-long Ponzi fraud was securities fraud in its purest form: investors believed they owned real securities, but the money merely circulated between new and old victims. In cases such as MoviePass and The Real Wolf of Wall Street, the issue was misleading claims made to investors and shareholders. The GameStop case raised questions of market manipulation, while crypto-related cases such as Bitconned touched on the borderland between traditional securities and digital assets.
The penalty under 18 U.S.C. § 1348 is a fine, imprisonment for up to 25 years, or both. The high maximum reflects the seriousness US law attaches to fraud that undermines confidence in the capital markets. Cases are typically prosecuted by the federal Department of Justice in cooperation with the Securities and Exchange Commission, which exercises civil oversight of the securities markets.
