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Penalties for Securities Fraud

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What is at risk if you or your company is under investigation for securities fraud? Here are some examples of recent federal securities fraud cases that resulted in substantial jury verdicts and settlements with the U.S. government.

Violations of securities laws and regulations in the United States can have serious consequences—both civil and criminal. Under both the Securities Act of 1933 and the Securities Exchange Act of 1934, securities fraud is defined as willfully engaging in deceptive practices intended to manipulate financial markets or induce investors to make financial investment decisions based on deceptive or false information. A security can take the form of any investment, from stocks and bonds to futures contracts and other financial instruments.

What are the Potential Penalties for Securities Fraud in the U.S.?

Any time an individual or entity knowingly provides false information regarding any type of security, there is a risk that the individual or entity will face a securities fraud investigation. At the federal level, securities law violations are punishable by up to 20 years in prison and a $5 million fine. The range of punishment for securities fraud is determined based upon the amount of money manipulated in the alleged fraudulent scheme.

Here are 10 real-life examples of federal securities and financial fraud cases and the penalties imposed (our firm did not represent the individuals and entities charged in these cases):

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Dr. Nick Oberheiden
Dr. Nick Oberheiden



Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney


Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

1. Former Mining Company Owner Sentenced for Securities and Financial Fraud

Following a federal jury trial in California, a former owner of a mining company was sentenced to 54 months in prison for his role in a securities and financial fraud scheme. According to the evidence presented, the former executive secured a $15.8 million loan from the United States government to build a marble mine in Afghanistan. In order to secure the loan, the executive falsified financial documents pertaining to the future profitability of the mine; and, once he received the loan, he diverted a significant portion of the funds for his own use. Although some of the loan proceeds went to construction of the mine, the former executive took over a million dollars to pay his personal debts and purchase luxury items. In addition to his prison sentence, the former executive will also have to repay the United States more than $15 million in restitution.

2. Securities Broker Found Guilty of Perpetrating a Ponzi Scheme

A securities broker in Montana was found guilty of numerous counts of securities fraud by a federal jury for his role in a Ponzi scheme. According to the evidence presented at trial, the broker used false bank documents to lure investors to buy loan instruments for a company based in Switzerland. The loan instruments were never meant to materialize, and the broker converted the investors’ money for his own use. The total amount the broker stole from these investors was over $4 million. The broker is currently awaiting sentencing and faces restitution, fines, and other penalties.

3. Public Company CFO Pleads Guilty to Altering Earnings Statements in Order to Mislead Investors

The chief financial officer (CFO) of a publicly-traded financial services company pleaded guilty to his role in a securities fraud scheme that involved the falsification of the company’s accounting records. According to the plea agreement, the CFO made material alterations to the company’s yearly earnings which misled the company’s investors regarding earnings capabilities. As a result of the fraudulent earnings statements, the company’s investors continued to invest in the failing company, resulting in over $25 million in losses to the company’s shareholders. As a result of his guilty plea, the CFO will have to pay back the $25 million in restitution and faces the possibility of up to 20 years in prison.

4. Trader Pleads Guilty to Spoofing Scheme Involving Fraudulent Commodities Investments

A former trader at a commodities firm based in New York pleaded guilty to his role in a “spoofing” scheme. According to the plea agreement, the trader solicited orders for foreign commodities from numerous investors, but never intended to execute these orders. The trader created fake documents to make it look like the commodities were legitimate, when in fact they were not. The trader took the funds paid to him by the investors and converted them for his own use, buying expensive cars and other luxury items. As a result of his spoofing scheme, the trader caused investors to lose more than $60 million. As part of his plea agreement, the former trader will have to repay all $60 million in restitution, plus a fine to be assessed by the Court. The former trader also faces up to 20 years in prison.

5. Medical Advertising Company Agrees to Pay $70 Million to Settle Investor Fraud Allegations

A medical advertising company based in Illinois agreed to pay $70 million to settle allegations that it engaged in securities fraud. According to the settlement agreement, the company was accused of falsifying business records and contracts to create the appearance that it was more profitable than it actually was, and then using these fraudulent records to attract investors. The company was also accused of misrepresenting the services it provided, which was also deemed to be a fraudulent inducement for investment. Since this investigation was resolved via a settlement, there was no affirmative finding of liability.

6. Oil Company CEO Faces $100 Million in Restitution and 20 Years in Prison or Misleading Investors

A former chief executive officer (CEO) of an oil company was found guilty of securities fraud by a federal jury. According to the evidence presented at trial, the former CEO misled the company’s investors by hiding massive losses. During a two-year period, the oil company lost more than $100 million in revenue, but the CEO directed the company’s other officers not to report the losses on the company’s financial disclosure forms and to withhold the information regarding the losses on the company’s yearly SEC filings. Investors were never made aware of the $100 million loss and continued to invest in the company as if it was profitable. When the company’s losses were made public, investors realized their shares were worthless and the company’s employees lost their jobs as the company was shut down by the FDIC. As a result of his plea agreement, the former CEO will have to pay $100 million in restitution plus a fine to be assessed by the Court. The former CEO also faces up to 20 years in prison.

7. Brokerage Firm CEO Indicted on Allegations of Overcharging Investors

A former CEO of a brokerage firm based in Florida was indicted on charges of securities fraud. According to the indictment, the former CEO misrepresented the buying price of investments he was brokering for his clients. The former CEO is alleged to have inflated the cost of the investments when discussing them with the firm’s clients and then pocketing the overcharged amounts when he made the investments at their actual purchase prices. As a result of his scheme, the indictment alleges that the former CEO stole over $5 million from investors. If convicted of the charges, the former CEO is facing up to 20 years in prison and a maximum fine of $5 million.

8. Commodities Trading Firm Agrees to Settle Securities Fraud Allegations for $25 Million

A global commodities trading firm has agreed to a settlement with the United States to resolve allegations that it committed securities fraud. According to the settlement agreement, the trading firm was alleged to have manipulated the futures market for precious metals. The firm allegedly created false orders for precious metals in order to drive up the market price of the metals. The firm also created false filings regarding the profitability of precious metal futures options and then disseminated these filings into the market. As a result of the settlement agreement, the commodities firm will pay the government $25 million.

9. Foreign National Faces Prosecution in the U.S. for Alleged $11 Million Fraud Scheme

An individual was extradited to the United States from Thailand after he was indicted by a federal court on numerous counts of securities fraud. According to the indictment, the individual created websites that were meant to induce individuals to invest in a “gold payout opportunity.” Under this “opportunity,” the investors would buy shares of gold with the promise that their gold would be quickly liquidated, resulting in a payout amount several times their initial investment. The indictment, however, alleges that there never was any gold and that the individual was simply collecting money from the investors. As a result of his scheme, the individual is alleged to have stolen more than $11 million. If convicted, the individual faces up to 20 years in prison and a $5 million fine.

10. Financial Services Company Agrees to Pay $64 Million to Settle Allegations of Charging Fraudulent Commissions

A financial services company based in Massachusetts entered into a settlement agreement with the United States government to resolve allegations of securities fraud. According to the settlement agreement, the financial services company was alleged to have charged its clients unlawful commissions. The company’s clients were told commissions on certain commodities trades would have no charge, but the company charged fees anyway by taking funds out of the clients’ accounts. The company is further alleged to have prepared documents that misrepresented the buying price on certain commodities in order to conceal the commissions. These secret commissions resulted in millions of dollars fraudulently appropriated to the company. As a result of the agreed settlement, the company will pay the United States $64 million.

Contact the Federal Securities Fraud Defense Lawyers at Oberheiden P.C.

Oberheiden P.C. is a federal defense law firm comprised entirely of senior attorneys and consultants, including former DOJ prosecutors and FBI Special Agents. If you or your company is under investigation for securities fraud, we can protect you. For a complimentary initial case assessment, call 214-692-2171 or inquire online now.

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