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5 Most Common Types of Securities Fraud and the Consequences of Each

Securities Fraud criminal lawyer in Dallas TX

5 Most Common Types of Securities Fraud and the Consequences of Each

Securities fraud is a category of white-collar crime that comes with serious consequences. Learn about the most common types of securities fraud and their penalties. 

Crimes that are non-violent and financially motivated are referred to as white-collar crimes. There are various criminal acts that fall within this category, with one of the most recognized being securities fraud. Securities fraud isn’t a singular crime itself, but rather an umbrella term for a group of illegal actions that involve deception for financial gain. 

Last year there were nearly 70,000 cases of securities fraud reported to the U.S Sentencing Commission, costing the United States billions of dollars in losses. Here’s what you should know about the most common types of securities fraud and the associated penalties for those who are convicted. (1)  

What Is Securities Fraud?

You often hear about these types of white-collar crimes in the news, but seldom answered is the question of “what is securities fraud?’. Securities fraud is a serious form of white-collar crime that’s also sometimes referred to as investment fraud. In the simplest terms, securities fraud involves the misrepresentation of key information that an interested party would consider when making an investment decision. 

Securities fraud can be committed by an individual, such as an individual investment broker, or by a larger group or organization. The end goal of the person or group committing an act of securities fraud is to provide false information in order to manipulate financial markets in a way that provides financial benefit or gain.  

Types of Securities Fraud 

The Federal Bureau of Investigations outlines a number of crimes that fall under the securities fraud umbrella. The FBI’s site specifically lists crime that includes (2):

  • High Yield Investment Fraud
  • Ponzi Schemes
  • Pyramid Schemes
  • Advanced Fee Schemes 
  • Broker Embezzlement or Misconduct

There are other criminal acts that fall within the category of securities fraud, however, the five listed above are the most common. To help you better understand these most common types of securities fraud, here is a brief description of each. 

  • High Yield Investment Fraud: Characterized as investments that seem too good to be true, and actually are. These investments typically promise a high return with minimal or no risk. These investment offers are often unsolicited, with victims being contacted via email or phone. 
  • Ponzi Schemes: Probably one of the most recognized types of securities fraud, Ponzi schemes work on a structure that collects money from newly acquired victims to pay a high rate of return to earlier investors. In short, there is no actual investment but rather all the returns come through new investors only. 
  • Advanced Fee Schemes: Fees are collected from victims, with the promise that their small investment will produce a more sizable gain. The fee might be described as processing fees, supply fees, or program entrance fees, but in reality, the perpetrator never follows through on their promise. 
  • Broker Embezzlement or Misconduct: Investment brokers may act inappropriately by adding on unexplained fees, or by participating in unauthorized trades. Some investment brokers might also engage in embezzling funds from their clients. 
  • Pyramid Schemes: Pyramid schemes are business models in which top tier members recruit new members, with those members recruiting new additions in return. Each person who joins pays an upfront cost, which goes directly up the chain. Pyramid schemes, not to be confused with multi-level marketing operations, are illegal in the United States. 

Securities Fraud Penalties

It’s evident that acts of securities fraud can have a significant impact on the businesses or individuals that find themselves on the victim end of the crime. For those who are involved in committing the crime, the associated securities fraud penalties can be severe. 

Securities fraud is considered a felony in Texas. The degree of felony offense charged depends on the monetary amount associated with the crime. 

  • If the offense involves up to $10,000, it will be charged as a third-degree felony
  • Amounts between $10,000 and $100,000 are charged as a second-degree felony
  • Any amount that exceeds the $100,000 threshold will be charged as a first-degree felony in Texas

Each of these felony classifications carries the potential for time served in prison, along with fines and legal fees. 

Contact An Experienced Securities Fraud Attorney In Dallas

If you’ve been accused of involvement with securities fraud, contacting an experienced securities fraud attorney first, before you speak to anyone else, is the most important step you can take to protect your future. The penalties for securities fraud are severe, with the average term of incarceration for a securities fraud conviction being 54 months. Don’t risk your future, contact a securities fraud attorney in Dallas today. 

Dallas Best Securities Fraud Defense Lawyers

Broden & Mickelsen

(T): 214-720-9552

https://www.brodenmickelsen.com/

 

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Prior results cannot and do not guarantee or predict a similar outcome with respect to any future case.

 

Sources 

  1. https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/Securities_Fraud_FY18.pdf 
  2. https://www.fbi.gov/stats-services/publications/securities-fraud 

https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/Securities_Fraud_FY18.pdf

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