Securities and Commodities Fraud - 18 U.S.C. § 1348

Securities and Commodities Fraud is a significant Federal offense that comes with harsh penalties. Accordingly, federal prosecutors invest substantial time and resources toward investigating allegations of financial crimes to crackdown on these offenses. One such way is through partnerships with other government agencies. For example, the Department of Justice actively works with the Commodity Futures Trading Commission to target individuals and companies for potential violations of federal commodities laws.

18 U.S.C. § 1348 is the statute Federal prosecutors use to bring charges against those alleged to have engaged in Securities and Commodities Fraud. The law, mirrored after the mail and wire fraud statutes, makes it a crime for one to defraud someone in connection with a commodity or security or obtain by false or fraudulent pretenses any money or property in connection with a sale or purchase of a commodity or security.

Role of 18 U.S.C. § 1349 – Attempt and Conspiracy

It is important to note that under 18 U.S.C. § 1349, one who attempts or conspires to commit an offense under 18 U.S.C. § 1348 faces the same penalties as if they actually violated § 1348 itself.

What the Prosecutor Must Prove

At trial, the government must prove four elements beyond a reasonable doubt to find one guilty of securities fraud. Those elements are:

  • The party involved deceived another in the course of business, such as through false statements;
  • The fraudulent act relates to the sale of securities;
  • The securities in question are connected to the deception; and
  • The alleged party knowingly executed the plan.
What are Commodities and Securities?

A commodity is a tangible item that can be bought or sold on the open market. Examples of commodities include food and oil. A security is any form of financial instrument that can be traded, like stocks and bonds. Given the importance of commodities and securities in the global financial market, the government regulates them heavily.

Examples of Federal Securities Fraud

There are countless ways one can run into an 18 U.S.C. § 1348 violation, but to get a general sense of crimes covered under the statute, here are a few examples:

  • Insider trading: This offense occurs when one trades securities based on material, non-public information.
  • Misrepresentations: One commits this crime when, despite knowing the security's value, manipulates said value by deceiving investors with misrepresentations, like the company's profitability.
  • Churning: Since stockbrokers receive a commission for every trade made on a client's behalf, the practice of churning occurs when the broker excessively trades to generate commission.
  • Accounting Fraud: Similar to misrepresentations, to make a company look more profitable and attractive to potential investors, one manipulates the company's financial records.
Penalties for Securities Fraud under 18 U.S.C. § 1348

Penalties for securities fraud include both potential imprisonment and significant financial penalties. It is also important to note that one could face civil penalties, like revoking trading privileges and fines from the Securities and Exchange Commission. Conviction under 18 U.S.C. § 1348 comes with a possible 25-year Federal prison sentence and fines in the thousands of dollars.

Role of Legal Counsel

As a former Federal and State prosecutor, Peter Katz has much of his career as a prosecutor and knows the ins and outs of criminal defense. By engaging with defense counsel during the early stages of the investigation, the more leverage one has in crafting their defense and proving their innocence. With one's professional reputation on the line, a Securities Fraud conviction has the potential to ruin one's livelihood. Just the possibility of being indicted comes with significant ramifications that could put your life and future in jeopardy

Peter is ready to bring his over two decades of experience to your case and work tirelessly on your behalf to protect you and your rights. Call the Law Offices of Peter Katz at (609) 734-4380 or online to begin preparing your defense today.