Securities fraud can involve false claims, market manipulation or misuse of insider information. These actions can mislead investors and impact financial markets. Individuals charged with securities fraud may face steep penalties, including fines and prison.
Understanding the different types of securities fraud is important if you are facing criminal charges. The legal process is complex, and knowing what type of conduct is under scrutiny is a key part of protecting your rights.
1. Securities fraud by a company
Some companies inflate their financial performance by misrepresenting profits, assets or business growth. When leadership provides false financial data to shareholders or the public, it can create an unrealistic valuation of the company. Investors may be misled into buying or holding stock based on incorrect information. If the truth is later revealed, losses can be significant. This type of fraud played a major role in past corporate scandals that led to bankruptcy and investor harm.
2. Insider trading
Insider trading occurs when someone with access to confidential information about a company uses it to buy or sell stocks before the public becomes aware. The unfair advantage gained by acting on non-public data makes this a serious form of securities fraud. For example, an executive may learn that the company is about to report poor earnings and decide to sell their stock before the price drops. These cases often involve internal audits or regulatory investigations.
3. Third-party misrepresentation
Some securities fraud is carried out by people not directly associated with the company. One common method is a pump-and-dump scheme. In this tactic, someone buys stock in a small or unknown company and spreads false claims to inflate its value. Once others invest and the price rises, the original buyer sells their shares at a profit, leaving others with the losses when the value crashes. These schemes can also involve fake tips or misleading promotional emails.
Each of these types of fraud can lead to serious legal consequences. If you are under investigation or facing white collar crime charges, seeking legal guidance can help you understand your options and prepare for what comes next.