Federal Securities and Commodities Fraud Defense – 18 U.S.C. § 1348
Federal securities and commodities fraud is a serious white-collar crime that carries substantial prison exposure, massive financial penalties, and long-term professional consequences.
Charges under 18 U.S.C. § 1348 are aggressively pursued by federal prosecutors and often arise from complex financial investigations involving regulators, financial institutions, and investors.
If you are under investigation or facing charges for securities or commodities fraud, navigating the federal criminal justice system without experienced defense counsel can be disastrous. Early legal intervention is critical.
Understanding the SEC investigation process, the types of allegations involved, and the strategies regulators use is critical.
Your best hope for a favorable outcome is with a highly experienced criminal defense attorney at Eisner Gorin LLP. To schedule a consultation, call (818) 781-1570 or contact us here.
What Is Securities and Commodities Fraud Under 18 U.S.C. § 1348?
Under 18 U.S.C. § 1348, it is a federal crime to knowingly execute—or attempt to execute—a fraudulent scheme:
-
In connection with a security or commodity, or
-
To obtain money or property from the purchase or sale of a security or commodity
-
By means of false or fraudulent pretenses, representations, or promises
This statute is patterned after the federal mail fraud and wire fraud laws and was designed to give prosecutors broad authority to criminally prosecute fraudulent conduct in financial markets.
Importantly, a defendant does not need to successfully profit from the scheme to be convicted. Intent and participation alone may be sufficient.
In many situations, federal laws protect whistleblowers—even when they signed a non-disclosure agreement—especially when reporting fraud, illegal conduct, or threats to public safety.
The federal whistleblower process enables individuals to report fraud, corruption, and violations of federal law related to government programs, financial institutions, healthcare providers, contractors, and corporations.
In many cases involving securities fraud, insider trading, accounting fraud, market manipulation, and disclosure-related issues, SEC civil proceedings and DOJ prosecutions proceed simultaneously.
What Qualifies as a “Security” or “Commodity”?
Securities
A security generally includes any financial instrument where an investor contributes money with the expectation of earning a return, including:
-
Corporate stocks
-
Bonds (corporate or municipal)
-
Investment contracts
-
Notes and debentures
Commodities
Commodities are goods traded on open markets, such as:
-
Oil
-
Gold
-
Agricultural products (wheat, corn, soybeans)
-
Futures and options contracts tied to those goods
Trading securities and commodities is essential to the stability of global markets—but fraudulent conduct within these markets is harshly punished.
Common Types of Federal Securities Fraud Schemes
Federal securities fraud can take many forms. The most commonly prosecuted schemes include:
Insider Trading
Trading securities based on material, non-public information gives an unfair advantage over other investors.
Churning
Excessive buying and selling of securities by a broker to generate commissions, often without regard to the client's financial interests.
Misrepresentation
Knowingly making false statements or omissions to manipulate the perceived value of a security.
Pump and Dump
Artificially inflating a stock's price through misleading promotions, then selling at a profit, leaving investors with losses.
Accounting Fraud
Manipulating or falsifying financial statements to misrepresent a company's assets, revenue, or liabilities.
Outsider Trading
Using stolen or hacked non-public information—often obtained through data breaches—to trade securities unlawfully.
Other conduct charged as securities fraud may include Ponzi schemes, embezzlement, abusive short selling, cryptocurrency fraud, and lying to auditors.
Two Categories of Conduct Criminalized by 18 U.S.C. § 1348
The statute criminalizes two distinct but related forms of conduct:
-
Defrauding any person in connection with a securities or commodities transaction
-
Obtaining money or property through false or fraudulent representations related to those transactions
Both categories are punishable—even if no actual financial loss occurred.
Related Federal Charges Often Filed
Depending on the facts, securities fraud charges may be accompanied by additional federal counts, including:
-
Wire Fraud (18 U.S.C. § 1343)
-
Mail Fraud (18 U.S.C. § 1341)
The Corporate Transparency Act (CTA) requires certain companies to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) to prevent money laundering, fraud, tax evasion, and other financial crimes.
CA Insider trading, under Corporations Code § 25402, occurs when someone buys or sells securities while in possession of material nonpublic information obtained through a relationship with the issuer.
Attempting or conspiring to commit securities fraud carries the same penalties as completing the offense.
Penalties for Securities and Commodities Fraud
A conviction under 18 U.S.C. § 1348 is punishable by:
-
Up to 25 years in federal prison
-
Substantial fines
-
Restitution to alleged victims
-
Professional license consequences
Sentencing is heavily influenced by the United States Sentencing Guidelines, particularly:
-
Alleged loss or intended loss amount
-
Number of victims
-
Sophistication of the scheme
-
Defendant's role in the offense
Federal judges retain broad discretion, and sentences can vary dramatically depending on how these factors are litigated.
In major financial crime cases, sentencing enhancements can increase exposure — sometimes resulting in 10, 20, or even 30+ years in federal prison.
Defenses to Federal Securities Fraud Charges
Securities fraud cases are complex and document-intensive. Effective defenses may include:
Lack of Intent
The government must prove intentional or knowing deception. Poor judgment, negligence, or business failure alone is not a crime.
No Causal Link to Investor Loss
Losses must be connected to the alleged misrepresentations. Market forces or independent decisions may break that link.
Truthful or Immaterial Statements
Not all inaccurate statements are material to investors. Immaterial information cannot support a securities fraud conviction.
Overreach by Prosecutors
Federal fraud cases often blur the line between criminal conduct and civil regulatory issues.
Early defense involvement can dramatically affect charging decisions, loss calculations, and sentencing exposure.
Speak With a Federal Securities Fraud Defense Lawyer
Federal investigations into online securities fraud typically begin with market surveillance by the SEC's Division of Enforcement, which uses algorithmic tools to detect unusual trading patterns linked to social media activity.
If you are under investigation or indicted for securities or commodities fraud under 18 U.S.C. § 1348 or § 1349, do not speak with investigators without counsel. The stakes are extraordinarily high.
Eisner Gorin LLP is a nationally recognized criminal defense firm representing clients nationwide in complex federal financial crime cases.
Our attorneys understand how federal investigations operate and how to build effective defense strategies in securities fraud prosecutions.
📞 Call 877-781-1570 or contact us online for a confidential consultation and immediate legal guidance.