Title 18 U.S.C. § 1348 – Pump and Dump Schemes
Federal Securities Fraud Defense
Pump-and-dump schemes are among the most aggressively prosecuted federal financial crimes in the United States.
Under Title 18 U.S.C. § 1348, federal prosecutors pursue individuals accused of artificially inflating the price of stocks, securities, commodities, or digital assets through false or misleading information—then selling at a profit before the market collapses.
If you are under investigation or have been charged with a pump-and-dump scheme, the stakes could not be higher.
A conviction under 18 U.S.C. § 1348 carries a maximum term of imprisonment of 25 years, substantial fines, forfeiture of assets, and permanent reputational damage.
Federal securities fraud cases require immediate, sophisticated legal defense.
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 a Pump and Dump Scheme?
A pump-and-dump scheme is a form of market manipulation involving two deliberate stages:
The “Pump”
The price of a stock, security, or digital asset is artificially inflated through false, misleading, or exaggerated statements, often claiming:
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Inside information
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Imminent mergers or partnerships
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Breakthrough technology or regulatory approval
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Celebrity or institutional backing
These statements are intended to create urgency and induce prompt purchase.
The “Dump”
Once the price spikes, those behind the scheme sell their holdings at the inflated price, leaving unsuspecting investors holding assets that quickly collapse in value.
These schemes frequently target:
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Microcap and penny stocks
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Thinly traded securities
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OTC and lightly regulated markets
Pump and Dump Schemes and Cryptocurrency
Modern pump-and-dump schemes increasingly involve cryptocurrencies, digital tokens, and NFTs. These schemes are often coordinated through:
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Social media platforms
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Encrypted messaging apps
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Online chat rooms and forums
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Investment newsletters and influencer accounts
Participants may receive coordinated instructions about when to buy, what to buy, and where to trade, followed by a rapid sell-off once prices spike.
Federal authorities now treat crypto-based pump-and-dump schemes with the same severity as traditional securities fraud, even when the asset itself is loosely regulated.
What Does Title 18 U.S.C. § 1348 Prohibit?
18 U.S.C. § 1348 criminalizes schemes to defraud involving securities and commodities. The statute makes it a federal crime to:
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Knowingly defraud any person in connection with securities or commodities; or
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Obtain money or property through false or fraudulent pretenses related to the purchase or sale of securities or commodities
Importantly, attempts and conspiracies are punishable—even if no money was actually gained.
Elements the Government Must Prove
To convict someone under 18 U.S.C. § 1348, federal prosecutors must establish:
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A Scheme to Defraud
Participation in or execution of a plan designed to deceive investors -
Material Misrepresentations or Deceptive Conduct
False or misleading statements that would influence investment decisions -
Intent
Knowledge and intent to deceive or manipulate the market -
Connection to Securities or Commodities
The scheme involved stocks, securities, commodities, or digital assets
Notably, actual financial loss by investors is not required. The attempt alone can support a conviction.
Example of a Pump and Dump Scheme
A group secretly acquires shares in a thinly traded company, then launches an online campaign claiming the company is about to secure a major partnership—the stock price surges due to investor excitement.
The group sells its shares at peak value, and the stock rapidly collapses once the misinformation is exposed.
This conduct fits squarely within 18 U.S.C. § 1348.
Penalties for Pump and Dump Convictions
A conviction under Title 18 U.S.C. § 1348 can result in:
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Up to 25 years in federal prison per count
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Significant fines
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Asset forfeiture
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Supervised release
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Permanent federal felony record
Sentencing is often enhanced by:
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Loss amount
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Number of victims
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Leadership role in the scheme
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Use of sophisticated means
In major financial crime cases, sentencing enhancements can increase exposure — sometimes resulting in 10, 20, or even 30+ years in federal prison.
Related Federal Fraud Charges
Pump-and-dump investigations frequently involve additional federal charges, including:
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Securities fraud under other federal statutes
Multiple charges can significantly increase exposure to sentencing.
Common Defenses to Pump and Dump Allegations
Federal securities fraud cases are complex and fact-intensive. Depending on the circumstances, viable defenses may include:
Lack of Intent
Fraud requires intent. Honest belief, negligence, or poor investment judgment does not equal criminal fraud.
No False or Misleading Statements
Statements based on opinion, speculation, or good-faith analysis may not qualify as fraudulent misrepresentations.
Legitimate Market Activity
Buying and selling securities—even aggressively—is not illegal absent deception or manipulation.
Entrapment
If government agents induced conduct that would not otherwise have occurred, entrapment may apply.
Insufficient Evidence
Federal cases often rely on digital communications, cooperating witnesses, and circumstantial evidence—each subject to challenge.
Why Federal Defense Experience Matters
Federal agencies prosecute pump-and-dump cases with enormous resources. Early intervention by experienced federal defense counsel can:
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Prevent charges from being filed
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Limit exposure through pre-indictment advocacy
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Control damaging statements and evidence
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Challenge search warrants and subpoenas
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Negotiate favorable resolutions
Once charges are filed, the defense strategy must be precise, aggressive, and informed by federal sentencing law.
Contact 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 facing charges related to a pump-and-dump scheme, do not speak to investigators without counsel. Early mistakes can permanently damage your defense.
Eisner Gorin LLP provides strategic, high-level defense for individuals accused of federal securities and commodities fraud. We represent clients nationwide from our Los Angeles offices and intervene early to protect our clients' freedom, finances, and future.
Call now for a confidential consultation at 818-781-1570. Federal cases move fast—your defense must move faster.