Securities Fraud Defense

By Elizabeth Franklin-Best, Esq., and Christopher Zoukis, JD, MBA

A securities fraud case rarely begins with an arrest. It begins with an SEC inquiry, a subpoena for trading and corporate records, or a whistleblower complaint — and the strongest matters are referred to the Department of Justice for criminal prosecution. Securities fraud is technical, document-intensive, and almost always shadowed by a parallel civil case. If your conduct has drawn that kind of scrutiny, a securities fraud lawyer should be involved while the investigation is still taking shape.

Elizabeth Franklin-Best, P.C. defends securities fraud investigations and prosecutions across the federal system — Exchange Act charges, Title 18 securities fraud, and the parallel SEC matters that travel with them. Our principal attorney, Elizabeth Franklin-Best, has appeared in more than 330 federal proceedings, including over 100 appeals, in every one of the twelve federal circuit courts of appeals and at the United States Supreme Court; she confines her work to the federal arena. Best Lawyers in America named her a 2026 “Best Lawyer” in Appellate Practice, and Chambers USA ranks her in 2026 for Litigation: White-Collar Crime & Government Investigations. In a field where the two charging statutes carry different elements and different case law, that doctrinal precision is not decoration — it is the defense.

The sections below compare the two criminal routes — Rule 10b-5 and 18 U.S.C. § 1348 — element by element, survey where the government is stretching § 1348 today, and explain the penalties and the defenses that matter. Read it as background, not as advice on your own facts; that assessment is what our paid, one-hour initial consultation is for. This page anchors the securities corner of our federal fraud defense practice.

Quick Answer

Question	Answer
What is securities fraud?	Using material misrepresentations, omissions, or manipulative or deceptive conduct in connection with the purchase or sale of a security.
What laws make it a crime?	Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5, prosecuted criminally under 15 U.S.C. § 78ff, and the Title 18 securities fraud statute, 18 U.S.C. § 1348.
What must the government prove?	A material misrepresentation or deceptive device, in connection with a securities transaction, made with scienter and — for a criminal case — willfully.
What penalties can apply?	Up to 20 years under Section 78ff and up to 25 years under Section 1348, plus fines, restitution, and SEC civil penalties.
What does an initial consultation cost?	One hour, paid — a confidential session covering the SEC matter, the criminal exposure, and your next moves.

Key Takeaways

• Securities fraud covers a wide range of conduct — accounting fraud, offering fraud, market manipulation, misrepresentations to investors, and insider trading.
• It is prosecuted under two main vehicles: Section 10(b) with Rule 10b-5, and the broader Title 18 statute, Section 1348.
• Section 1348 demands no reliance and fewer technical elements than Rule 10b-5, which is why prosecutors increasingly prefer it — and why its coverage limits deserve early scrutiny.
• A criminal conviction requires scienter and willfulness — an intent to deceive, manipulate, or defraud, not negligence or an honest error.
• The SEC’s civil enforcement action and the criminal case usually proceed in parallel, and what is said in one can affect the other.
• Forward-looking statements, opinions, and good-faith projections that did not pan out are not, by themselves, securities fraud.
• An SEC subpoena or document request is a signal to retain counsel before giving testimony or producing records.

What Is Securities Fraud?

Securities fraud is deception connected to the buying and selling of investments. It covers a broad field — false or misleading statements to investors, manipulation of a stock’s price, accounting fraud that distorts a company’s reported results, fraudulent securities offerings, and insider trading. What ties these together is a common harm: the corruption of the honest, informed market on which investors rely.

Securities fraud is enforced on two tracks at once. The Securities and Exchange Commission pursues civil enforcement under a preponderance-of-the-evidence standard, while the Department of Justice prosecutes the most serious conduct criminally, where it must prove guilt beyond a reasonable doubt. The two proceedings frequently run side by side on the same facts. That parallel structure is one reason securities fraud defense has to be coordinated and strategic from the very first contact — a statement, a filing, or a production in one forum can shape the other.

The Securities Fraud Statutes

Two statutory vehicles carry most criminal securities fraud cases:

• Section 10(b) and Rule 10b-5. Section 10(b) of the Securities Exchange Act of 1934 prohibits the use of any manipulative or deceptive device in connection with the purchase or sale of a security; the SEC’s Rule 10b-5 implements it by barring fraud, material misstatements and omissions, and deceptive practices. Willful violations are prosecuted criminally under 15 U.S.C. § 78ff.
• Section 1348. Enacted as part of the Sarbanes-Oxley Act, 18 U.S.C. § 1348 is a Title 18 securities and commodities fraud statute modeled on the mail and wire fraud statutes. It punishes schemes to defraud in connection with a security, and it is generally read more flexibly than Rule 10b-5.

The two are not identical. Section 1348 was written to broaden the government’s reach, and courts interpret it with reference to mail and wire fraud principles rather than the more technical body of Rule 10b-5 law. Prosecutors often charge both. Identifying which theory the government is relying on — and whether its specific requirements are met — is a foundational step in a securities fraud defense.

Common Forms of Securities Fraud

Securities fraud charges arise from a range of conduct. The most common include:

• Accounting and disclosure fraud — misstating revenue, earnings, or financial condition in public filings or to investors.
• Offering fraud — raising money through false statements about an investment, including fraudulent private placements.
• Market manipulation — artificially affecting a security’s price or volume, including pump-and-dump schemes.
• Misrepresentations to investors — false statements by issuers, brokers, or advisers about an investment’s risks or prospects.
• Insider trading — trading on material non-public information in breach of a duty, a distinct branch of securities fraud.

Securities fraud also overlaps heavily with investment fraud and Ponzi schemes and with wire fraud, which is almost always charged alongside it. The label on the count matters less than the conduct the government must actually prove.

What the Government Must Prove

The precise elements depend on the statute charged, but a criminal securities fraud prosecution under Rule 10b-5 generally requires the government to prove beyond a reasonable doubt:

• A material misrepresentation, omission, or deceptive device. A false statement of material fact, a misleading omission, or a manipulative or deceptive practice.
• In connection with a securities transaction. The conduct was connected to the purchase or sale of a security.
• Scienter. The defendant acted with scienter — an intent to deceive, manipulate, or defraud. Under Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976), Section 10(b) reaches knowing or intentional misconduct, not negligence.
• Willfulness. For a criminal conviction under Section 78ff, the violation must have been willful — and the statute adds a rare safeguard: a defendant who proves he had no knowledge of the rule he is charged with violating cannot be imprisoned for the violation.

Under Section 1348, the framework is closer to wire fraud: a scheme to defraud in connection with a security, carried out with intent to defraud. Across both statutes, the contested ground is usually intent and materiality. Markets move on judgment, forecast, and opinion, and the line between an aggressive-but-honest disclosure and a criminal misrepresentation is exactly where a securities fraud case is fought.

Applied insight. Securities fraud cases are built on hindsight. A projection that proved wrong, an accounting position later restated, a risk that materialized — viewed backward, each can look like deceit. The defense’s task is to return the jury to what the defendant actually knew and believed at the time, because scienter is measured then, not after the fact.

Rule 10b-5 or § 1348: Why the Statute Chosen Changes the Defense

A criminal Exchange Act case runs through three layers: Section 10(b), Rule 10b-5, and the criminal penalty provision in Section 32(a), 15 U.S.C. § 78ff(a). In United States v. O’Hagan, 521 U.S. 642 (1997), the Supreme Court called out two safeguards built into that route: the government must prove the defendant acted willfully, and a defendant who proves he had no knowledge of the rule he allegedly violated cannot be imprisoned for the violation. O’Hagan is also the decision that cemented the misappropriation theory — a person commits 10b-5 fraud by trading on confidential information in breach of a duty owed to the source of that information, not just a duty owed to shareholders. Those layers of doctrine — scienter under Hochfelder, willfulness, materiality, the personal-benefit rules in tipping cases — are what make Title 15 prosecutions technical, and technical statutes generate defense motions.

Section 1348 was Congress’s answer to that complexity. Written into Sarbanes-Oxley with language borrowed from the mail and wire fraud statutes, it punishes knowing schemes to defraud in connection with covered securities (and, since Dodd-Frank, commodities), and courts construe it through fraud-statute precedent rather than the technical body of Rule 10b-5 law. It requires no reliance, no purchase or sale by the deceived party, and — in the Second Circuit’s Blaszczak litigation — arguably no personal benefit in tipping cases: a 2019 panel declined to graft the Dirks personal-benefit test onto § 1348, the Supreme Court sent the case back in light of Kelly, and United States v. Blaszczak, 56 F.4th 230 (2d Cir. 2022), then vacated most of the convictions on a different ground — confidential government regulatory information is not “property” — while leaving the personal-benefit question unresolved. The asymmetry between the two statutes remains contested, and we treat it as live ammunition.

Which statute appears in the indictment therefore dictates the defense architecture. These are the points of divergence we examine first:

• Mental state instructions. Willfulness and the no-knowledge proviso under Section 78ff; knowing execution and intent to defraud under § 1348 — the difference shapes the jury charge and the trial proof.
• The coverage element. Section 1348’s securities prong reaches only securities of issuers registered under Section 12 or required to report under Section 15(d) of the Exchange Act — an element worth checking, not stipulating.
• Imported doctrine. When the government uses § 1348 to avoid a Title 15 limit — personal benefit, contemporaneous trading, the definition of a security — we ask whether that end-run survives the rule of lenity and the statute’s own text.

Penalties for Securities Fraud

Criminal securities fraud is a felony with severe penalties. A willful violation of the Exchange Act under 15 U.S.C. § 78ff carries up to 20 years in prison and a fine of up to $5 million for an individual. A conviction under 18 U.S.C. § 1348 carries up to 25 years. Convictions also bring mandatory restitution and the forfeiture of proceeds.

The criminal case is rarely the only exposure. The SEC can pursue a parallel civil action seeking disgorgement, civil penalties, an injunction, and officer-and-director bars. As with other fraud offenses, the actual prison sentence is shaped by the United States Sentencing Guidelines, where the loss amount — or the gain — is the dominant factor, and where the number of victims and the use of sophisticated means add further weight. Because the criminal and civil tracks move together, a defense has to manage both. Our federal sentencing practice addresses the Guidelines analysis in detail.

Applied insight. In a securities fraud case, the loss calculation is a battle of its own. Stock-price declines reflect many forces — market conditions, sector news, broader sentiment — not just the alleged fraud. Disentangling fraud-related loss from ordinary market movement can move a sentence substantially, and it is work that belongs at the center of the defense.

Where § 1348 Is Being Stretched: Digital Assets and Private Markets

Over the past several years, 18 U.S.C. § 1348 has become the government’s growth statute. Prosecutors reach for it because a jury already understands “scheme to defraud,” because it avoids decades of restrictive Title 15 case law, and because its commodities prong — added by Dodd-Frank — opens a second door when an instrument’s status as a security is doubtful. The result has been a wave of charges at the frontier: digital-asset trading and manipulation cases, fraud claims around tokens and perpetual futures, and theories built on pre-IPO and private-market transactions. The results have been mixed, with trial and appellate courts increasingly willing to test whether the charged instrument and conduct actually fit the statute’s words.

That fit is exactly where the defense should press. The securities prong covers only securities of an issuer registered under Section 12 of the Exchange Act or required to file reports under Section 15(d) — so a token, a private note, or an interest in a company that reports nothing to the SEC may fall outside the prong entirely. The commodities prong carries its own definitional limits. And where the government instead proceeds under Title 15, whether a digital asset is a “security” at all remains actively litigated. In a new-market prosecution, the first motion we evaluate is not about intent — it is about coverage, because a scheme cannot defraud “in connection with” an instrument the statute never reached.

What Changed in Securities-Fraud Law (2023–2026)

Securities-fraud doctrine has moved quickly, and several recent Supreme Court decisions changed the terrain on which these cases are fought. We read each new ruling for the leverage it gives the defense, not merely as background.

• A jury, not an agency, decides SEC penalty cases. In SEC v. Jarkesy, 603 U.S. 109 (2024), the Supreme Court held that the Seventh Amendment entitles a defendant to a jury trial when the SEC seeks civil penalties for securities fraud, because such a claim is the modern analogue of a common-law fraud action and cannot be funneled into the agency’s in-house tribunal. The SEC must now litigate contested penalty cases in federal district court, with the discovery rights and Article III protections that come with it — a forum shift the defense can use to build the record and expose weaknesses that also bear on a parallel criminal case.
• Materiality is the boundary of fraud-by-inducement. In Kousisis v. United States, 605 U.S. 114 (2025), the Court upheld convictions under a fraudulent-inducement theory even without proof of net economic loss, but it anchored the offense to a genuine material misrepresentation. For securities cases — where the government often charges a scheme without showing any investor lost money — Kousisis confirms that materiality, not just deception, is the line the prosecution must cross.
• Standing to sue contracted in offering cases. Slack Technologies, LLC v. Pirani, 598 U.S. 759 (2023), held that a plaintiff suing under Section 11 of the Securities Act must plead and prove that the shares purchased are traceable to the allegedly defective registration statement. The decision is civil, and it does not bind a criminal prosecution under Section 1348 — but by narrowing the pool of private plaintiffs in direct listings and novel offering structures, it can reduce the parallel civil pressure that often accompanies a securities indictment.
• The Section 1348 personal-benefit question is still open. Prosecutors increasingly use Section 1348 to sidestep the technical limits of Title 15. The Second Circuit’s Blaszczak litigation — where a 2019 panel declined to import the Dirks personal-benefit test into Section 1348, the Supreme Court vacated and remanded in light of Kelly v. United States, 590 U.S. 391 (2020), and United States v. Blaszczak, 56 F.4th 230 (2d Cir. 2022), then overturned most convictions because confidential government information is not “property” — left the personal-benefit asymmetry unresolved. We treat that gap as live ground for a motion whenever the government runs a tipping theory through the broader statute.

Defending a Securities Fraud Case

The strongest securities fraud defense is usually the absence of criminal intent. The statutes require scienter and, for a criminal conviction, willfulness — a deliberate intent to deceive. Good faith is a complete defense. A defendant who honestly believed a disclosure was accurate, who relied in good faith on auditors, lawyers, or other professionals, or who made an honest judgment about a forecast or an accounting question has not committed securities fraud, however the investment later performed.

Other defenses target the remaining elements. A statement may have been an opinion, a forward-looking projection, or immaterial puffery rather than a false statement of material fact. The alleged conduct may not have been “in connection with” a securities transaction. The loss attributed to the defendant may reflect ordinary market forces rather than fraud. We work through the filings, the communications, and the trading and accounting records in detail, coordinate the criminal defense with any parallel SEC matter, and test each element of whichever statute the government chose. Promising results would be false comfort, and we refuse to offer it; rigorous, statute-specific defense work is the commitment we make instead.

Why Work With Elizabeth Franklin-Best, P.C.

Securities cases demand counsel equally at home before a jury, an agency, and an appellate panel. Elizabeth Franklin-Best is a member of the Supreme Court bar and the bars of all twelve federal circuit courts of appeals, takes district-court matters nationwide through pro hac vice admission — from Montana to Florida — and confines her work to the federal arena. Alongside trial-level defense, she maintains a nationwide federal post-conviction and appellate practice, the discipline that surfaces the doctrinal arguments — on scienter, materiality, and statutory reach — that decide securities cases. Her recognition as a Best Lawyers in America 2026 “Best Lawyer” for Appellate Practice and her 2026 Chambers USA ranking for Litigation: White-Collar Crime & Government Investigations reflect that orientation.

Securities fraud cases turn on technical, doctrine-heavy questions — scienter, materiality, the reach of Rule 10b-5 and Section 1348 — and on synchronizing a criminal defense with a parallel civil proceeding. Doctrine moves fast in this field, and arguments that did not exist five years ago now win cases; an appellate orientation keeps those arguments on the table from day one. Each client’s strategy is drawn from the trading records, the disclosures, and the testimony in that client’s own matter — never from a form file. The wider charge family is mapped across our federal fraud defense pages.

Talk With a Securities Fraud Lawyer

An SEC subpoena, a request for testimony, or word of a grand jury inquiry means decisions with criminal consequences are already in front of you — what to produce, whether to testify, how the parallel proceedings should be sequenced. Get advice before you commit to a course. In a paid, one-hour initial consultation, we evaluate the government’s likely theory under both charging statutes and lay out your options while they are still open.

Frequently Asked Questions