Introduction
Investment fraud causes not only financial harm but also raises complex legal issues. Understanding relevant laws is crucial for successful recovery. This guide explains criminal and civil legal options available to fraud victims.
Criminal Law: Wire Fraud and Securities Fraud
Federal Statutes
18 U.S.C. § 1343 - Wire Fraud:
Whoever, having devised or intending to devise any scheme or artifice to defraud… transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both.
Elements of Wire Fraud
1. Scheme to Defraud
- Material Misrepresentation: False claims about investments, fake credentials
- Intent to Deceive: Victim relied on false information
- Financial Loss: Actual monetary damage occurred
2. Use of Interstate Communications
- Electronic Communications: Email, phone, internet
- Interstate Commerce: Crosses state lines
- In Furtherance: Used to execute the fraud
Federal Sentencing
Sentencing Guidelines
- Loss Amount Under $6,500: 0-6 months
- Loss Amount $6,500-$15,000: 8-14 months
- Loss Amount $95,000-$150,000: 18-24 months
- Loss Amount Over $550,000: 41-51 months
Enhancement Factors
- Vulnerable victims (elderly, disabled)
- Sophisticated means
- Abuse of trust
- Number of victims
Securities Fraud
Securities Exchange Act of 1934
Section 10(b) and Rule 10b-5:
Prohibits any manipulative or deceptive device in connection with the purchase or sale of securities.
Criminal Penalties
- Up to 20 years imprisonment
- Fines up to $5 million for individuals
- Fines up to $25 million for entities
Civil Remedies
Federal Securities Laws
Private Right of Action
- Sue for damages under federal securities laws
- Recover actual damages plus attorney fees
- Possible punitive damages
Class Action Lawsuits
- Join with other victims
- Share legal costs
- Increased negotiating power
State Law Claims
Common Law Fraud
- Misrepresentation of material fact
- Intent to deceive
- Justifiable reliance
- Resulting damages
Breach of Fiduciary Duty
- If advisor relationship existed
- Violation of duty of care/loyalty
- Damages from breach
RICO Claims
Racketeer Influenced and Corrupt Organizations Act
18 U.S.C. § 1962:
Civil RICO allows victims to sue for triple damages when fraud involves organized criminal enterprise.
Requirements
- Pattern of racketeering activity
- Enterprise involvement
- Injury to business or property
- Causation
Statute of Limitations
Criminal Cases
Federal Wire Fraud
- General Rule: 5 years from offense
- Financial Institution Fraud: 10 years
- Securities Fraud: 6 years
Civil Cases
Federal Securities Claims
- General Rule: 2 years from discovery
- Maximum: 5 years from violation
State Law Claims
- Fraud: Typically 2-6 years from discovery
- Contract: 4-6 years from breach
- Maximum: Varies by state
Recovery Options
Criminal Restitution
Mandatory Victim Restitution Act
- Courts must order full restitution
- Covers actual losses
- Priority over fines
- Enforceable as civil judgment
Civil Recovery
Advantages
- Control over litigation
- Broader discovery rights
- Potential for settlement
Challenges
- Upfront costs
- Burden of proof
- Collection difficulties
Administrative Remedies
SEC Disgorgement
- Return of ill-gotten gains
- Distributed to victims
- No statute of limitations
CFTC Restitution
- For commodity fraud
- Similar to SEC process
Evidence Requirements
Document Everything
Essential Evidence
- All communications (emails, texts, calls)
- Financial records (transfers, statements)
- Marketing materials (websites, brochures)
- Contracts and agreements
Preservation Duties
- Don’t delete anything
- Make backup copies
- Maintain chronological order
Expert Witnesses
- Financial experts
- Technology specialists
- Damage calculations
Working with Law Enforcement
Federal Agencies
FBI
- Primary investigator for wire fraud
- Financial Crimes Section
- IC3.gov for online complaints
SEC
- Securities-related fraud
- Whistleblower program
- Investor complaint form
CFTC
- Commodity/forex fraud
- Customer complaint process
Cooperation Benefits
- Possible reduced sentences for defendants
- Priority in restitution
- Access to seized assets
Choosing Legal Representation
Criminal vs Civil Attorneys
Criminal Case
- Government prosecutes
- You’re a witness
- Free to you
Civil Case
- You control litigation
- Choose your attorney
- You pay costs
Attorney Selection
- Experience with investment fraud
- Track record of recoveries
- Resources for complex litigation
- Fee structures
Asset Recovery Strategies
Pre-Judgment Remedies
Temporary Restraining Orders
- Freeze defendant assets
- Prevent dissipation
- Emergency basis
Preliminary Injunctions
- Longer-term freeze
- After notice and hearing
- Show likelihood of success
Post-Judgment Collection
Enforcement Tools
- Bank levies
- Property liens
- Wage garnishment
- Asset seizure
Fraudulent Transfers
- Recover assets moved to others
- Look-back periods
- Badges of fraud
Victim Resources
Government Programs
Crime Victim Compensation
- State-run programs
- Limited coverage
- Application required
Tax Deductions
- Theft losses may be deductible
- Consult tax professional
- Document everything
Support Services
Join our support network for:
- Legal referrals
- Case strategy advice
- Recovery resources
- Peer support
Key Takeaways
Understanding your legal rights empowers recovery efforts:
- Multiple Legal Options: Criminal and civil remedies available
- Time Limits Apply: Don’t delay in taking action
- Evidence is Critical: Preserve everything
- Professional Help: Experienced counsel improves outcomes
Knowledge is power - use the law to fight back against fraud!
This guide provides general legal information only. Consult qualified attorneys for advice specific to your situation.