Securities Fraud Defense & Commodities Fraud Defense

Federal securities and commodities fraud investigations often run for months or years before charges are filed. These investigations are frequently covert. In other words, the government investigates in secret, and a target may not know his or her status until charges are revealed.

Nonetheless, common indicators of a securities or commodities fraud investigation include receipt of a grand jury subpoena for trading records, financial documents, or communications. An SEC subpoena, a CFTC investigative demand, or a FINRA information request may also signal investigation. Federal agents from the FBI may contact current or former colleagues for interviews without advance notice. Such interviews, called “knock and talks” by law enforcement, are a significant sign that the investigation is at an advanced stage.

Less obvious signs also matter. A compliance inquiry from your broker-dealer, an unusual request for trading records from a clearing firm or prime broker, or questions from your employer’s legal department may indicate that a regulatory inquiry is underway. SEC enforcement investigations and CFTC enforcement investigations frequently run in parallel with DOJ criminal investigations. A federal indictment may follow months or years of covert investigation. Agents will also execute a search warrant at a place of business or residence without advance notice.

If any of these indicators are present, retain experienced federal criminal defense counsel immediately. Scott Armstrong and Drew Bradylyons served as senior prosecutors at DOJ’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Virginia. Scott and Drew understand how federal investigators build securities and commodities fraud cases from the ground up because they did it for years in complex multi-million-dollar cases around the country. They now provide a hard-nosed defense for financial professionals.

Securities and commodities fraud investigations are multi-agency operations. DOJ’s Fraud Section and U.S. Attorney’s Offices lead criminal prosecutions. The SEC brings civil enforcement actions for securities fraud, insider trading, and market manipulation. The CFTC brings civil enforcement actions for commodities fraud, spoofing, and manipulation in the futures and derivatives markets.

FINRA regulates broker-dealers and registered representatives. FINRA referrals frequently lead to SEC and DOJ investigations. The FBI conducts criminal investigations alongside DOJ prosecutors. State securities regulators, state securities boards, and state attorneys general pursue parallel enforcement actions under state law.

These agencies regularly coordinate. A single course of conduct can produce parallel criminal, civil, and regulatory proceedings. Scott Armstrong and Drew Bradylyons navigated these multi-agency dynamics for years as federal prosecutors. They now use that experience to defend individuals across parallel proceedings. Most importantly, Scott and Drew defend their clients with a watchful eye towards protecting their clients’ long-term interests in any parallel criminal investigation. Scott and Drew navigate this critical dynamic based on years of experience in these complex, parallel investigations.

The penalties are severe. Securities fraud under 15 U.S.C. § 78j(b) and SEC Rule 10b-5 carries up to 20 years of imprisonment per count. Commodities fraud under 18 U.S.C. § 1348 carries up to 25 years per count. Spoofing under 7 U.S.C. § 9(a)(2) carries up to 25 years per count. Defendants often do not receive a sentence anywhere close to the maximum penalties for each count of conviction. But sentences of twenty years are more common for fraud schemes involving losses in the hundreds of millions of dollars.

Beyond incarceration, defendants face substantial fines, restitution orders, and forfeiture of assets. Wire fraud under 18 U.S.C. § 1343 carries up to 20 years per count and is charged alongside nearly every securities fraud prosecution. Money laundering, bank fraud, mail fraud, and false statements charges further compound sentencing exposure.

The SEC can also obtain disgorgement of profits, civil monetary penalties, and officer-and-director bars. The CFTC can impose trading bans. FINRA can impose an industry bar that permanently prevents a registered representative from working in the securities industry.

Federal sentencing in securities and commodities fraud cases is driven by loss calculations under the Federal Sentencing Guidelines. The government’s loss methodology can dramatically inflate sentencing exposure. These stakes demand a federal securities fraud defense attorney with trial experience in complex financial fraud cases. Scott and Drew have that direct trial experience after nearly two decades of combined experience handling complex financial fraud cases around the country in federal courts.

SEC civil enforcement actions focus on recovering money, imposing penalties, and barring individuals from the securities industry. The SEC’s burden of proof is preponderance of the evidence. SEC remedies include injunctions, disgorgement of profits, civil penalties, and officer-and-director bars.

DOJ criminal prosecutions focus on proving fraud beyond a reasonable doubt. Criminal cases carry the possibility of imprisonment, criminal fines, restitution, and forfeiture. The government must prove that the defendant acted knowingly and with intent to defraud.

The SEC and DOJ frequently run investigations in parallel. The same conduct can expose an individual to both civil liability and criminal prosecution at the same time. This is one of the most perilous dynamics in securities fraud enforcement. Statements made in SEC depositions or written responses can be used to build a criminal case.

Experienced defense counsel ensures that an individual does not make statements or concessions in a civil or regulatory matter that can be used in a criminal proceeding. Scott Armstrong and Drew Bradylyons have nearly twenty years of experience navigating parallel civil and criminal proceedings in complex financial fraud cases.

Spoofing is the practice of placing orders in the futures or securities markets with the intent to cancel them before execution. The purpose is to create a false impression of market demand and manipulate prices. Spoofing is a federal felony under 7 U.S.C. § 9(a)(2) of the Commodity Exchange Act. It carries penalties of up to 25 years of imprisonment per count. It is also commonly charged as wire fraud under 18 U.S.C. § 1343 because the spoof order injects false and misleading information into the market with the intent to fraudulently induce others to trade at artificial prices.

DOJ and the CFTC build spoofing cases through order flow analysis, market surveillance data from exchanges and clearing firms, chat logs, recorded telephone calls, and other electronic communications between traders. Prosecutors analyze patterns of order placement and cancellation to reconstruct the alleged manipulation.

Scott Armstrong served as co-lead trial counsel in the leading trial against two senior traders at a major financial institution who ran a years-long manipulation scheme in precious metals futures. He also served as lead trial counsel in a market manipulation case involving over $300 million in spoof and wash trades. The firm brings that direct, high-profile trial experience to every market manipulation defense engagement. Scott and Drew deconstruct the government’s trading evidence and build evidence of good faith or lack of fraudulent intent.

Insider trading is prosecuted under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. The government must prove that the defendant traded securities while in possession of material nonpublic information obtained through a breach of fiduciary duty or a relationship of trust and confidence. Prosecutors charge corporate insiders, tippers, and tippees. Trading during a blackout period is a common fact pattern that triggers investigation.

DOJ, the SEC, and FINRA build insider trading cases using sophisticated surveillance of trading activity around material corporate events, including mergers and acquisitions, earnings announcements, and regulatory decisions. Investigators analyze trading patterns, communications, and relationships between insiders and traders.

Scott Armstrong supervised insider trading investigations at DOJ’s Fraud Section involving corporate board members and executives. Drew Bradylyons supervised insider trading investigations and prosecuted a first-of-its-kind commodities insider trading ring involving natural gas futures. The firm defends individuals in this space by challenging the government’s evidence of material nonpublic information, personal benefit, and fraudulent intent.

Federal prosecutors rarely have direct evidence of insider trading intent. Instead, they build circumstantial cases through multiple categories of evidence. The government analyzes the timing of trades relative to material corporate events such as mergers, earnings announcements, or FDA decisions. A pattern of well-timed trades before public announcements is a primary indicator.

Prosecutors also rely on communications evidence. Emails, text messages, encrypted messaging apps, phone records, and cell-site location data are used to establish contact between the insider and the trader before the trades occurred. The government does not need a recorded conversation in which the insider explicitly shares the information. Circumstantial proof of the relationship and the timing is often sufficient.

Financial evidence matters. Investigators examine whether the trading was out of pattern for the defendant. A first-time purchase of options in a company days before a public announcement, an unusually large position, or a departure from the defendant’s normal trading behavior are all facts prosecutors use to establish knowledge and intent.

The government must also prove that the insider received a “personal benefit” in exchange for the tip. Courts have interpreted this broadly to include financial gain, reputational benefit, and even the maintenance of a close personal relationship. Scott Armstrong and Drew Bradylyons challenge each of these evidentiary categories. They attack the government’s timeline, contest the sufficiency of the communications evidence, and dispute the existence of a personal benefit. That is how insider trading cases are won.

Yes. Federal law holds “tippees” criminally liable for insider trading. A tippee is a person who receives material nonpublic information from a corporate insider or other source and trades on it. The government does not need to prove that you were the insider. It needs to prove that you knew or should have known the information was obtained through a breach of duty and that you traded on it.

The Supreme Court established the framework for tippee liability in Dirks v. SEC, 463 U.S. 646 (1983). Under Dirks, tippee liability requires proof that the tipper breached a fiduciary duty, that the tipper received a personal benefit for the tip, and that the tippee knew or had reason to know of that breach. The Second Circuit expanded this framework in United States v. Martoma, 894 F.3d 64 (2d Cir. 2018), holding that the personal benefit requirement is met where the tipper intended to benefit the tippee and the tip was a breach of fiduciary duty.

Tippee chains add complexity. Federal prosecutors charge “remote tippees” who are several steps removed from the original insider. The government traces the flow of information through intermediaries using communications records, trading data, and cooperating witness testimony. Each link in the chain must be established.

The defense focuses on what the tippee actually knew. If the defendant did not know or have reason to know that the information originated from an insider breach, there is no liability. Scott Armstrong and Drew Bradylyons challenge the government’s proof of tippee knowledge at every stage. They contest whether the information was truly material, whether the tippee knew its source, and whether the tipper received a personal benefit.

The available defenses depend on the specific allegations. Common defenses in a complex securities or commodities fraud case include the following:

Lack of fraudulent intent. The government must prove knowing and willful fraud. Legitimate trading strategies, good-faith business decisions, and reasonable reliance on legal or compliance advice can negate the element of intent.

Regulatory ambiguity. SEC rules, CFTC regulations, FINRA requirements, and exchange rules are complex and evolving. Where the rules do not clearly prohibit the client’s conduct, regulatory ambiguity is a powerful defense tool.

Challenging trading data analysis. Federal prosecutors rely on order flow records, market surveillance data, chat logs, and recorded telephone calls. Defense counsel challenges the government’s data methodology, analytical assumptions, and interpretation of trading patterns. In cases involving allegations of front-running or cherry-picking, the firm analyzes the trading data to demonstrate legitimate execution practices.

Contesting loss calculations. Sentencing exposure in securities cases is driven by loss calculations under the Federal Sentencing Guidelines. The government’s methodology can dramatically inflate loss figures. The firm challenges loss calculations at every stage.

Contesting witness testimony. Cooperating witness and informant testimony is frequently unreliable and subject to effective cross-examination at trial.

Scott Armstrong and Drew Bradylyons leverage their significant federal trial experience to anticipate the government’s strategy and develop an aggressive, evidence-based defense for financial professionals nationwide.

The firm defends individuals across the full spectrum of federal securities and commodities fraud cases, including Ponzi schemes and investment fraud, market manipulation (spoofing, layering, and wash trading), insider trading, pump-and-dump schemes, precious metals and commodities fraud, private investment fraud and misappropriation, cryptocurrency fraud, digital asset fraud, offering fraud, cherry-picking, front-running, accounting fraud, and financial advisor misconduct.

The firm defends executives, traders, hedge fund managers, fund managers, investment professionals, registered investment advisers, broker-dealers, registered brokers, investment bankers, accountants, and commodities trading advisors. Scott Armstrong, Drew Bradylyons, and Andrea Savdie tried 25 federal jury trials at DOJ, including multi-week trials involving market manipulation in precious metals futures and cryptocurrency futures, a Ponzi scheme that laundered approximately $650 million through financial institutions, and the first-ever cryptocurrency manipulation case under Title 15 involving commodity futures. They bring a trial-ready defense to individuals in federal courts around the country.

Scott Armstrong served as an Assistant Chief at DOJ’s Fraud Section, where he tried 13 complex federal cases, including multi-week trials involving the nation’s leading market manipulation trial in precious metals futures, a Ponzi scheme that laundered approximately $650 million through financial institutions, and the first-ever cryptocurrency manipulation case under Title 15 involving over $300 million in spoof and wash trades. Scott Armstrong has first-chair experience in fraud and manipulation cases involving U.S. Treasuries, cryptocurrencies, futures, equities, and private investments.

Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia. His unit charged Ponzi schemes involving tens of millions in losses, precious metals schemes, pump-and-dump schemes, crypto investment fraud, and insider trading. He also prosecuted a first-of-its-kind commodities insider trading ring involving natural gas futures at DOJ’s Fraud Section.

Together with Special Counsel Andrea Savdie, the firm’s attorneys have tried 25 complex federal jury trials. That trial experience is the foundation of every securities and commodities fraud defense engagement for clients nationwide.

Yes. Armstrong & Bradylyons PLLC defends individuals in federal securities and commodities fraud investigations and prosecutions nationwide. The firm can practice in every federal district court in the country.

The most active districts for securities and commodities fraud prosecutions include the Southern District of New York (SDNY), the Eastern District of New York (EDNY), the District of Columbia (DDC), the Eastern District of Virginia (EDVA), the Northern District of California (NDCA), the Southern District of Florida (SDFL), and the Northern District of Illinois (NDIL). Prosecutions also originate from U.S. Attorney’s Offices beyond these districts.

Scott Armstrong and Drew Bradylyons have tried complex financial fraud cases in federal courts around the country, including in many of these federal jurisdictions. The firm is based in Washington, D.C. and represents clients in every jurisdiction where DOJ, the SEC, and the CFTC bring securities and commodities fraud cases.