Securities Market
Manipulation Defense
Scott Armstrong tried the first securities price manipulation case involving cryptocurrency under Title 15 while serving as an Assistant Chief at DOJ’s Fraud Section. Drew Bradylyons served as Chief of Financial Crimes at the Eastern District of Virginia. They now defend traders, executives, and firms facing securities manipulation, spoofing, and fraud charges in federal courts nationwide.
Scott Armstrong served for nearly a decade at the Criminal Division’s Fraud Section, including as an Assistant Chief in the Market Integrity and Major Frauds Unit. That unit is DOJ’s national leader in prosecuting fraud and manipulation in U.S. securities, commodity, and financial markets. Scott tried 16 federal jury trials at DOJ. He understands how the government builds securities manipulation cases because he built them. He now uses that knowledge to defend against them.
First Securities Price Manipulation Trial Involving Cryptocurrency
Scott Armstrong tried the first securities price manipulation case involving cryptocurrency in federal court while serving at DOJ’s Fraud Section. The government charged conspiracy to commit securities price manipulation under 15 U.S.C. § 78i and 15 U.S.C. § 78j, alongside conspiracy to commit wire fraud. The case involved over $300 million in spoof and wash trades on a U.S. exchange. Scott tried the case to a jury verdict in the Southern District of Florida (Miami). The trial required presenting complex trading data, automated trading evidence, and expert testimony on market microstructure to a federal jury. That experience gives Scott a detailed understanding of how the government presents securities manipulation evidence at trial and where that evidence is vulnerable to challenge.
Precious Metals Spoofing Trial
Scott Armstrong also tried a multi-week precious metals spoofing case in the Northern District of Illinois (Chicago) involving senior traders at Deutsche Bank, Bank of America, and Morgan Stanley. The spoofing techniques at issue in that trial are the same techniques the government targets in equities and options markets. The government’s playbook is identical across asset classes: trading data, communications evidence, pattern analysis, and expert testimony on market microstructure. Scott knows that playbook from the inside.
Drew Bradylyons — Parallel Proceedings & Financial Crimes
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, one of the most active federal prosecution offices in the country. At EDVA, Drew supervised complex financial fraud cases and coordinated parallel criminal and civil enforcement matters. Securities manipulation cases almost always generate parallel SEC civil enforcement actions alongside criminal charges. Drew’s experience navigating that dynamic protects clients from making a misstep in one proceeding that becomes a liability in the other. Drew previously served at DOJ’s Fraud Section, where he supervised complex financial fraud investigations and prosecutions nationwide.
Securities market manipulation is a core federal enforcement priority. DOJ’s May 2025 White Collar Enforcement Plan identified “market manipulation schemes, securities fraud and fraud with tangible harm to U.S. investors” as one of ten high-impact enforcement areas for the Criminal Division. The SEC under Chairman Paul Atkins has committed to prioritizing enforcement actions focused on market manipulation, insider trading, and fraud that harms investors. FINRA brings parallel regulatory actions against registered broker-dealers and associated persons.
The government charges securities manipulation under Section 9(a)(2) of the Securities Exchange Act, which prohibits transactions creating actual or apparent active trading or raising or depressing the price of a security for the purpose of inducing others to buy or sell. Section 10(b) and Rule 10b-5 prohibit the use of any manipulative or deceptive device in connection with the purchase or sale of a security. DOJ also charges securities manipulation as wire fraud and securities fraud under 18 U.S.C. § 1348.
The penalties are severe. Securities fraud under 18 U.S.C. § 1348 carries up to 25 years in prison. Wire fraud carries up to 20 years per count. Wire fraud affecting a financial institution carries up to 30 years. The SEC seeks disgorgement, civil monetary penalties, injunctive relief, and industry bars. FINRA can impose fines, suspensions, and permanent bars from the securities industry. Individuals facing these charges need defense counsel who have tried securities manipulation cases in federal court.
Spoofing in Securities Markets
Spoofing in securities markets involves placing orders to buy or sell stocks, options, or other securities with no intention of executing them. The purpose is to create false signals of supply or demand that move the market price. The spoofer profits by executing genuine orders on the opposite side at the artificially moved price. The SEC charges spoofing under Section 9(a)(2) and Section 10(b) of the Securities Exchange Act. DOJ charges spoofing as securities fraud and wire fraud. The SEC has continued to bring spoofing cases under the current administration, including settled actions against traders for manipulative options spoofing schemes.
Pump-and-Dump Schemes
A pump-and-dump scheme involves acquiring a position in a security, artificially inflating its price through false or misleading promotional activity, and then selling the position at the inflated price. These schemes are common in microcap and penny stocks. The government charges pump-and-dump schemes under Section 10(b) and Rule 10b-5, the wire fraud statute, and the securities fraud statute. Social media platforms have become a primary vehicle for pump-and-dump promotions. The SEC’s Cross-Border Task Force targets pump-and-dump schemes perpetrated by foreign-based issuers of U.S. securities.
Short-and-Distort Campaigns
A short-and-distort scheme is the inverse of a pump-and-dump. The trader takes a short position in a security and then publishes false or misleading negative information to drive the price down, profiting from the decline. DOJ and the SEC have brought parallel criminal and civil actions against activist short sellers who published sensationalized reports designed to manipulate stock prices. These cases are charged under Section 10(b) and Rule 10b-5 and the federal fraud statutes.
Wash Trading and Layering
Wash trading in securities markets involves executing transactions with no genuine change in beneficial ownership to create the false appearance of trading activity. Layering involves placing multiple orders at different price levels on one side of the order book to create the illusion of depth and momentum, then cancelling them after the market moves. Both practices are prohibited under Section 9(a)(1) of the Securities Exchange Act, which prohibits transactions creating a misleading appearance of active trading. DOJ charges wash trading and layering as wire fraud and securities fraud.
Marking the Close and Window Dressing
Marking the close involves executing trades near the end of a trading session to influence the closing price of a security. Fund managers engage in this practice to inflate portfolio valuations, trigger performance benchmarks, or meet margin requirements. Window dressing involves similar activity at quarter-end or year-end reporting periods. These practices are charged as securities manipulation under Section 9(a)(2) and Section 10(b) of the Securities Exchange Act. The SEC and FINRA conduct surveillance for end-of-day trading anomalies that indicate potential marking activity.
Matched Orders and Pre-Arranged Trading
Matched orders involve coordinating with another person to simultaneously buy and sell the same security at a predetermined price, creating the misleading appearance of genuine market activity. Section 9(a)(1) of the Securities Exchange Act expressly prohibits matched orders and wash sales. Pre-arranged trading involves any agreement between parties to execute trades at specific prices or times to create false market signals. The government proves matched orders through communications evidence, account records, and trading pattern analysis showing coordination.
Intent is the central battleground in every securities manipulation case. The government must prove that the defendant acted with the specific intent to defraud or manipulate. Trading data alone rarely establishes that element. Prosecutors rely on two additional categories of evidence to bridge the gap between trading activity and wrongful intent: cooperator testimony and contemporaneous communications.
Cooperator Testimony
Federal prosecutors build manipulation cases from the inside out. They identify co-conspirators, colleagues, or counterparties and flip them into cooperating witnesses. Cooperators provide testimony about the defendant’s knowledge, intent, and instructions. Cooperator testimony is powerful because it puts a human voice on conduct that would otherwise appear as raw data. It is also inherently vulnerable. Cooperators testify under cooperation agreements that give them powerful incentives to testify in a way favorable to the government. Effective cross-examination of cooperators is one of the most important skills in a manipulation trial.
Institutional Communications
The government subpoenas and seizes communications from institutional platforms that log and archive messages. Bloomberg Terminal chat, internal Slack channels, Microsoft Teams messages, and recorded phone lines are primary sources. Compliance and recordkeeping obligations under Section 17(a) of the Securities Exchange Act and SEC Rule 17a-4 require broker-dealers to retain communications for specified periods. These archived messages are a primary source of evidence in securities manipulation cases. The government treats statements in which traders discuss their strategies, describe their intentions, or coordinate with others as direct evidence of intent.
Personal and Encrypted Messaging
Securities manipulation investigations increasingly involve evidence from personal messaging platforms. Telegram, Signal, WhatsApp, and personal email accounts are examined when traders use personal devices to discuss trading activity. The use of personal or encrypted channels to discuss trading activity in a regulated environment can itself become evidence of consciousness of guilt. The SEC and FINRA have imposed hundreds of millions of dollars in penalties on broker-dealers for failing to preserve off-channel communications. When those communications surface in a criminal investigation, the content is often damaging precisely because the trader used an unmonitored channel to discuss activity they did not want recorded.
Defense counsel must understand these evidence streams and how to challenge them. Scott Armstrong presented communications evidence at trial in his market manipulation cases at DOJ. He knows how the government selects, sequences, and presents messages and cooperator testimony to construct a narrative of intent. He now uses that knowledge to deconstruct the government’s narrative and expose the weaknesses in its proof.
Challenging Intent
Securities manipulation requires proof of intent to defraud or manipulate. Legitimate trading activity can produce patterns that resemble spoofing or manipulation. The defense challenges the government’s characterization of trading activity by presenting evidence of genuine economic purpose, market-making activity, hedging strategies, and portfolio management decisions that explain the trading patterns the government relies on.
Trading Data Analysis
Manipulation cases are built on trading data. The government relies on exchange records, order audit trails, and market surveillance data to reconstruct trading activity and attribute it to specific individuals. The defense retains forensic trading experts to independently analyze the same data, identify weaknesses in the government’s analysis, and present alternative explanations. Fill rates, order duration, order modification patterns, and market conditions at the time of the trades are common battlegrounds.
Materiality and Market Impact
The government must prove that the defendant’s trading activity had a meaningful impact on the market. The defense challenges the government’s theory of market impact by demonstrating that the defendant’s orders were too small relative to overall volume, that price movements were caused by exogenous factors, or that the market absorbed the defendant’s activity without distortion. Expert testimony on market microstructure and price formation is critical to this defense.
Wells Submission and Pre-Charge Advocacy
Before the SEC files a civil enforcement action, it typically issues a Wells Notice informing the target of the staff’s intent to recommend charges. A Wells Submission is the target’s opportunity to persuade the SEC not to bring the case. Experienced defense counsel use the Wells process to present evidence, challenge the staff’s legal theories, and narrow or eliminate the proposed charges before they are filed. The Wells process does not exist in criminal cases, but pre-charge advocacy with DOJ prosecutors can serve a similar function.
Securities manipulation cases frequently involve three parallel tracks: DOJ criminal prosecution, SEC civil enforcement, and FINRA regulatory action. All three can run simultaneously. Statements made in one proceeding can be used in another. Testimony provided to the SEC under oath can be used in a subsequent DOJ criminal prosecution. A FINRA suspension or bar can destroy a career independently of any criminal or civil outcome. This creates extreme risk for individuals who do not have counsel experienced in navigating parallel tracks.
The SEC brings civil enforcement actions under Section 10(b) and Rule 10b-5, seeking disgorgement, civil monetary penalties, injunctive relief, and industry bars. The Supreme Court is expected to rule in 2026 on a case that may redefine the SEC’s disgorgement authority. Regardless of that outcome, criminal prosecution remains fully available. FINRA can impose fines, suspensions, and permanent bars from the securities industry through its own disciplinary process.
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. At EDVA, Drew coordinated parallel criminal and civil enforcement matters and understands firsthand how DOJ and the SEC share information, align strategy, and pursue individuals across parallel proceedings. That experience is critical in securities manipulation cases, where a misstep in one proceeding can be devastating in the other.
Scott Armstrong supervised and prosecuted securities and commodities manipulation cases at DOJ’s Fraud Section alongside parallel SEC enforcement actions. He understands how the government coordinates across agencies and how to defend against the specific risks that parallel proceedings create. Together, Scott and Drew protect clients across every front of a securities manipulation investigation.
Scott Armstrong tried the first securities price manipulation case involving cryptocurrency under Title 15 in the Southern District of Florida (Miami). He also tried a multi-week precious metals spoofing case in the Northern District of Illinois (Chicago) involving senior traders at three major Wall Street banks. He knows how the government builds these cases from the inside. He knows how to take them apart.
Scott served as an Assistant Chief in the Fraud Section’s Market Integrity and Major Frauds Unit, DOJ’s national leader in prosecuting fraud and manipulation in U.S. securities, commodity, and financial markets. He supervised manipulation investigations and prosecutions across asset classes. He tried 16 federal jury trials. That trial experience is rare. It matters.
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. Drew supervised complex financial fraud cases and coordinated parallel criminal and civil enforcement actions. His experience navigating multi-agency investigations and parallel proceedings is directly relevant to securities manipulation cases, where DOJ, the SEC, and FINRA often pursue the same individual simultaneously.
Armstrong & Bradylyons PLLC defends traders, executives, fund managers, and financial institutions facing securities market manipulation charges in federal courts nationwide, including the Southern District of New York, the Eastern District of New York, the District of New Jersey, the Eastern District of Virginia, the Southern District of Florida, the Northern District of Illinois, and every other federal district where these cases are prosecuted. The firm also handles cryptocurrency market manipulation defense, commodities market manipulation defense, and broader white-collar defense matters.
What Is Securities Market Manipulation?
Securities market manipulation is the use of deceptive trading practices or schemes to artificially influence the price, volume, or market conditions of a security. The most common forms include spoofing, pump-and-dump schemes, short-and-distort campaigns, wash trading, layering, and marking the close. Federal prosecutors charge securities manipulation under Section 9(a) and Section 10(b) of the Securities Exchange Act, the wire fraud statute, and the securities fraud statute (18 U.S.C. § 1348).
The penalties are severe. Securities fraud carries up to 25 years in prison. Wire fraud carries up to 20 years per count. Wire fraud affecting a financial institution carries up to 30 years.
What Is Spoofing in Securities Markets?
Spoofing in securities markets involves placing orders to buy or sell stocks, options, or other securities with no genuine intent to execute them. The orders are designed to create false signals of supply or demand that move the market price. The spoofer profits by executing genuine orders on the opposite side at the artificially moved price. The SEC charges spoofing under Section 9(a)(2) and Section 10(b) of the Securities Exchange Act. DOJ charges spoofing as securities fraud and wire fraud.
Scott Armstrong tried the first securities price manipulation case involving cryptocurrency in the Southern District of Florida (Miami) and a multi-week precious metals spoofing case in the Northern District of Illinois (Chicago).
What Federal Charges Apply to Securities Manipulation?
Securities manipulation can be charged under multiple federal statutes. The most common charges include securities fraud under 18 U.S.C. § 1348, wire fraud under 18 U.S.C. § 1343, securities price manipulation under 15 U.S.C. § 78i, fraud in connection with the purchase or sale of securities under 15 U.S.C. § 78j and Rule 10b-5, and conspiracy under 18 U.S.C. § 371.
DOJ increasingly charges wire fraud and securities fraud under Title 18 alongside or instead of Securities Exchange Act violations because those statutes carry higher maximum sentences and broader elements.
What Is a Wells Notice?
A Wells Notice is a formal communication from the SEC staff informing a target that the staff intends to recommend that the Commission bring an enforcement action. The target has the opportunity to submit a written response, known as a Wells Submission, arguing why the case should not be brought. This is a critical moment. A well-crafted Wells Submission can persuade the SEC to decline to bring charges, narrow the scope of the charges, or reduce the requested relief. Experienced defense counsel use the Wells process to present evidence, challenge legal theories, and shape the outcome before charges are filed.
What Should I Do If I Am Under Investigation for Securities Manipulation?
Retain experienced federal defense counsel immediately. Do not speak with federal agents, respond to a grand jury subpoena, or make any statements to your employer’s internal counsel without your own independent legal representation. The most consequential decisions in a manipulation investigation happen before charges are filed.
Common signs that you may be under investigation include receiving a grand jury subpoena or a target letter, receiving a Wells Notice from the SEC, learning that the SEC or DOJ has issued subpoenas to your employer, being contacted by FBI or SEC investigators, receiving a FINRA inquiry, or learning that a colleague has retained defense counsel or is cooperating with the government.
What Sentencing Exposure Do I Face in a Securities Manipulation Case?
Sentencing exposure depends on the charges and the U.S. Sentencing Guidelines calculation. Securities fraud under 18 U.S.C. § 1348 carries a statutory maximum of 25 years. Wire fraud carries 20 years per count. Wire fraud affecting a financial institution carries 30 years. The actual guideline range is driven primarily by the loss calculation under U.S.S.G. § 2B1.1, with potential enhancements for sophisticated means, number of victims, and role in the offense.
Loss calculation is one of the most contested issues at sentencing. The government often calculates loss broadly. The defense challenges the government’s loss methodology, argues for a narrower loss figure, and presents mitigating factors. Experienced defense counsel can make a material difference in the guideline calculation and the ultimate sentence.
What Defenses Are Available in a Securities Manipulation Case?
The available defenses depend on the specific charges and facts. Common defenses include the following.
Lack of manipulative intent. The government must prove that the defendant intended to manipulate the market. Legitimate trading activity, portfolio rebalancing, hedging, and market-making can produce patterns that resemble manipulation. Challenging the government’s inference of intent is frequently the most effective defense.
No market impact. The defense can demonstrate that the defendant’s trading activity had no meaningful effect on the market price, undermining the government’s theory of manipulation.
First Amendment. In short-and-distort cases, the defense may raise First Amendment protections for published opinions and analysis, distinguishing protected speech from actionable fraud.
Trading data analysis. Independent expert analysis of trading data can undermine the government’s pattern evidence and demonstrate that the trading activity had a legitimate economic purpose.
Can My Employer’s Internal Investigation Be Used Against Me?
Yes. Statements made to your employer’s internal counsel or compliance team during an internal investigation can be disclosed to the government. Many financial institutions cooperate with DOJ and the SEC by sharing the results of internal investigations, including employee interview memoranda, trading data analysis, and communications evidence. This cooperation can earn the institution credit under DOJ’s cooperation guidelines and the SEC’s cooperation framework.
If your employer is conducting an internal investigation related to your trading activity, you should retain your own independent defense counsel before participating in any internal interviews. Your employer’s counsel represents the institution. They do not represent you.
What Is FINRA’s Role in Securities Manipulation Cases?
FINRA is a self-regulatory organization that oversees broker-dealers and their associated persons. FINRA conducts market surveillance, investigates potential manipulation, and brings disciplinary actions that can result in fines, suspensions, and permanent bars from the securities industry. FINRA’s disciplinary process operates independently of DOJ and SEC proceedings. A FINRA bar can end a career in the securities industry regardless of the outcome of any criminal or SEC case.
FINRA can compel testimony from registered persons under FINRA Rule 8210. Refusal to testify can result in an automatic bar from the securities industry. Because FINRA is not a government actor, the Fifth Amendment privilege against self-incrimination does not apply in the same way it does in government proceedings. This creates a serious trap. A registered person who provides testimony to FINRA under threat of a bar can have that testimony shared with the SEC and DOJ. FINRA routinely refers matters to the SEC, and the SEC shares information with DOJ. Testimony compelled by FINRA can become evidence in a federal criminal investigation. Anyone facing a FINRA inquiry in connection with potential manipulation should retain independent defense counsel before providing any testimony or documents to FINRA.
Why Does Trial Experience Matter in a Securities Manipulation Defense?
Securities manipulation cases are data-intensive, technically complex, and difficult for juries to understand. The government presents trading data, order audit trails, and expert testimony on market microstructure and price formation. Defending against this evidence requires counsel who have tried these cases and know how to cross-examine government experts, challenge data analysis, and present complex financial evidence to a jury in a clear and persuasive way.
Scott Armstrong has tried 16 federal jury trials, including the first securities price manipulation trial involving cryptocurrency in the Southern District of Florida (Miami) and a multi-week spoofing case in the Northern District of Illinois (Chicago). That level of trial experience in market manipulation cases is rare among defense attorneys.
Does Armstrong & Bradylyons Handle Securities Manipulation Cases Nationwide?
Yes. Armstrong & Bradylyons PLLC defends traders, executives, fund managers, and financial institutions facing securities market manipulation charges in federal courts across the country. The firm obtains pro hac vice admission in any federal district where a client faces charges or investigation.
Securities manipulation cases are concentrated in the Southern District of New York, the Eastern District of New York, the District of New Jersey, the Eastern District of Virginia, the Southern District of Florida, the Northern District of Illinois, and the District of Columbia. Scott Armstrong and Drew Bradylyons have tried cases and handled investigations in federal courts across the country. The firm also handles cryptocurrency market manipulation defense, commodities market manipulation defense, and broader white-collar defense matters nationwide.