Can Market Manipulation Become a Criminal Offense?
The Federal Bureau of Investigation describes market manipulation as “artificially raising or lowering the price of stock on any national securities or commodities exchange or in the over-the-counter marketplace.”
There are different types of market manipulation schemes that can occur, and involvement with any effort to manipulate the market could result in serious criminal charges. Defendants could face charges under the Commodities Exchange Act, under the Securities and Exchange Act, under Sarbanes-Oxley, and under general fraud laws, among other federal and state laws. The types of criminal charges that a defendant could face will vary based on the market manipulation scheme that allegedly occurred.
An experienced New York City securities fraud lawyer can provide assistance if you have been charged with any crimes for attempting to manipulate markets.
What is Market Manipulation?
Market manipulation refers to any attempt to interfere with the normal free operation of the market and to create an artificial market for a security, currency, or commodity. Examples of market manipulation may include:
- Stock market manipulation– Stocks can be pushed higher or lower through techniques like starting false rumors, giving inaccurate information to reporters, and pump-and-dump schemes.
- Gold market manipulation or silver market manipulation– Banks set the gold fix, or standard price for gold, twice per day. Financial institutions may engage in price fixing to manipulate the price of gold and precious metals. Ten major banks were under investigation as of February 2015 for potentially rigging precious metals markets.
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- Market maker manipulation- Market makers can manipulate brokers and investors into believing they are getting the best execution price even though they aren’ Market makers may post phony bid sizes to lure buyers and sellers to make it appear the stock is moving higher; may switch tickets by using customer or broker trades as a cover; and may jump ahead of market orders.
Authorities take market manipulation seriously. The Federal Bureau of Investigation announced that 14 people were arrested in 2013 as a result of participation in long-term schemes to manipulate stock prices. The scheme allegedly resulted in investors losing more than $30 million after conspirators inflated prices and trading volumes of stocks to make it appear the stocks were being actively traded and increasing in value. The indictments specified five specific deals, and according to the FBI, if the defendants were convicted, they faced a statutory maximum penalty of at least 100 years in federal prison.
A New York Criminal Defense Lawyer Can Help in Market Manipulation Cases
Regulators frequently bring civil cases when market manipulation occurs. Civil cases can result in monetary penalties but not jail time. Civil cases are a common tool in market manipulation cases because there is a lower burden of proof. This means that you could be required to pay large sums of money even if your involvement in a market manipulation scheme has not been proved beyond a reasonable doubt.
When a criminal case is brought, proving the case may be more difficult. There are different federal laws that a defendant could be prosecuted under for alleged market manipulation. For example, 7 U.S. Code Section 13 makes it a felony punishable by a fine up to $1,000,000 and up to 10 years imprisonment to “manipulate or attempt to manipulate the price of any commodity in interstate commerce.” However, to get a conviction, the prosecutor generally must prove beyond a reasonable doubt that the intent of a defendant’s actions was to manipulate the market.
An experienced New York City securities crimes defense lawyer can help you to raise doubts about your intentions or about other aspects of involvement in an alleged securities fraud scheme. These types of cases can be extremely complicated and a knowledgeable attorney can often make it difficult for prosecutors to unravel exactly what actions you took or what your motivations were. This means it may be possible to avoid conviction for the alleged offense.
Market manipulation cases should be handled by an experienced and skilled New York City defense lawyer with knowledge of these types of financial crimes. The Law Offices of Bukh Law Firm, PLLC is here to help you.
Give us a call today to schedule a consultation and learn more.
FAQs
However, investors may still be able to recover their losses by filing claims in securities litigation or FINRA arbitration. If you believe that you may have lost money in a market manipulation scam or as the result of a trading violation, you should speak with a market manipulation lawyer promptly.
Is market manipulation a felony? ›
For example, 7 U.S. Code Section 13 makes it a felony punishable by a fine up to $1,000,000 and up to 10 years imprisonment to “manipulate or attempt to manipulate the price of any commodity in interstate commerce.” However, to get a conviction, the prosecutor generally must prove beyond a reasonable doubt that the ...
Has a defense lawyer ever turned on their client? ›
Answer: Yes a lawyer can turn against their client in exceptional and rare circ*mstances, particularly when a client employs the lawyer's services for illicit activities.
What is the most valuable tool for defense attorneys? ›
Eyewitness testimony is the most valuable tool for defense attorneys, especially when coming from children, as it is the most reliable source.
What is the penalty for market manipulation? ›
If convicted, the defendant may face fines of $10,000 or more and up to 25 years in federal prison. Restitution typically goes hand in hand with this category of crimes. In addition to these criminal charges, the defendant may have to defend against a civil lawsuit against the alleged victims of the fraud.
Can you get in trouble for market manipulation? ›
(1) Prohibition against manipulationIt shall be unlawful for any person, directly or indirectly, to use or employ, or attempt to use or employ, in connection with any swap, or a contract of sale of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity, any ...
Is market manipulation a federal crime? ›
Generally speaking, if your matter involves the offer or sale of securities within California, it is a state law issue. If it involves more than one state, it is a federal issue. Although, it is not uncommon for someone facing criminal securities fraud to be charged on both the state and federal level.
How do you report market manipulation? ›
We strongly encourage the public (whistleblowers and non-whistleblowers) to submit any tips, complaints, and referrals (TCRs) using the SEC's online TCR system and complaint form at https://www.sec.gov/tcr.
What is the four part test for market manipulation? ›
In the first few decades of the CFTC's existence, a generally accepted four-part test for manipulation under the CEA developed: (1) intent to manipulate prices; (2) the ability to influence prices; (3) existence of an artificial price; and (4) causation of the artificial price.
Do defense attorneys really believe their client is innocent? ›
They can present a defense that seeks to show there is insufficient evidence to convict beyond a reasonable doubt. If an individual comes to a defense lawyer and proclaims innocence, the lawyer may or may not believe the client; in fact, perhaps the person is not being candid and is, in fact, guilty.
A client may also have a case of malpractice if an attorney acts against their client's wishes because they believe their client is not being practical. The attorney should rather advise them of the best course of action rather than go against their wishes without their knowledge.
Do lawyers have to listen to their clients? ›
Communicating with Client
[3] Paragraph (a)(2) requires the lawyer to reasonably consult with the client about the means to be used to accomplish the client's objectives.
What is the 4 main lines of defense that a defense attorney can use? ›
When it comes to defending criminal cases, there are typically four primary strategies that may be employed: innocence, constitutional violations, self-defense, and insanity. Choosing the most suitable strategy for a case relies on both the particulars of the case as well as an attorney's expertise and capability.
What is the most used lawyer? ›
Top Ten Most Common Lawyers and Practice Areas
- Personal Injury Lawyers. Personal injury attorneys help accident victims get the compensation they're owed for their pain and suffering. ...
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What Is Manipulation? Market manipulation is conduct designed to deceive investors by controlling or artificially affecting the price of securities. 1 Manipulation is illegal in most cases, but it can be difficult for regulators and other authorities to detect and prove.
What are the laws on market manipulation? ›
Market manipulation is prohibited in most countries, in particular, it is prohibited in the United States under Section 9(a)(2) of the Securities Exchange Act of 1934, in the European Union under Article 12 of the Market Abuse Regulation, in Australia under Section 1041A of the Corporations Act 2001, and in Israel ...
What is a market manipulation violation? ›
Market manipulation includes (1) the dissemination of false or misleading information and (2) transactions that deceive or would be likely to mislead market participants by distorting the price-setting mechanism of financial instruments.
