Newport Beach is one of Southern California's busiest financial centers, home to investment firms, wealth managers, real estate developers, and startup founders raising capital. When an investment loses money, frustrated investors sometimes go to regulators or law enforcement. What began as a business disagreement can quickly become a criminal investigation. Understanding what California actually considers securities fraud is essential if you are facing allegations.
What Is Securities Fraud in California?
California's securities laws are found mainly in the Corporations Code. Some of the most commonly charged violations include:
- Corporations Code 25401: Offering or selling a security through a false statement of material fact, or by leaving out important information that makes other statements misleading
- Corporations Code 25400: Manipulating the market for a security, such as through false trading activity or misleading statements meant to affect its price
- Corporations Code 25110: Selling a security that was not properly qualified or exempt from qualification
- Corporations Code 25210: Acting as a broker-dealer without the required license
A "security" is broader than most people realize. Stocks and bonds qualify, but so can promissory notes, interests in a real estate project, LLC memberships, and some cryptocurrency tokens.
What Types of Schemes Lead to Investment Fraud Charges?
Prosecutors and regulators commonly pursue cases involving:
- Ponzi schemes that pay earlier investors with money from new investors
- Pump-and-dump schemes that inflate a stock's price before selling
- Misrepresenting an investment's risk, returns, or how the money will be used
- Affinity fraud targeting members of a church, community, or professional group
- Unregistered offerings for real estate, private companies, or digital assets
- Investment schemes targeting elderly investors
What Are the Penalties for Securities Fraud?
Willful violations involving fraud or market manipulation can be charged as felonies carrying significant prison time and fines that can reach millions of dollars. California's aggravated white collar crime enhancement under Penal Code 186.11 can add even more prison time when a pattern of fraudulent conduct causes losses over $100,000.
Federal charges are also possible when cases involve interstate transactions, publicly traded companies, or the mail and internet. Federal securities and wire fraud convictions can bring sentences of up to 20 years. In addition, defendants often face restitution orders, asset forfeiture, and civil actions from the SEC or the California Department of Financial Protection and Innovation.
What Defenses Are Available in an Investment Fraud Case?
Not every failed investment is a crime. Common defenses include:
- Good faith: You honestly believed the information you provided was accurate
- No material misstatement: The challenged statement was not significant to an investor's decision
- Adequate disclosures: Risks were clearly explained in offering documents
- Lack of willfulness: Mistakes or poor judgment are not criminal intent
- Civil dispute: The issue is a contract or business disagreement better handled in civil court
Securities cases involve large volumes of financial records, emails, and transaction data. An experienced defense team can review this evidence for gaps and context the prosecution may have missed. These cases often overlap with money laundering allegations and can threaten professional licenses.
Get Help From a Newport Beach Fraud Defense Attorney
If you have received a subpoena, been contacted by investigators, or learned you are a target of a fraud investigation, early intervention can make a real difference in how your case is charged. Attorney Michael L. Fell is a California Board Certified Criminal Law Specialist experienced in complex fraud defense. Call Law Office of Michael L. Fell at (949) 585-9055 today for a free, confidential consultation.