1. Identify the Statement Behind the Allegation
Start with the statement, omission, or promise being challenged: who communicated it, when the investor received it, and what supported it. An investment’s later failure does not, by itself, establish fraud.
Separate Projections from Guarantees
A projected return and a promise of guaranteed income communicate different levels of certainty. Compare presentation materials with messages and witness accounts. Written risk disclosures matter, but they do not automatically defeat allegations that a salesperson contradicted them.
New York’s Martin Act also addresses future promises unsupported by reasonable expectations or existing circumstances. Calling a statement a “projection” does not establish that its assumptions were reasonable.
Check What Each Participant Knew
Internal forecasts, valuations, and communications about existing losses can show what information was available during solicitation. Later knowledge should not automatically be attributed to an earlier statement. A securities fraud case review should distinguish who prepared, repeated, or approved the information.
2. Compare the Agreement with the Actual Transactions
Agreements describe the proposed arrangement; bank, brokerage, and accounting records show what happened afterward. Compare permitted expenditures with transfers, purchased assets, and investor payments. A transfer’s destination may not explain its purpose.
Follow the Funds and Supporting Records
Trace investor payments through receiving accounts and subsequent transfers. Match expenditures with invoices, trade confirmations, loan documents, and accounting entries. Disclosed compensation, operating expenses, personal spending, and payments to earlier investors can carry different implications.
| Representation | Records to Compare | Question to Resolve |
|---|---|---|
| Funds would purchase identified assets | Purchase and custody records | Did the assets exist, and who owned them? |
| Distributions came from investment income | Revenue records and transfers | What funded the payments? |
| Withdrawals remained available | Redemption terms and liquidity records | Did restrictions match the explanation? |
Examine the Claimed Cause of Loss
A private federal Rule 10b-5 damages claim generally requires reliance, economic loss, and loss causation, among other elements. Separate losses attributed to market declines or business performance from those allegedly caused by misrepresentation. These civil requirements are not universal elements of criminal fraud.
3. Separate Recovery Claims from Enforcement and Prosecution

Investors seeking repayment, regulators investigating violations, and prosecutors pursuing charges have different legal tasks. Identify the sender and requested relief before interpreting a demand letter, complaint, subpoena, or charging document. Multiple proceedings can concern the same transactions.
Private Claims Need an Independent Legal Basis
An investor may pursue an investment fraud claim through litigation or applicable arbitration. The Martin Act creates no private right of action, but it does not eliminate otherwise valid common-law claims with an independent legal basis.
An Investor Protection Bureau complaint or SEC TCR submission serves an enforcement purpose. Neither substitutes for filing a private damages action or arbitration claim. The bureau does not represent individuals in private disputes.
Criminal Liability Depends on the Charged Provision
Federal securities fraud, wire fraud, and New York offenses have different elements. Wire fraud may apply to a scheme involving interstate or foreign electronic communications even when securities-law coverage is disputed. State charges may include larceny, scheme to defraud, or Martin Act violations.
Prosecutors must prove criminal charges beyond a reasonable doubt. The required mental state varies by provision; lack of fraudulent intent should not be presented as a complete defense to every regulatory or statutory allegation.
4. Determine the Forum and Applicable Deadline
A local address alone does not establish jurisdiction or venue. The alleged conduct, district boundaries, contractual provisions, and asserted claims can affect where proceedings belong. Filing periods also differ from deadlines to answer a complaint or respond to a subpoena.
Identify the Court or Agency
Manhattan and the Bronx fall within the Southern District of New York; Brooklyn, Queens, and Staten Island fall within the Eastern District. Actual federal venue requires a connection to the offense or claim.
State criminal proceedings involve the appropriate prosecuting authority and state courts, with New York Supreme Court handling felony trials in the city. SEC civil or administrative enforcement is separate from federal criminal prosecution.
Distinguish the Relevant Time Limits
New York common-law fraud claims generally use the longer of six years from accrual or two years from actual discovery or when reasonable diligence would have revealed the fraud. Federal claims governed by 28 U.S.C. §1658(b) use the earlier of two years after discovery of the facts constituting the violation or five years after the violation.
FINRA’s six-year customer-arbitration eligibility rule is separate from applicable statutes of limitations. None of these periods establishes a criminal limitations period or the response date on an investigative demand.
5. Preserve Records before Preparing a Response
Keep original documents, complete message threads, attachments, and transaction data. Selected screenshots may omit qualifications or corrections that change the meaning. Suspend relevant automatic deletion and record where material is held without altering its contents.
Review Production and Testimony Obligations
Check the issuing authority, scope, covered dates, and deadline. Preserve responsive material while counsel evaluates privilege, objections, or an extension request. Sending existing business records to an attorney does not automatically make them privileged.
A review of government and internal investigations can address overlapping demands and testimony risks. Any response should rest on the actual request, contemporaneous records, and the recipient’s role.
27 Oct, 2026

