Securities fraud under 18 USC § 1348, adopted in 2002 as part of the Sarbanes-Oxley Act, was modeled on the mail and wire fraud statutes.  According to its legislative history, the purpose of the statute was to expand the range of conduct proscribed by existing federal securities laws to include other illegal transactions involving securities.  Specifically, Title 18 “[wa]s intended to provide needed enforcement flexibility in the context of publicly traded companies to protect shareholders and prospective shareholders against all the types [of] schemes and frauds which inventive criminals may devise in the future.”1


Generally, an individual is liable under Section 1348 if the government can prove that the person:

  1. was involved in a scheme or artifice to obtain money or property 
  2. with an intent to defraud and
  3. there is a nexus to a security.

Involvement in Scheme to Defraud

The government must show that the defendant participated in a scheme to defraud a person or to obtain money or property by materially false and fraudulent pretenses, representations, or promises.2

Intent to Defraud

The government must prove that the defendant acted intentionally, deliberately, and voluntarily, rather than by mistake, accident, or carelessness.  As with the wire fraud statute, the government must show that the defendant acted with the intent to deprive another person of something of value.  In United States v. Blaszczak, the government was required to prove that the defendants acted with the intent to deprive a federal agency of something of value (material, non-public information, MNPI) by trading on the agency’s information or converting it to their own use.3

Nexus to a Security

Finally, the government must prove that the scheme to defraud was connected to the purchase or sale of securities of a company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, 15 USC § 78l.4

No Personal Benefit

One reason why Section 1348 is an attractive alternative basis for criminal liability is that courts have recently held that, under Section 1348, the government need not prove that the tipper received a personal benefit from his or her tip of confidential information.  In other words the personal benefit test, which is an element of traditional insider trading under Title 15, does not extend to Title 18.5

In December 2019, the Second Circuit ruled in United States v. Blaszczak that the personal benefit test under Title 15 “does not apply to the wire fraud and Title 18 securities fraud statutes,” thereby affirming the convictions of two hedge-fund traders under 18 U.S.C. § 1348, even though they were unaware of the tipper’s identity or whether any personal benefit was afforded to the tipper in exchange for MNPI.6  

Whether the Blaszczak decision will stay as good law remains to be seen.  On January 11, 2021, the Supreme Court granted, vacated, and remanded the Blaszczak decision, returning the case to the Second Circuit for further consideration in light of the Supreme Court’s ruling in Kelly v. United States, 140 S.Ct. 1565 (2020).7  A decision is now pending before the Second Circuit. 

1148 Cong. Rec. S7421 (daily ed. July 26, 2002), available here

2 18 USC § 1348.

3 See Tr. of Jury Charge Proc., United States v. Blaszczak, No. 1-17-cr-00357 (LAK) (S.D.N.Y. Apr. 27, 2018) at 3970:2-10.

4 18 USC § 1348.

See, e.g., United States v. Melvin, No. 3:14-cr-00022-TCB-RGV, 2015 WL 7116737, at *10 (N.D. Ga. May 27, 2015) report and recommendation adopted, 143 F. Supp. 3d 1354 (N.D. Ga. 2015), aff’d 918 F.3d 1296 (11th Cir. 2017); United States v. Slawson, No. 1:14-CR-00186-RWS-JFK, 2014 WL 5804191, at *6 (N.D. Ga. Nov. 7, 2014) report and recommendation adopted, No. 1-14-CR-0186-RWS, 2014 WL 6990307 (N.D. Ga. Dec. 10, 2014). 

See United States v. Blaszczak, 947 F.3d 19, 36-37 (2d Cir. 2019); see also United States v. Ramsey, No. 19-268, 2021 WL 4554631 at *2-4 (E.D. Pa. Oct. 4, 2021).

United States v. Blaszczak, 141 S.Ct. 1040 (2021). 


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