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Microcap Fraud Defense

Defense for Microcap Fraud Allegations

  • The defense attorneys at Oberheiden, P.C. regularly advise clients on complex corporate securities matters, including microcap fraud, throughout all stages of the investigation and litigation process.
  • We represent small and large corporations and provide ongoing personalized defense strategies to combat unfair charges of microcap fraud and put our clients at ease with our meticulous work ethic.
  • Consider placing an experienced defense attorney from Oberheiden, P.C. on your side today to work on your microcap fraud defense and give you the best chance of success.

Experienced Defense Team

John W. Sellers
Attorney John W. Sellers
Microcap Fraud Team Lead
Former DOJ Trial Attorney
envelope iconContact John

If you have been charged or are being investigated for microcap fraud, now is the time to take prompt action in your defense.

The SEC has increased its aggressive enforcement efforts and often coordinates its investigation with other federal agencies such as the DOJ and FBI. Microcap companies are at risk more than ever. This could result in unfair accusations leading to significant jail time and criminal penalties.

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You need an individualized defense strategy. Do not wait to get in touch with an experienced defense attorney today.

A charge against you has the power to shut down your life’s hard work and your company itself. Do everything possible to defend your rights and career. We are here to help.

At Oberheiden, P.C., our attorneys are highly qualified in handling complex securities fraud cases including microcap fraud. We are a prominent national law firm employing the most skilled and diligent defense attorneys in the nation specialized to help you.

Our attorneys include former FBI agents, former U.S. attorneys, and former prosecutors. Drawing upon this interdisciplinary background, we are tailored with the unique perspective to understand what it takes to help your company succeed at every stage.

The stakes are high. Put Oberheiden, P.C. on your side today to fight for your liberty and reputation.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden



Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney


Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

What is Microcap Fraud?

Microcap fraud is a type of securities fraud involving microcap companies. The fraud occurs on the over-the-counter (OTC) market for securities as opposed to a national securities exchange. The company’s microcap stock, or penny stock, are traded on two quotation systems: the OTC Bulletin Board and Pink Sheets. The microcap stock is generally very low-priced stock issued by very small companies.

Microcap fraud is sometimes difficult to find because microcap companies do not file financial reports with the SEC and are less regulated. Therefore, microcap fraud is very prevalent.

Companies that can be targeted with microcap fraud are those with low market capitalizations of less than $250 or $300 million.

In the following sections, we will briefly explain some common examples of microcap fraud, how a typical microcap fraud investigation proceeds, and, most importantly, what you can do to protect yourself.

How To Select an SEC Defense Lawyer if You Have Been Accused of Microcap Fraud

Examples of Microcap Fraud

There are several examples of microcap fraud:

  • “Pump and Dump” Scheme: This is the most common example of microcap fraud. It typically occurs when investors are urged by telemarketers to quickly buy stock or to sell before the price goes down. Once the stock is hyped, “insiders” sell their stock and make a profit, leaving the investors “dumped” with inflated prices.
  • The Off-Shore Scam: If a company sells their stock outside of the United States to foreign investors, they do not need to register their stock under Regulation S. This off-shore scheme occurs when a microcap company sells unregistered stock (as per Reg. S) at a discount to fraudsters posed as foreign investors. These fraudsters/foreign investors in turn sell the stock to U.S. investors at inflated prices and then share the profits with “insiders.” The U.S. investors are subsequently left with unregistered, worthless stock.

In addition, fraud involving microcap stocks can involve email spam, paid promoters, or press releases, or Internet fraud. Internet fraud techniques use online bulletin boards or chat rooms. The Internet and other telecommunications are popular devices for carrying out microcap fraud.

How Microcap Fraud Investigations Work

It is relatively easy for an investor to claim they have been harmed by the alleged fraud of a microcap company. There are easy-to-follow steps on the SEC’s website that guides the investor into how to contact the compliance department of the SEC or the investor’s state securities regulator. If and when a response is due, it would be simple from there for a protracted investigation to begin.

The SEC also publishes several “red flags” that alert investors of possible fraudulent activity occurring in microcap stock:

  • SEC trading suspensions,
  • large assets but small revenues,
  • odd items in the financial statements’ footnotes,
  • unusual auditing issues, and
  • insiders of the microcap company that own large amounts of the stock (indicator of “pump and dump” schemes)

Microcap Fraud charges are typically alleged to violate the following provisions of the federal securities laws:

  • Section 10(b) of the Securities Exchange Act of 1934 and its corresponding Rule 10b-5: makes it unlawful to employ manipulative and deceptive devices:
    • to employ any device, scheme, artifice to defraud;
    • to make an untrue statement of material fact or omit a material statement necessary to make the statement not misleading; or
    • to engage in any act that would be deceitful upon fraud or deceit upon any person
  • Section 17(a) of the Securities Act of 1933: prohibits fraud and misrepresentations in the offer or sale of securities by making it unlawful:
    • to employ any device, scheme, or artifice to defraud;
    • to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary to make the statement not misleading; or
    • to engage in any transaction or practice which would operate as fraud or deceit upon the purchaser.
  • Liability for aiding and abetting in connection with the fraudulent activity
  • Liability for acting as unregistered broker-dealers and failing to register
  • Liability for failure to comply with certain registration provisions of the Securities Act
  • Conspiracy charges

In addition, companies should be wary that the SEC may seek additional federal charges from the defendant such as wire fraud or violations of the Racketeered Influenced and Corrupt Organizations Act (RICO). The defendant could also be charged at the state level for violating the state’s own securities laws.

How to Respond If You’ve Been Charged/Arrested in Connection with Microcap Fraud

A charge of microcap fraud can result in substantial criminal penalties and jail time. The SEC may also seek disgorgement, or the return of all the defendant’s allegedly ill-gotten gains plus interest as well as a permanent injunction. An investigation could waste needless time, expense, and result in many challenges for your company.

The SEC vigorously investigates companies for microcap fraud under the guise of “protecting investors” from unscrupulous companies. Microcap companies can be easy targets since federal agents know these companies are less regulated. Law enforcement could prey upon microcap companies because they do not have as the same degree of public information available compared to a company that trades on a national security exchange. This makes it easier to initiate an investigation and bring a charge against you for microcap fraud.

The federal criminal process can be very lengthy, sometimes spanning months or years. Do not wait for an investigation into your company to proceed without taking prompt and smart action. Do not divulge any information to a federal agent without first discussing with your attorney and having your attorney present. Understand your rights. Get an attorney on your side to defend you.

The defense attorneys at Oberheiden, P.C. have the experience and extensive knowledge needed to prepare your defense to fight these accusations. We will listen to you even if you have a mere suspicion. Let us help you.

If you are charged and need help defending your company, call us today or contact our office for a free consultation.

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