Comprehensive Guide to White-Collar Criminal Defense: New York City

An overview and guide to white-collar enforcement in New York

New York is the financial capital of the United States, and because of that, it holds a unique place in the enforcement of white-collar crime. With its concentration of financial institutions, multinational corporations, and, of course, Wall Street's prominence, it is a focal point for regulatory oversight and legal action. Unlike most jurisdictions, New York’s federal, state, and local authorities all work zealously (and frequently too zealously) to investigate and prosecute offenses like corporate fraud, securities violations, and financial misconduct. Frequently, people are the targets of “New York” investigations even when they have very little, if any, ties to New York.

This comprehensive guide delves into the enforcement mechanisms at each level, highlighting significant cases and emerging trends to help businesses and individuals understand the New York landscape. For those facing allegations, experienced legal counsel, such as Dynamis LLP, is essential to protect rights and navigate the complexities of white-collar cases.

The Landscape of White-Collar Enforcement in New York

New York's reputation as a global financial hub attracts a high level of scrutiny from regulatory and law enforcement agencies.

Federal authorities like the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and the Federal Bureau of Investigation (FBI) focus generally on large-scale fraud, insider trading, and other crimes with national or even international implications. As an example, the DOJ's prosecution of Bernie Madoff's Ponzi scheme remains a landmark case, involving billions of dollars and affecting thousands of investors. In fact, the last payment made to victims was recently made — dozens of years after his conviction. Similarly, the SEC's action against Elon Musk (albeit somewhat unsuccessful) for misleading statements about taking Tesla private showcased the agency's focus on corporate accountability. The FBI's takedown of insider trading rings, such as the Galleon Group led by Raj Rajaratnam, illustrates New York’s role in dismantling sophisticated financial networks.

But not everything (and even everything big) is prosecuted at the federal level. At the state level, the New York Attorney General’s Office plays a vital role. Recent cases involve convicting a medical biller of stealing more than $1.1 million from surgeons, arresting a father/daughter combo for stealing from the elderly, and the conviction of an attorney from stealing from client trust accounts.

Finally, New York’s local prosecutors should not be left out, particularly in Manhattan. As an example, the Manhattan District Attorney’s Office addresses crimes within its jurisdiction (widely interpreted), that sometimes are crimes that the feds either cannot or will not prosecutor. Examples of these include the recent charges and convictions of President Trump and his organization for falsification of business records.

Federal White-Collar Enforcement

The Southern District of New York (SDNY) is renowned as the epicenter of federal white-collar crime prosecution, leveraging its jurisdiction over Wall Street and key financial institutions.

The DOJ prioritizes crimes like corporate fraud, insider trading, embezzlement, and securities fraud, often bringing high-profile cases that set legal precedents. As discussed, the SDNY went after Raj Rajaratnam, the billionaire founder of the Galleon Group. Rajaratnam’s use of insider information to profit from stock trades led to his conviction under the Securities Exchange Act and resulted in an 11-year prison sentence. This case highlighted the use of wiretaps—a novel approach for white-collar prosecutions—to secure critical evidence. This case and others in the white-collar realm highlights the need for attorneys to be fluent in how wiretaps work and whether or not they can be suppressed. Luckily, Dynamis is proficient in wiretaps, having led Operation Varsity Blues, which utilized a wiretap to take-down the leader of the Key Worldwide Foundation (Rick Singer).

In the realm of securities fraud beyond insider trading, the SDNY successfully prosecuted executives from FTX, the massive crypto exchange that was being run, effectively, as a Ponzi scheme by Sam Bankman-Fried, who is now serving a 20 year prison sentence. As another example, James Velissaris, the founder and former chief investment officer of Infinity Q Capital Management (“Infinity Q”), a New York-based investment adviser that ran a mutual fund and a hedge fund that purported to have approximately $3 billion in assets under management, was sentenced to 15 years in prison for his participation in a scheme to defraud Infinity Q’s investors

The SDNY has also targeted corporate embezzlement. In one case, an executive at a Fortune 500 company was charged under the federal wire fraud statute for diverting millions of dollars in company funds for personal use. The prosecution’s reliance on forensic accounting and financial audits ensured a robust evidentiary foundation.

These cases show the Southern District of New York’s leadership in tackling high-stakes white-collar crimes, employing unique strategies and powerful statutes to go after offenders nationwide. Being charged in the SDNY should not be shrugged off. Both the charges, and potential sentences, are serious, and as a result, serious defense counsel should be retained.

State-Level Enforcement by the New York Attorney General

The New York Attorney General’s Office wields broad authority under statutes like the Martin Act to pursue corporate fraud, securities violations, and consumer protection cases. This office has played a leading role in several high-profile prosecutions that underscore its commitment to safeguarding public and investor interests.

One significant case involved ExxonMobil, a civil case, where the Attorney General’s Office alleged the company misled investors about the financial risks of climate change. This case, prosecuted under the Martin Act, focused on ExxonMobil’s public disclosures and their failure to account for the true costs of regulatory compliance in a carbon-constrained world. Although the court ultimately ruled in favor of ExxonMobil, the case highlighted the Attorney General’s dedication to corporate accountability and transparency.

Another landmark case was the civil litigation against Purdue Pharma for its role in fueling the opioid crisis. Using consumer protection statutes, the office secured a $4.5 billion-dollar settlement. This agreement directed substantial funds to addiction treatment and prevention programs, emphasizing the office’s commitment to addressing public health crises caused by corporate misconduct.

The Attorney General’s Office has also tackled widespread predatory lending practices. In one instance, the office prosecuted payday loan operators who charged exorbitant interest rates far exceeding New York’s usury laws. The case resulted in restitution for victims and stricter compliance measures for financial operators.

In the securities domain, the office’s investigation into Ponzi schemes and financial frauds has kept apace. For example, it successfully prosecuted investment advisers who misused client funds, bringing charges under both the Martin Act and New York’s larceny statutes.

Collaboration with federal agencies like the SEC and DOJ has been a hallmark of the Attorney General’s strategy. Joint investigations have addressed cross-border securities fraud, tax evasion, and corruption, maximizing enforcement impact. These partnerships enable the office to leverage additional resources and expertise, further strengthening its capacity to tackle complex financial crimes.

Local Enforcement by the Manhattan District Attorney

The Manhattan District Attorney’s Office too plays a critical role in prosecuting white-collar crimes occurring within Manhattan, home to Wall Street and numerous corporate headquarters. The office’s efforts encompass a broad range of financial misconduct, from securities fraud to cryptocurrency schemes, with a strong focus on protecting the integrity of financial markets and holding high-profile offenders accountable.

One prominent case, of course, was the prosecution of the Trump Organization, which faced allegations of tax fraud. The case centered on claims that the organization falsified business records to evade taxes, with charges brought under New York Penal Law sections 175.10 (falsifying business records in the first degree) and 180.00 (commercial bribery).

Another significant example is the prosecution of the Abacus Savings Bank, from New York’s Chinatown area. The case fell apart due to a shoddy investigation, underscoring the differences, at times, between federal and state investigations.

However, in the realm of emerging financial crimes, the Manhattan has aggressively pursued cryptocurrency-related fraud. One notable case involved the prosecution of an operator of an unlicensed cryptocurrency exchange who laundered millions in illicit funds. Using blockchain tracing techniques and digital forensic tools, the DA’s Office has successfully brought charges under New York’s Money Laundering statutes (Penal Law §170.30).

Through these efforts, the Manhattan District Attorney’s Office has established itself as a leader in white-collar enforcement, adapting to modern financial crimes while maintaining its focus on traditional fraud and corruption cases.

The New York Department of Financial Services (NYDFS)

The New York Department of Financial Services (NYDFS), although a civil agency only, plays a pivotal role in regulating and enforcing laws related to the financial services industry. As one of the most influential state regulatory agencies in the U.S., the NYDFS oversees banks, insurance companies, and other financial institutions operating within New York. The agency’s mandate includes ensuring the safety and soundness of financial institutions, protecting consumers, and combating financial crimes such as money laundering and fraud.

One of the NYDFS’s landmark actions involved a settlement with Standard Chartered Bank, a joint investigation with the Manhattan DA’s Office, which faced allegations of violating anti-money laundering laws by processing transactions for entities in sanctioned countries. Under the New York Banking Law and the state’s anti-money laundering regulations, the NYDFS imposed a fine of $340 million and implemented enhanced compliance measures within the bank.

Another significant case was the investigation into Equifax following its massive data breach in 2017. The NYDFS utilized its authority under the state’s cybersecurity regulations, which are among the most stringent in the nation, to mandate corrective actions and ensure that the company bolstered its data protection measures.

The NYDFS is also at the forefront of regulating cryptocurrency businesses through its "BitLicense" framework. This regulatory approach aims to address risks in the rapidly evolving digital asset space while fostering innovation. For example, the NYDFS fined a prominent cryptocurrency exchange $100 million for failing to address compliance deficiencies related to anti-money laundering and cybersecurity controls. This enforcement action underscored the department’s focus on ensuring integrity in emerging financial sectors.

If you are an organization or individual facing a situation requiring an aggressive, robust response to a government inquiry or even an active case in New York or elsewhere, contact attorneys at Dynamis LLP or email whitecollar@dynamisllp.com today. Dynamis has offices in Boston, New York, and Miami, but can and will zealously represent your interests everywhere.