Criminal Defense Lawyers

What Happens If You Don’t Respond to SEC Subpoena

Ignoring an SEC subpoena to keep the investigation quiet is the exact thing that makes it public. The enforcement action creates permanent court records that didn’t exist before.

Confidential investigations stay confidential if you comply. The moment the SEC files an enforcement petition, that becomes a public court filing. Journalists monitor these filings specifically.

Terraform Labs tried to hide from SEC subpoenas in 2024. The result was an SEC press release, media coverage, and a court case with their name attached to searchable documents forever. By refusing to respond, they created the publicity they were trying to avoid.

The 10-Day Timeline Nobody Tells You About

Heres the timeline nobody tells you about. When you ignore an SEC subpoena, the SEC files an enforcement petition in federal court. The court gives you 10 days to respond. Not weeks. Not months. Ten days to prove the subpoena is invalid or face contempt proceedings.

Terraform Labs had months to comply with the original subpoena. They could of negotiated. They could of requested extensions. Once they refused and the SEC filed enforcement, they had 10 days. Even a major company with sophisticated legal teams couldnt buy more time once enforcement started. The timeline collapses on you.

The Daily Fines That Destroy You

This is when the daily fines begin. Civil contempt means $1,000 or more per day until you comply. People hear “$1,000 per day” and think thats manageable. Its not.

If it takes you 60 days to finaly hire a lawyer and start cooperating, thats $60,000 in contempt fines alone. This is seperate from the penalties related to the actual investigation. Seperate from your legal fees. Your paying $1,000 per day to NOT cooperate while also paying a lawyer $50,000 to $150,000 to eventualy cooperate anyway.

The math nobody does:

• 30 days of non-compliance equals $30,000.
• Sixty days equals $60,000.
• Ninety days equals $90,000.

These fines accumalate every single day you remain non-compliant. They dont pause on weekends. They dont stop for holidays.

The Bond Trap

Then theres the bond trap. Anthony Coronati ignored an SEC subpoena and had to post a $50,000 bond just to stay out of jail during the investigation. He wasn’t charged with anything yet. He hadnt been convicted. He paid $50,000 for the priviledge of being investigated.

The court also restricted his travel to the Southern and Eastern Districts of New York. If his job required business travel outside the NYC area, he couldn’t do it. And that $50,000 doesn’t count toward legal fees or future penalties. Its a separate cost for non-compliance.

How Legal Costs Stack Up

The legal costs stack up fast. The subpoena response phase typicaly costs $50,000 to $150,000. That covers scope negotiation, privilege protection, document review, and testimony preparation. If charges are filed and you go to trial, add another $500,000 to $2,000,000 in defense costs.

So your looking at contempt fines plus bond money plus initial legal response costs plus potential trial defense. The financial trap closes before you even get to the penalties related to whatever the SEC is actualy investigating.

Permanent Records: The Career Death Timeline

Now about those permanent records. BrokerCheck is FINRA’s public database. Industry bars appear on BrokerCheck. Anyone can search it. Potential employers. Clients. Journalists. Competitors.

Theres no expungement process. Theres no way to seal the records. Theres no way to make it dissapear. If your 28 years old and you ignore an SEC subpoena and catch an industry bar, your 28 years old with 40 years of unemployability ahead of you.

Every future employer searches BrokerCheck before hiring. Every client searches it before signing a contract. You made one decision at 28 and it follows you at 35, at 42, at 50, at 60. The career death timeline is permanant.

Why SEC Investigations Are Backwards From Criminal Law

This contradicts your instinct. In criminal law, staying silent protects you. Fifth Amendment. Dont talk to cops. That instinct is completly backwards in SEC investigations.

In SEC investigations, cooperation is your protection. Non-cooperation gets noted as “a factor considered in resolution.” Thats from the SEC Enforcement Manual. If you refuse to cooperate with an informal investigation request, that counts against you even tho informal requests dont have subpoena power.

Taking the Fifth Amendment in SEC testimony can trigger FINRA registration bars. Your silence, which would protect you in criminal court, destroys your securities career in an SEC investigation. The incentive structure is inverted.

The “Voluntary” Trap

Heres another trap: informal SEC investigations are technically voluntary. The SEC doesn’t have subpoena power during the informal phase. But if you dont voluntarily comply, “non-cooperation is a factor in resolution.” So its voluntary the way a mob boss asking for a favor is voluntary.

Failure to respond to an informal request may result in the SEC issuing a formal subpoena for the same documents plus additional materials. Your being coerced without legal compulsion. Most people treat informal requests as if they were subpoenas becuase the consequences of refusal are the same.

Criminal Escalation

The criminal escalation happens fast. Civil contempt is just the begining. If the court believes your non-compliance is willful, your looking at criminal contempt under 18 U.S.C. Section 401. Thats up to six months in jail.

If you destroyed documents or intentionaly obstructed the investigation, obstruction of justice charges carry up to five years in federal prison. What started as ignoring a subpoena becomes a seperate federal crime with its own penalties.

The SEC Enforcement Machine

You think your not important enough for the SEC to chase. In FY 2024, the SEC collected $8.2 billion in enforcement penalties. Thats the highest amount in SEC history. They filed 583 enforcement actions. Your one of 583.

In September 2024 alone, the SEC charged 13 firms and 10 individuals in a single enforcement sweep related to off-channel communications violations. Individual penalties ranged from $10,000 to $200,000. Firm penalties hit $750,000. There running a record-breaking enforcement machine and your a line item in a spreadsheet.

The SEC required 34 admissions of guilt in FY 2024. Thats a record. There not settling quietly. There extracting public admissions and creating precedent. Your case isnt special. Its part of an assembly line.

The 2-to-5-Year Timeline

The timeline for SEC investigations is 2 to 5 years from initial subpoena to resolution. Not months. Years.

• The document production phase alone takes 2 to 6 months.
• Testimony phase: 3 to 12 months.
• SEC staff review: 3 to 6 months.
• Wells process: 1 to 3 months.

When you decide to ignore that subpoena, your not making a decision about next week. Your making a decision about the next five years of your life. Thats how long this lasts. Thats how long your under investigation, bleeding money on legal fees, watching your career options narrow.

People think short-term. “I’ll deal with this later.” “Maybe it goes away.” But SEC investigations are marathons. Five years of your life. Five years of uncertainity. Five years of answering “yes” when the Form U4 asks if your under investigation.

The Extension Request Most People Never Make

Heres what most people dont know: 85 percent of extension requests are granted. But only 40 percent of people even ask for extensions. That means the majority of people are frantically scrambling to meet impossible deadlines when the SEC would of given them more time if they’d just asked.

The SEC’s actual incentive is to get complete document production, even if its late. They’d rather have everything two weeks late then have an incomplete production on time. But people assume rigidity that doesnt exist. They dont ask. They panic. They miss deadlines. Then they face contempt proceedings.

The keyword is “promptly.” If you contact the SEC staff attorney promptly after recieving the subpoena and explain you need additional time to conduct a thorough search, extensions are routinely granted. Dont wait until the day before the deadline. Contact them as soon as you know you need more time.

What You Should Do Instead

What you should do instead: hire a securities lawyer immediately. Not a general criminal defense attorney. A securities lawyer who handles SEC investigations specifically. The rules are different. The strategy is different. The incentive structure is inverted from criminal defense.

Your lawyer negotiates the scope of the subpoena. Many SEC subpoenas are overly broad. They request “all documents related to” something that could mean thousands of emails. Lawyers can narrow that scope, reduce the burden, and make compliance achieveable.

Your lawyer also handles priviledge protection. Attorney-client communications are priviledged. Work product is protected. But you need to identify and segregate those documents during production. If you dump everything to the SEC without a priviledge review, you’ve waived those protections forever.

Document preservation starts immediatly. The moment you recieve the subpoena, you have a legal obligation to preserve relevant documents. That means litigation holds on email accounts. It means stopping auto-delete policies. It means telling employees not to delete anything. If documents get destroyed after the subpoena arrives, thats obstruction.

The Decision Matrix

The decision matrix is simple.

• You can ignore the subpoena, which leads to enforcement actions, daily fines, contempt charges, public court records, and career destruction.
• You can comply, which costs money but preserves confidentiality and keeps you out of contempt.
• Or you can negotiate, which is what 85 percent of people should do but only 40 percent actualy try.

Terraform Labs chose option one. They ignored it. The result was an SEC enforcement petition, a public court case, media coverage, and a 10-day deadline to respond. They spent more money fighting enforcement then they would of spent complying with the original subpoena.

Anthony Coronati chose option one. He paid a $50,000 bond and couldnt leave the NYC area. Hes now a cautionary tale in articles like this one.

The people who choose option three dont become cautionary tales becuase there cases stay confidential. You never hear about them. Thats the point.

Early Warning Signs the Subpoena Is Serious

Early warning signs the subpoena is serious:

• its a formal order of investigation, not an informal request
• It specifies detailed document categories with date ranges
• It includes a deadline for compliance
• It references specific securities laws or regulations
• It comes with a letter from SEC Enforcement staff

If you get an informal request first, thats actualy good news. It means the SEC hasnt opened a formal investigation yet. You have more room to negotiate. You can potentially resolve issues before formal subpoena power gets involved. But you still need to respond. Ignoring informal requests triggers formal investigations.

Who Gets Charged vs Who Gets Warnings

The prosecutorial decision factors: who gets charged versus who gets warnings. The SEC looks at cooperation. They look at whether you voluntarily disclosed the problem. They look at whether you’ve implemented compliance fixes. They look at your history of violations.

First-time violators who cooperate and fix the problem often get warnings or small fines. Repeat violators who obstruct investigations get charged, get banned from the industry, and get there cases referred to the DOJ for criminal prosecution.

The Stakes Are Permanent

The stakes are permanent.

• One decision at 28 equals 40 years of BrokerCheck searchability.
• One decision to ignore a subpoena equals five years of investigation hell.
• One decision to obstruct equals federal prison time.

The timeline is long. The consequences are permanant. And ignoring it makes everything worse.