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New York lawyers are bracing for a surge of white-collar criminal and civil cases stemming from market volatility caused by the COVID-19 pandemic, former prosecutors told the New York Law Journal this week.

The attorneys said the expected upswing is likely to mirror trends that followed the dot-com bubble of the turn of the century and the financial crisis of 2008. However, they added, investigations may be slowed and trials delayed as a result of court shutdowns imposed to slow the spread of the coronavirus.

David Miller, a partner at Greenberg Traurig and former assistant U.S. attorney in the Southern District of New York, said investigations of pandemic-related misconduct were likely already underway, but additional cases also would arise from prior acts that are just now being brought to light.

"I think you're going to see a combination of both criminal and civil law-enforcement actions," Miller said. "Either way, I think you're going to see an uptick in civil and criminal enforcement work later this year."

Miller said that U.S. attorney's offices would keep their focus on the same general areas of enforcement but would also place an increased emphasis on areas specific to the coronavirus crisis, such as false claims and fraud and misrepresentations in connection with efforts to obtain critical personal protective gear and government loans.

Prosecutors also were likely to probe insider-trading allegations in the wake of market swings.

The Defense Production Act, triggered by President Donald Trump to spur manufacture and delivery of key products, has already become a tool for prosecutors.

The Brooklyn U.S. Attorney's Office in recent weeks has brought criminal charges for hoarding and price-gouging of PPE under the Defense Production Act. And the Justice Department has signaled that COVID-related fraud would be a top priority going forward.

Many of the expected cases were likely to land in the Southern and Eastern District of New York, where prosecutors have deep experience with complex financial and securities fraud schemes, Miller said.

But just as the 2008 financial crisis resulted in civil actions by the U.S. Securities and Exchange Commission related to valuation fraud, Miller said he expects prior bad acts to be exposed in the wake of the COVID-19 pandemic.

Those cases, he said, could be offshoots of probes directly related to the pandemic, or they could be unearthed simply as a result of pressures from heightened market volatility, like the potential collapse of Ponzi schemes when skittish investors demand to withdrawal their investments.

"I think all COVID-related financial fraud is a top priority right now," said Jaimie Nawaday, chair of Kelley Drye & Warren's white collar, investigations and compliance practice group and a former Southern District prosecutor.

Actions under the Foreign Corrupt Practices Act would also be especially likely, given the rush to buy PPE, Nawaday said. Companies and individuals looking to do cross-border transactions with unfamiliar parties had particularly become targets for illicit traffickers or third-party "consultants" whose real job is to bribe officials and others, she said.

"There's so much chaos in the market," Nawaday said. "Everybody is chasing the same thing."

Both Miller and Nawaday agreed that getting the cases to trial was another matter entirely.

Like everyone else, many investigators are under orders by elected officials to stay home, which could hamper travel and face-to-face interviews.

"What they like to do is knock and talk, go door to door" Nawaday said.

With difficulties impaneling grand juries, there also be issues with indicting criminal defendants, as well. Miller said that courts were working on measures under the Speedy Trial Act to roll over the time for bringing indictments, but often, prosecutors plan well in advance with cases that could involve potential statute-of-limitations issues.

"It appears that it may take some time for grand juries to be impaneled, and that delay may result in a difficulty in charging certain complex white-collar fraud schemes," he said. "Consequently, certain investigations that the Department of Justice may be investigating now may take longer to charge."

Currently, all jury trials in the Southern District have been suspended indefinitely, and it is not clear when the court will fully open again to conduct its regular business. Some trials scheduled for the fall have already been pushed until next year, and the resulting backlog in cases will likely prove a logistical challenge for courts.

Civil trials would be required to take a backseat to criminal prosecutions, but the SEC complaints could seek temporary restraining orders and preliminary injunctions, which could ensure expedited treatment by the courts, Miller said.

One attorney expressed caution over whether to expect trials, both civil and criminal, are to begin in earnest for the remainder of this year.

A feared second wave of infections could throw a wrench into proceedings. A new spike, Nawaday said, could lead to another round of "corrective measures," and "you don't want new trials happening in that first, experimental phase."

"I don't think we're going to see normal trial activity until Spring 2021," she said.

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