What Is A Round-Trip Transaction?

Companies in New York have become quite proficient at limiting their tax burdens. Some of these strategies are legal, and some are not. While taking advantage of loopholes in the system can sometimes be extremely rewarding, you need to steer clear of any illegal activity. If you are caught evading taxes illegally, you may face considerable consequences. One of these illegal strategies is a “round-trip transaction.” But what exactly is a round-trip transaction, and why is it illegal?

A Real-Life Example of a Round-Trip Transaction 

To understand what a round-trip transaction actually looks like, it is helpful to examine a real-world example. On November 28th of 2022, it was reported that the CEO of Iconix Brand Group had been found guilty of accounting fraud. The scheme helped Iconix Group inflate its revenue and earnings per share through false filings made with the SEC. In the words of one US attorney, he “cooked the books.”

The CEO was specifically accused of orchestrating a string of “round-trip” transactions. These involved inducing another company to pay artificially inflated buy-in purchases. The CEO then promised this company that they would eventually be reimbursed in full for these purchases. This is a classic example of a “round-trip” transaction, and it helped the CEO artificially inflate the value of his company. This private agreement was hidden from the company’s lawyers and outside auditors.

As a result, the CEO was convicted of one count of securities fraud, six counts of making false filings with the SEC, and one count of improperly influencing the conduct of audits. Each of these counts carries a maximum prison sentence of 20 years. So to answer the question: Yes, you can go to prison for making round-trip transactions.

The Definition of a Round-Trip Transaction 

Investopedia defines a round-trip transaction – otherwise known as “round-tripping” as an unethical practice that involves “purchasing and reselling shares of the same security over and over again in an attempt to manipulate observers into believing that the security is in higher demand than it actually is.” They also note that this practice has led to the complete collapse of several high-profile companies, including Enron.

Wikipedia gives a broader definition, stating that round-tripping can involve virtually any asset being sold with an agreement to buy it back. This might include stocks, products, and much more.

Where Can I Find a Qualified, Experienced Criminal Defense Attorney in New York? 

If you’ve been searching for a qualified, experienced New York criminal defense attorney, look no further than Phillip J. Murphy, Attorney at Law. Over the years, we have helped defendants fight a range of charges. We know that tax evasion and fraud charges have the potential to completely ruin your reputation and send you to prison. With our help, you can avoid these potential consequences at all hazards. Book your consultation today to get started with an effective defense strategy.

Sources:

justice.gov/usao-sdny/pr/former-ceo-iconix-brand-group-convicted-trial-accounting-fraud

investopedia.com/terms/r/round-triptrades.asp