DOJ Fraud Division’s Rise Diminishes Premier White Collar Unit

The Justice Department’s corporate crime enforcement hub has lost the bulk of its market manipulation and securities expertise over the past few months, accelerating what former officials call a downgrade of the team’s once-formidable brand.

The White House directed a pivot this year to target public benefits schemes through Vice President JD Vance’s launch of DOJ’s National Fraud Enforcement Division. That has come at the expense of a preexisting Criminal Division fraud section unit known for innovative cases to shore up the financial system and protect investors, said multiple former DOJ fraud supervisors.

Ongoing staff departures at the market integrity unit escalated in recent weeks when the team’s chief and her two deputies left for the new fraud division, said several of those former DOJ attorneys, who spoke anonymously to discuss internal personnel moves. Another market unit manager was fired in September over his resistance to a senior DOJ leader’s intervention to dismiss blockbuster securities fraud charges against Indian billionaire Gautam Adani.

The unit has historically secured high-profile convictions of traders at financial institutions such as

JP Morgan Chase & Co.

and

Deutsche Bank AG

.

The market team has shrunk from more than 40 attorneys at the start of President Donald Trump’s second term to about 10 today. It’s now expected to face significant challenges in advancing the types of data-driven and sophisticated investigations into insider trading, spoofing, and other market-rigging scams.

“It’s a combination of just smaller size plus relative lack of experience that makes it difficult to continue to bring big cases,” said William Johnston, a former market integrity unit assistant chief who’s now a partner at Bird Marella. “In the short term, they’re probably struggling just to push the cases they already have that are already charged.”

In a prepared statement, the department said the office formerly known as the fraud section, which was renamed in August to avoid confusion with the fraud division, won’t suffer from attrition.

“Although it has a new name, the White Collar and Corporate Enforcement Section has decades of experience in bringing complex cases and maintaining continuity in prosecutions as attorneys come and go,” said DOJ spokesperson Audrey Cook.

However, the department’s own messaging this week has created confusion as to which part of DOJ headquarters will now take the lead on securities cases.

A DOJ official said in a statement Thursday that the white collar section “continues to be the place where attorneys tackle some of the most complex securities fraud” cases. But the fraud division unveiled a memo later that day showing it, too, would be building out securities probes.

Retention Bonuses

An office previously considered a coveted destination for law firm associates looking to bolster their white collar credentials has now resorted to offering retention bonuses to prevent further exits.

Criminal Division chief Tysen Duva has started paying supervisors in the white collar and corporate enforcement section 20% of their salaries over six months to stay, multiple people familiar with the plan said. Line attorneys in the section will receive a 10% retention incentive.

One former fraud section leader said lawyers used to “give their left arm for that job.” Another veteran of the office recalled a period after the 2008 financial crisis when the fraud section was deluged with at least hundreds of applicants for only a few available attorney positions.

The department defended the experience of the white collar section’s personnel and their ability to maintain its historic mission.

“Our prosecutors are doing extraordinary work every day on some of the most difficult and consequential white collar cases in the country,” Cook said when asked to address the bonuses. “We want to recognize that hard work and make it clear how much we value the talented people who have dedicated themselves to the Criminal Division’s mission.”

Separately, a DOJ official said the white collar section, encompassing multiple other teams besides the market unit, is staffed with “dozens of attorneys” and that the Criminal Division employs “more than 500 attorneys.”

Greater Stability

Ten of the market integrity unit’s trial attorneys were previously reassigned to the new division to focus on procurement fraud and others have left for private practice — consistent with the fraud section’s longtime active revolving door to the defense bar.

But lately the office has seen supervisors and other lawyers motivated to voluntarily join a fraud division they view as a more stable faction of the department, with greater resources and prioritization from the attorney general, some of the former DOJ lawyers said.

“Why not go to where you’re going to be getting that support and encouragement rather than needing to justify what you’re doing and always having the threat that further attorneys in your unit are going to be taken away?” Johnston said.

It’s a shift from earlier this year, when fraud section attorneys said they felt betrayed by DOJ’s reversal from Duva’s prior commitment that the creation of the new division wouldn’t affect their work. There’s also been widespread concern among current and former department personnel that the new fraud effort, which sprung up in response to Nigerian daycare benefits theft in Minnesota, will be politically driven by the White House.

The fraud division is run by Colin McDonald, a close ally of Attorney General Todd Blanche who’s also built a strong bond with Vance and White House deputy chief of staff Stephen Miller. Duva, a veteran line prosecutor in Florida, joined the administration late last year as an unexpected choice to run the Criminal Division. His acquaintance with White House Chief of Staff Susie Wiles helped him land on the president’s radar.