A dormant federal law just became relevant again — and the penalties are severe.  In their newest Law360 article, Michael Longyear, Jillian Berman and Cindy Kuang analyze recent developments concerning the Continuing Financial Crimes Enterprise statute.  Take note, private credit lenders, C-suite executives, and white-collar defense attorneys.

The U.S. Attorney’s Office for the Southern District of New York (SDNY) has charged two major lending fraud cases under the Continuing Financial Crimes Enterprise statute (18 U.S.C. § 225) — a law that hadn’t appeared on SDNY’s docket in 30 years. In U.S. v. Chu (December 2025) and U.S. v. James (January 2026), federal prosecutors targeted the CEOs of Tricolor Holdings and First Brands Group, respectively, alleging they orchestrated massive collateral fraud schemes that drove both companies into bankruptcy. Unlike wire fraud or bank fraud — which carry no mandatory minimums — the CFCE imposes a 10-year mandatory minimum and a maximum of life imprisonment, making it one of the most powerful tools in the federal white-collar arsenal.

The CFCE’s return reflects a deliberate enforcement signal from SDNY, which has prioritized financial crime and market integrity since taking office. Both cases involve warehouse lending and revolving credit facilities — the lifeblood of the private credit market — and SDNY has explicitly flagged private credit as an area of ongoing scrutiny. For private credit funds and direct lenders, which often lack the regulatory oversight that might surface fraud early, these prosecutions are a warning to tighten collateral verification protocols and borrowing base audit practices now, before problems escalate to criminal exposure.

For executives and their counsel, the stakes are equally high. The CFCE’s mandatory minimum fundamentally changes plea negotiation leverage, and its leadership element — requiring proof that a defendant organized, managed, or supervised the fraud — has been interpreted broadly by courts to include executives who delegated day-to-day operations. Board members and C-suite officers who approved or directed fraudulent conduct cannot assume that distance from execution provides insulation. If the Tricolor and First Brands prosecutions result in convictions and new Second Circuit precedent, prosecutors nationwide will have fresh reason to reach for this long-dormant statute.