I want to state ahead of time that my business is not publicly traded on any market! So if I draft a document which would hereby give a 10% stake in my company to an investor "this is not a stock! more like a proof of sale contract" in exchange for $50,000. I tell the investor I am purchasing high quality stocks to make strong returns on their investment. Then i turn around and buy 50k worth in stock, then liquefy the company and all of it's assets for 40k, give the investor 10% of it's value or $4,000 since that's what they own, while I keep the other $36,000. Would that be considered securities fraud? I don't lie to the investor, I'll tell them that they are not 100% guaranteed a profit. and since I actually did buy stocks like I said I would I'm not lying. Could I be criminally charged for this? or could the investor sue me for their losses? I know what you might be thinking..... no one would give me 50k...... just ignore that possibility. Assuming they did give me the money. would such a process be legal? Also I have double check and yes it is legal to sell someone stake in your company via contact without have to be publicly traded or using a broker.