Wire Fraud Defense

Wire fraud is a federal crime that carries some severe penalties when someone receives a conviction. This type of fraud is committed using any type of wire, television, or radio communication. However, given the advances in technology, it has also grown to include online communication, such as email. Because it is a federal crime, the charges for wire fraud are brought by the Department of Justice instead of the state.

The Crime of Wire Fraud

To be convicted of wire fraud, prosecutors need to prove several things.

The Scheme

First, they need to prove that there was a scheme to commit fraud, which means that the defendant knowingly lied or misrepresented something to cause a loss to the victim. This loss is typically monetary.

For example, someone might be selling a product over the phone that they claim will provide certain benefits, even though there is no substantiation of those benefits. Someone doesn’t need to lie to be charged with wire fraud, though. Failure to provide certain facts could be considered misleading and would show the deceit of the victim.

An example might be trying to convince investors to put money into a property venture by saying a prominent real estate professional has already shown interest. However, not telling people that the real estate professional decided to pass would be deceit. The other potential investors would still be under the impression that they would be investing in property with that person, even though it is not true. This would cause them to make their decision based on false or misleading information.

In cases like these, even when no one lost money, someone could still be charged with wire fraud. The scheme doesn’t have to succeed to be a crime.

The Wires, or Lack Thereof

Since Congress enacted the wire fraud statute in 1952, technology has broadened communications to include wireless devices and the internet. And it’s conceivable that in the near future we’ll be considering two-way satellite communications as yet another way to deliver so-called wire fraud.

In fact, wire fraud can happen over email, it can happen via text messaging, and it can happen over social media messaging. There really is no limit to the ways or forms that we communicate in the Digital Age. And if you really want to bend your mind around a pole, consider what it will be like when some of our more adventurous early adopters start receiving brain implants that enhance cognition but open them up to all kinds of potential privacy violations (how do you block a backdoor intrusion to a chip implanted next to your brain?) And it makes you wonder if Congress should consider updating the wire fraud act to list some of these methods with better definitions of relevant terms.

For the crime to be considered wire fraud, though, it could still utilize wires in the old way. Some Americans remain suspicious of wireless communications and prefer the old landlines and still use fax machines. Some examples of wire fraud still utilize the phone, a telegram, or overnight mail. Anyone who has bought real property recently probably received a warning notice about protecting oneself against fraudulent wire transfers. You should go through several steps to ensure that the other party’s identity had been verified.

The Intent

The next element that the prosecutors need to prove would be intent. The prosecutors must show that you were acting with the intention to defraud someone. Just being a participant in these schemes is not enough to be charged. You need to have known about the scheme and the goals. Someone who is simply working a phone bank and who doesn’t realize they are part of the scheme would not be charged.

There is an exception to this, though. If it can be proven that you acted with reckless indifference regarding the truth of what you were saying, you could still be charged. Reckless indifference is an interesting term, because it grows more significant the longer one stays working for a fraudulent enterprise. I mean at some point, you would be expected to know details about the shenanigans; otherwise, you’d need to prove that it was so incredibly well hidden that you never had the slightest idea that there was something amiss.

Really, you didn’t notice the number of irate phone calls to customer service?

Penalties for Wire Fraud

Wire fraud is a federal crime, and the penalties are severe. It may result in up to 20 years in federal prison and/or both prison time and a large fine. In cases where the fraud involved a national bank or other financial institution, the prison time could be as high as 30 years. The same is true in cases where the fraud involved a national disaster.

Possible Defenses for Wire Fraud

You will find some potential defenses that can be used when you’ve been charged with wire fraud.

The prosecutors must show beyond a reasonable doubt that there was an intention to commit fraud. This can be hard to prove, as it requires that they show what you were thinking when the fraud was committed.

A mistake of fact defense could work in some situations, as well. If you were mistaken about certain facts when the fraud was committed, they might not be able to charge you with a crime. If you believed the claims that you were telling clients were true, for example, and you were mistaken about the actual truth, it would be difficult for the prosecutors to get a conviction.

It might also be possible to show that you lack the requisite technical skills to understand how the fraud occurred. Perhaps you don’t know anything about the Dark Web, backdoors, or malware because you’ve never experienced it firsthand. Maybe you just offered marketing services to the fraudulent company, but you had no idea that the service or product being offered was fraudulent.

There have been some high-profile fraudulent cases in recent years (depending on when you read this). The first one that comes to mind was the Elizabeth Holmes scandal and her former startup Theranos. She was convicted for investor fraud because the scanning device didn’t actually work. She went to prison, but investors will never see all their money returned to them, and they are angry and wondering if there may be criminal liability elsewhere in the communications chain.

Insurance companies, it should be noted, are realizing that they need to reconsider offering certain kinds of protection coverage against accusations of this broader definition of wire fraud, but since the law itself is struggling to keep up with the complexity of these communications, they may have a defense if the policy doesn’t specifically mention protection against charges of wire fraud.

Crypto companies are vulnerable to wire fraud charges. In Michael Lewis’s latest book Going Infinite: The Rise and Fall of a New Tycoon , where he documents the rise and fall of Sam Bankman-Fried, he mentions numerous incidents where crypto tokens suddenly vanish or get stolen from an exchange deposit account. At the end of 2023, crypto tokens are not registered securities, even widely tracked ones such as Bitcoin and Ether. Any type of investment that is not a registered security opens itself up to charges of wire fraud. Bankman-Fried was convicted of 100 counts of wire fraud, conspiracy, and money laundering. It is in the process of being appealed, and it will be interesting to see what defenses will be clarified for the appeals court.

Talk with an Experienced Attorney

It is important to contact a defense lawyer right away if you have been charged with wire fraud. Find a professional with experience in the field who can provide you with the defense strategy you need. Get in touch with Gasner Law by calling 415-782-6000.

Resources: https://www.justice.gov/archives/jm/criminal-resource-manual-941-18-usc-1343-elements-wire-fraud