Wire Fraud

Wire Fraud: The Most Powerful Law In Crypto & Scams Right Now!

Portions courtesy of Reuters

Regulation and enforcement in the cryptocurrency space are hot topics, with the debate centered around the complex issue of whether to classify digital assets as securities, commodities, or a separate asset class entirely.

In the middle of this debate, the Department of Justice (DOJ) has sent a message — the classification does not matter for its purposes. In recent prosecutions, DOJ has used the wire fraud statute, 18 U.S.C. § 1343, a law with origins dating back to the 1800s, to bring innovative cases in the Internet fraud and cryptocurrency space, and scams in general, that do not depend on how a digital activity or asset is classified.

Since then, DOJ has used wire fraud to prosecute the first two rug pulls involving NFTs and to prosecute two digital asset insider trading cases, and countless online fraud or scam cases. The DOJ has recently used wire fraud in large-scale scammer cases and it seems to be a great area of focus, given public reports of scams, and it application in crypto fraud of all kinds such as spoofing (creating orders with the intent to cancel) by crypto whales, who are individuals or entities that own substantial amounts of a particular cryptocurrency.

Wire Fraud Is:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

Before You Give Up

1. It is important to know what laws apply to scams and scammers – this is just one
2. A mistake most victims make when trying to report their crime to the police is using the word “SCAM” & “SCAMMERS” – scams are FRAUD, and when you use the right word “fraud” the police understand this far better and will respond to your report far easier.

In this article, we are going to talk about “wire” – this just means phones, the Internet, or any communication today – all internet or cell phone communications are considered by wire.

The Wire Fraud Statute In Brief

The wire fraud statute is based on the nearly identical mail fraud statute, which was enacted in 1872 to combat fraud committed through the mail.

The wire fraud statute expanded the law beyond the mails to include the telephone, and now all forms of telecommunication including email, text messaging and social media. In general terms, the wire fraud statute prohibits using a “wired” communication to obtain money or property through a scheme to defraud, which is often accomplished through misrepresentations or false promises. This means it applies to online fraud (scams).

The statute is adaptable; it is not limited by subject matter. Prosecutors have applied it to insider trading schemes, money laundering, scam schemes, impersonation & spoofing, and more recently in cryptocurrency market manipulation.

It is a powerful tool for prosecutors. For this reason, Judge Jed Rakoff famously quipped that to prosecutors the mail and wire fraud statutes are “our Stradivarius, our Colt 45, our Louisville Slugger, our Cuisinart — and our true love.” (Jed S. Rakoff, “The Federal Mail Fraud Statute (Part 1),” 8 Duq. L. Rev. 771, 771 (1980)). DOJ’s recent cases only prove Judge Rakoff’s point.

The elements of wire fraud under Section 1343 directly parallel those of the mail fraud statute but require the use of an interstate telephone call or electronic communication (such as the Internet) made in furtherance of the scheme.

In the case: United States v. Briscoe, 65 F.3d 576, 583 (7th Cir. 1995) (citing United States v. Ames Sintering Co., 927 F.2d 232, 234 (6th Cir. 1990) (per curiam)); United States v. Frey, 42 F.3d 795, 797 (3d Cir. 1994) (wire fraud is identical to mail fraud statute except that it speaks of communications transmitted by wire); see also, e.g., United States v. Profit, 49 F.3d 404, 406 n. 1 (8th Cir.) (the four essential elements of the crime of wire fraud are: (1) that the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money; (2) that the defendant did so with the intent to defraud; (3) that it was reasonably foreseeable that interstate wire communications would be used; and (4) that interstate wire communications were in fact used) (citing Manual of Model Criminal Jury Instructions for the District Courts of the Eighth Circuit 6.18.1341 (West 1994)), cert. denied, 115 S.Ct. 2289 (1995); United States v. Hanson, 41 F.3d 580, 583 (10th Cir. 1994) (two elements comprise the crime of wire fraud: (1) a scheme or artifice to defraud; and (2) use of interstate wire communication to facilitate that scheme); United States v. Faulkner, 17 F.3d 745, 771 (5th Cir. 1994) (essential elements of wire fraud are: (1) a scheme to defraud and (2) the use of, or causing the use of, interstate wire communications to execute the scheme), cert. denied, 115 S.Ct. 193 (1995); United States v. Cassiere, 4 F.3d 1006 (1st Cir. 1993) (to prove wire fraud government must show (1) scheme to defraud by means of false pretenses, (2) defendant’s knowing and willful participation in scheme with intent to defraud, and (3) use of interstate wire communications in furtherance of scheme); United States v. Maxwell, 920 F.2d 1028, 1035 (D.C. Cir. 1990) (“Wire fraud requires proof of (1) a scheme to defraud; and (2) the use of an interstate wire communication to further the scheme.”).

Conclusion

As online fraud and crypto becomes mainstream, prosecutors have responded with one of DOJ’s oldest tools — wire fraud. In the first half of 2022, DOJ was actively prosecuting cases under the wire fraud statute, and we can expect that trend to continue and expand into other areas of financial fraud traditionally prosecuted by the DOJ.

Remember

• Always report all scam cases as Fraud or Wire Fraud.
• Do not call them scammers, call then criminals