Wire Fraud: The Wires Are (Mostly) Gone, but It’s Still Everywhere

If you watch classic films, especially comedies and gangster movies, you’ll have seen a lot of vintage hucksters plying their trade.  The scam might be a carnival sideshow, a crooked card game (Bystander:  “Is this a game of chance, gentlemen?”  W.C. Fields:  “Not the way I play it, no…”) or a faked-up telegram designed to fool the “mark.” 

The term wire fraud might conjure up those black-and-white images in your mind, with its old-fashioned sound.  While its roots do indeed go back to the days of the telegraph, the definition is a lot broader now and sadly, it’s very much in its golden age. 

The Criteria for Wire Fraud

Federal legislation lays out a few surprisingly simple criteria that must be met in order for a crime to be considered wire fraud.  The first is that it uses a form of electrical or electronic communications as opposed to the mail (otherwise it’s mail fraud, which is pretty old-school these days but it definitely still happens).  The second is that the communication takes place as part of a deliberate scheme to defraud someone of their money or other property.  A third is that it involves materially deceiving the victim.  The communication must also cross state lines at some point. 

Who's Calling Me?

Search any phone number to learn more about the owner!

That first point is the one that explains why wire fraud, despite its vintage sound, is still a very big deal in this century.  Although the law originally specified the use of “wire” as the medium used to conduct the fraud, its interpretation has been broadened to include any use of the telephone system or the internet.  In other words, even when the communication takes place over modern fiber-optic lines or wirelessly through the cellular network, it’s still considered “wire” fraud for legal purposes. 

Not only is wire fraud still a thing, then, it’s a bigger and broader category than it has been at any point in history.  You can scam a lot more people, a lot more quickly, if you do it remotely. 

What Is and Is Not Wire Fraud

Let’s look at a specific example.  Suppose friends of yours fall for one of the many (many!) Bitcoin scams that are currently making the rounds.  Your friends were approached via a phishing email (the first criterion), an organized crime ring is running the bogus investment (which meets the “deliberate scheme” criterion), and finally the scam has been misrepresented as a legitimate arbitrage opportunity or something equally plausible (a material deception).  If the scammers are caught, they can be prosecuted for wire fraud. 

But suppose your friends are really enthused about this investment and talk you into getting on board as well.  Because your friends were duped by the real criminals and legitimately believed the investment to be valid at the time, they’re not liable for wire fraud.  It might put a serious dent in your relationship, but they won’t be prosecuted. 

Similarly, if a legitimate business opportunity goes badly and you lose your investment, it’s a life lesson as opposed to wire fraud.  As long as the failed company was in compliance with prevailing law, and intended to turn a profit, it’s not a deliberate scheme to defraud investors. 

Use of Wire Fraud Charges by Prosecutors

The laws around wire fraud give prosecutors a powerful and versatile tool to work with.  Often an existing fraud prosecution under other statutes can have wire fraud charges tacked on.  Similarly, prosecutions under the RICO Act, bribery or kickback scams and even money laundering can often be broadened to include wire fraud charges. 

Prosecutors may also fall back on wire fraud charges to secure a conviction if they’re uncertain of successfully making their case on other charges.  As this article was written, for example, Elizabeth Holmes — the CEO of failed medical-tech startup Theranos — was on trial for nine counts of wire fraud and two counts of conspiracy to commit wire fraud.  Prosecutors assert (but haven’t yet proven in court, at the time of writing) that Holmes and her co-defendant knew their device didn’t work but lied about it to investors. 

The other virtue of wire fraud charges, from the prosecutor’s perspective, is that each offense results in a separate charge.  If the scammer has defrauded (or attempted to defraud) 100 victims, or 1,000, that means 100 or 1,000 counts of wire fraud.  Since each count carries a potential fine and/or jail time, they add up quickly.  That creates enough leverage to seek a long sentence for high-volume scammers or to coerce them into cutting their losses with a guilty plea. 

What To Do When You Encounter Potential Wire Fraud

We write about a lot of criminally fraudulent activity here on this blog, from romance scams and buy-and-sell scams to phishing emails and bogus social security calls.  One thing these scams — and most others — have in common is that they almost invariably meet the criteria for prosecution under the wire fraud statute. 

This means that if you’re approached by a scammer through email, text or a phone call, it’s worth taking a few moments to report the incident whether it was successful or not (a failed fraud is still fraud, just as a failed burglary is still burglary).  Not only does every report give investigators more information and an opportunity to crack the case, it gives prosecutors another potential charge to lay. 

At a minimum, you should report any potential fraud to the FTC’s fraud reporting page (or, if your identity has been stolen, IdentityTheft.gov) and the FBI’s Internet Crime Complaint Center.  Reporting the incident to your local law enforcement agency is never a bad idea, either. 

Finally, reaching out to public-facing venues like the AARP’s Scams & Fraud page, the BBB’s Scam Tracker or your local news outlets can help warn others about the potential for being scammed.  It might not lead directly to an arrest or prosecution, but you could help someone else avoid being victimized. 

References:

IMDB – My Little Chickadee (1940):  Quotes

Congressional Research Service – Mail and Wire Fraud:  An Abbreviated Overview of Federal Criminal Law

U.S. Department of Justice Office of Justice Programs – Mail and Wire Fraud

United States District Attorney’s Office, Northern District of California – U.S. v. Elizabeth Holmes, et al.

U.S. Federal Trade Commission – Report To Help Fight Fraud!

U.S. Federal Trade Commission – Report Identity Fraud and Get a Recovery Plan

U.S. Federal Bureau of Investigation – Internet Crime Complaint Center (IC3)

AARP  – Scams & Fraud

Better Business Bureau – BBB Scam Tracker

Related posts

The Jury Duty Scam: How Criminals Make Big Bucks from Your Civic Obligation

Survey Says: Online Shopping Scam Fears Exceed Reality

Password Entropy: How to Know if Your Passwords Are Strong or Not