Federal prosecutors tend to use wire fraud as "catch-all" type of crime. When prosecutors are unable to prove other serious fraud crimes, they often have enough to prove wire fraud. Read on to learn how federal law defines and penalizes wire fraud.
The crime of wire fraud occurs when someone voluntarily and intentionally uses an interstate communication (such as a phone or computer) as a part of any scheme to defraud another of property or anything else of value. Wire fraud is a federal crime with serious potential consequences.
(18 U.S.C. §§ 1343, 1346 (2022).)
Wire fraud requires proof of (1) an intentional scheme to defraud another and (2) the use of interstate wire communications to carry out the scheme.
In order to secure a conviction for wire fraud, federal prosecutors must show that a defendant acted with the intent to fraudulently deprive someone of money, property, "honest services," or something of value. A person cannot accidentally commit wire fraud.
Wire fraud crimes involve "schemes" to defraud. A scheme to defraud is a plan a person employs that uses a statement, promise, misrepresentation, deception, or any other kind of falsehood designed to deprive a victim of something of value. For example, offering to sell someone land that you do not own, in order to get that person to give you money, is a scheme to defraud.
To commit wire fraud, a person must use some kind of interstate communications device. An interstate communications device can be almost anything that sends, receives, or otherwise transmits messages across state lines. Wire fraud charges can arise when someone uses a phone, computer or fax machine, sends an email, or text, or uses any kind of internet or electronic communication to transmit messages.
A conviction for wire fraud doesn't require that the victim actually suffered a loss. Because the wire fraud statute prohibits engaging in a "scheme to defraud," a person can be convicted of wire fraud even if no victim suffers any actual loss (money, property, or otherwise). In other words, attempting to obtain the money or property is enough to be convicted of this crime. It's the scheme to defraud, rather than the actual fraud, that matters.
A person convicted of wire fraud faces significant potential penalties. A single act of wire fraud can result in fines and up to 20 years in prison. However, if the wire fraud scheme affects a financial institution or is connected to a presidentially declared disaster or emergency, the potential penalties are fines of up to $1,000,000 and up to 30 years in prison.
Every act of wire fraud constitutes a separate offense. For example, someone who engaged in a scheme to defraud and made 10 phone calls to victims as part of that scheme has committed 10 separate acts of wire fraud. And, if the underlying fraud scheme violates another federal statute (such as securities or bank fraud), prosecutors may be able to convict on those charges as well.
The defenses available to anyone charged with wire fraud will differ depending on the circumstances. The following defenses are often used in wire fraud cases, though they do not always apply in every situation, and do not represent all of the possible defenses available.
A scheme to defraud rests on intending to defraud someone of something of value. A person who acts in good faith doesn't commit wire fraud because that person does not have the intent to enter into a scheme to defraud the victim.
For example, a person charged with wire fraud could show good faith by proving that he acted within the requirements imposed under state law, that he didn't have any financial motive for depriving the victims of property, that he obtained legal advice from a lawyer before acting, or that he attempted to rectify the loss the victim suffered once learning of it.
Salespeople often use flattery, exaggerations, or opinionated statements in their attempts to persuade potential buyers. Such tactics are often known as "puffery" or "puffing," and can be used as a defense against wire fraud.
For example, a salesman who states over the phone that a product is "the best ever made" is not likely committing wire fraud, because the average listener would not rely on that statement to make a purchase. However, stating that the product is made of "solid 24-karat gold," when it's merely gold-colored, or making any other materially false claim, goes beyond puffery and can indicate an intent to defraud.
Below are some high-profile wire fraud cases that made headlines.
Elizabeth Holmes, the founder of Theranos, was found guilty of wire fraud charges for her role in lying to investors to raise money for her start-up tech company (blood-testing technology).
Lori Loughlin and Mossimo Giannuli pled guilty to conspiracy to commit wire fraud in connection with a widespread college admissions scheme. The couple "donated" contributions to sham charities as a quid pro quo to secure their daughter's admission to USC. Both parents got prison time.
Bernie Madoff pled guilty to wire fraud, among other federal crimes, for operating a private Ponzi scheme that ran for decades and defrauded around 40,000 people of $65 billion.
Being charged with wire fraud is a serious situation. If you're charged with or being investigated for this crime, you need to talk to a criminal defense attorney who practices in federal court. Always talk to a lawyer before you make any statements to investigators. Your lawyer will be able to guide you through the criminal justice process and protect your interests at every stage.