Headline: What is wire fraud and why is this statute so often used to prosecute cryptocurrency users?
Body: Anybody out there ever seen Law & Order, the original series? There are a few times that people are charged with murder, a few who are charged with rape AND murder, but, there are a phalanx of bad guys charged with conspiracy, as it seems that if you parked the bad guy’s car, you were a “participant” and now, part of the conspiracy. So, the charge of “conspiracy” is seen almost all over the place. Wire fraud seems to be the equivalent with respect to fraud and fraud-like crimes. So, how is it possible (or advisable) to have such an infraction on the books? So, Let’s take a look. Federal judges are not known for going into lyrical mode, but Wire Fraud was Judge Jed Rakoff’s muse, when he said, “to prosecutors the mail and wire fraud statutes are “our Stradivarius, our Colt 45, our Louisville Slugger, our Cuisinart — and our true love.”
What is wire fraud?
The U.S. Department of Justice Criminal Resource Manual Section 941.18 U.S.C. 1343 cites these as the key elements of wire fraud:
- “That the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money
- That the defendant did so with the intent to defraud
- That it was reasonably foreseeable that interstate wire communications would be used
- That interstate wire communications were in fact used”1
So, with respect to cryptocurrency, let’s take a look. #1 seems to be definitely true and #2 seems to follow. Cryptocurrency is often international in scope so #3 and #4 also are very likely to be true. But, it doesn’t stop there because, the penalty for this easy-to-prove crime can be severe. Each individual involved can be fined up to $250,000 and be put in prison for 20 years per incident, so the sentence can really rack up the years quickly. For these reasons, wire fraud is very frequently a crime charged in cryptocurrency cases.
Doesn’t Fraud mean depriving people of property?
Yes, it does. And there was a case in the 2nd Circuit Court of Appeals that broadened the definition of “property” to include digital assets.
What can I do?
- Be alert. Be especially alert if the headlines are in poor English.
- Adopt the mindset that if it seems too good to be true, it probably is.
The Verdict
So, why did I spend time running down a very technical area? Life has a way of instantly turning something from arcane and esoteric to something very much of-the-moment. It would seem likely that wire fraud would come up in the following of what happens to SBF.
REFERENCES
https://www.coindesk.com/consensus-magazine/2023/11/02/the-other-ftx-case/
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.