Man Charged with Federal Wire Fraud in Coronavirus Crime

April 13, 2020

Recently a California man was the first person charged with a federal crime in connection with the COVID-19 (“coronavirus”) pandemic.  The man posted on Instagram that he had developed a pill that would both prevent and cure the coronavirus and that he was looking for $1 million in investment seed money to mass market his product. 

He promised astronomical returns of 200-300% on investment.  Presumably to entice investors and create the impression of legitimacy, he also claimed (falsely) that basketball legend and accomplished businessman “Magic” Johnson was an investor.  Charged under the federal wire fraud statute by the United States Attorney’s Office for the Central District of California the man now faces up to 20 years in federal prison. 

Too many people, it may come as a surprise that a post on social media can result in federal charges.  While it is likely the United States Attorney brought this case in large measure to “send a message” in this time of societal crisis that profiting off of people’s misery will not be tolerated, what this case also illustrates is the broad reach of federal criminal laws and how they can be applied to all manner of activities.  The wire fraud statute is one of the favorite tools in the arsenal of federal prosecutors. 

History Of The Wire Fraud Statute

While many people think of the last 20 years as a period of transformative change given the internet and other advancements in communications (and to be sure it certainly has been), in the context of greater human history it was really the early 20^th century that put civilization on the path to where it is today.  In the 1800s it was the telegraph that was the most widely used means of communications. 

Then in the 1920s the telephone came into public use which changed human history forever.  Following the telephone came radio in the 1930s and then television in the 1950s.  To think all of this happened in a mere 100 years is simply astonishing.  The telephone from the 1920s compared to the smart phone of today tells the story of how far human civilization has come in one century.  What will the next 100 years look like?

Up until the 1950s the federal government had no means of prosecuting criminal fraud perpetrated or facilitated through electronic means.  With the flurry of technological change occurring, and the rise of organized crime following the prohibition era, the federal government felt the need to respond. 

Although there was a mail fraud statute “on the books,” the government had no means to prosecute fraud perpetrated through electronic means.  Thus, in 1952 the United States Congress passed the wire fraud statute, today codified at 18 U.S.C. § 1343, as part of the larger Communications Act Amendment.

The Elements Of A Wire Fraud Prosecution

The elements a federal prosecutor must prove to prosecute a person for wire fraud are as follows:

1. There was a scheme to defraud or obtain money or property by false pretenses;
2. There was criminal intent on the part of the defendant;
3. The defendant made materially false representations in furtherance of the scheme;
4. There was transmission of these representations or other statements in furtherance of the scheme to defraud through wire, radio or television communications in interstate or foreign commerce.   

Courts have interpreted “wire” transmissions very broadly to include all forms of electronic transmission.  Thus, posting something on social media in order to perpetrate a scheme to defraud would satisfy the “wire transmission” element of the federal statute. 

A federal prosecutor is not required to show that a wire, radio or television transmission was critical to the scheme, only that it was used to facilitate it.  The “interstate or foreign commerce” elements are what make the offense a federal crime.  A federal case under the wire fraud statute can be brought anywhere in the United States where the transmission originated or ended.         

Enhancements Under The Statute That Can Add Additional Penalties

The normal statutory penalty under the wire fraud statute is up to 20 years in prison.  However, if the violation occurs in relation to or involving a benefit in connection with a Presidentially declared major disaster or emergency or affects a financial institution, the penalty increases to up to 30 years in prison. 

In this current environment of financial crisis arising from the coronavirus and the government’s attempts to help small and large businesses with financial relief, there will undoubtedly be prosecutions in the future involving fraudulent claims for financial assistance.  The wire fraud statute will likely be the favored weapon in the federal prosecutors arsenal. 

Summary

Turning to the beginning of this blog and the discussion of the California man in “hot water” for soliciting funds from potential investors based upon fanciful and untrue claims of a coronavirus cure, it is easy to see how his conduct potentially satisfies all of the elements of the wire fraud statute.  From the perspective of a federal prosecutor, it not a hard case to make.  The takeaway for most people, however, should be that even a posting to a social media account can be the lynchpin for a federal criminal prosecution under the wire fraud statute. 

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