Criminal fraud is a type of white-collar crime that involves developing a scheme to cheat or deceive an individual or entity in order to obtain a financial gain or other type of gain. The individual who perpetrates the fraud may use misrepresentations, lies, or false statements, may hide or conceal important information, or may use deceptive conduct.
Fraud involves obtaining property to which an individual is not entitled, which sounds similar to theft. Fraud, however, is different from theft.
In general, theft means directly obtaining money or property by stealing it, in many cases, with the use of threat or force. Fraud, in contrast, involves a scheme or artifice to convince an individual to give up property or a case based on false pretenses.
Fraud arises if an individual is aware of and lies about an important key fact in a relationship or transaction, and the other party relies on that misrepresentation of fact and, as a result, suffers harm. Individuals do not commit fraud if they share a fact they believe is true, even if they are mistaken.
Are There Different Types of Fraud?
There are numerous different types of fraud. The basic elements of fraud, however, remain the same.
Examples of the many different types of fraud include, but are not limited to:
- Welfare fraud;
- Credit or debit card fraud;
- Identity theft;
- Check fraud;
- Bankruptcy fraud, such as lying about debts or assets;
- Mail fraud, or committing fraud using mail as a method of communicating with victims;
- Romance scam fraud, or pretending to care about several romantic partners, but in reality just hitting them up for money;
- Gambling fraud, which is a cyber crime designed to get money out of the creator of an online gambling site;
- Wire fraud, or fraud that is committed by wire transfer;
- Pharmacy fraud, for example, when a customer no longer needs a particular drug, but the pharmacy keeps filling it and billing Medicare;
- Securities fraud, or lying about stocks or other investment forms, such as:
- Ponzi schemes;
- pyramid schemes;
- insider trading;
- Charity fraud, which occurs when an individual claims they need money for a charity, but in reality, the money goes to themselves;
- Insurance fraud; and
In order for a defendant to be convicted of criminal fraud, the prosecution must prove the following elements:
- There was a misrepresentation of material fact;
- By an individual who was aware that the material fact was false;
- The individual intended to defraud the victim;
- The victim justifiably relied on the misrepresentation of fact; and
- The victim suffered actual injury or damages as a result of their reliance on that false information.
What Are Gifting Club Scams?
A gifting club is a type of fraudulent money-making operation that has become popular in recent years. A gifting club is a private club that often starts in churches, neighborhoods, or similar types of small communities.
In gift clubs, which may also be called gifting communities or gifting groups, new members give cash gifts to high-ranking club members in order to join. These new members are promised that if they recruit new members to join the club, they will rise in the ranks of the club and earn more money than they paid to join the club.
Gift clubs are actually illegal pyramid schemes. As a gift club grows, it has to attract more and more new members in order to continue making payouts.
As time passes, the club is not able to attract enough new members in order to survive, and, as a result, it collapses. The majority of the gift club members never actually receive their expected payouts and, in addition, lose their entire investment.
How Do I Know if I am Getting Involved in a Gifting Club?
There are several ways an individual can help determine if they are getting involved in a gifting club, including:
- In order to seem legitimate, gifting clubs may have names suggesting friendship, benevolence, and charity. Examples of recent gifting club scams have had names such as:
- “The Season of Giving;”
- “Women Empowering Women;”
- “The Friendship Investment Club;”
- Gift clubs often have a themed hierarchy of members. One example is the “airplane club,” where a new member buys into the club as a “passenger” and moves up in the ranks to eventually become a “pilot;”
- Gift clubs sometimes try to convince investors that money earned is a gift and, therefore, does not have to be reported as income to the IRS;
- This is a means of keeping the gifting club secret from authorities.
What Is the Difference Between Criminal Fraud and Civil Fraud?
The basic elements of civil fraud and criminal fraud are the same. One of the differences is the type of punishment that a defendant may face.
If a civil defendant is found liable, they will not face jail or prison time. Instead, the court will order the defendant to pay the plaintiff or victim the value of what was taken as well as any incidental expenses they suffered.
Additionally, punitive damages may be ordered in civil cases. These are additional monetary awards that are high enough for a defendant to be punished for egregious conduct.
If a defendant is convicted of criminal fraud, it may result in large fines, jail time, or prison time. Criminal fraud may be charged as a misdemeanor or as a felony.
A convicted defendant may also be ordered to make restitution payments to a victim or be sentenced to community service or probation. Additionally, criminal law cases have a higher standard of proof beyond a reasonable doubt.
Every element of the crime must be proven beyond a reasonable doubt to obtain a conviction. In civil cases, on the other hand, the burden is lower.
The plaintiff must only prove that the fraud occurred by a preponderance of the evidence. This burden of proof means that there is a greater than 50% chance that what the plaintiff alleges occurred was true.
Another difference between the two types of fraud cases is that, in criminal cases, the prosecution is not required to show fraud was successful. In a civil case, the plaintiff must prove the elements of fraud as well as the damages suffered as a result of the fraud.
What Should I Do if I Have Been Charged With Involvement in a Gifting Club?
If an individual is involved in a gifting club at any level, it may be considered a form of criminal fraud. If an individual is charged with involvement in this type of organized gifting, they should contact a criminal defense attorney.
A lawyer who has experience in fraud issues will help to explain the applicable laws as well as any defenses that may be available.
What if I Have Been Accused of Criminal Fraud?
If a defendant is convicted of criminal fraud, the consequences may be very serious. The penalties for a criminal fraud conviction may vary depending on certain issues, including:
- The jurisdiction;
- The severity of the fraud;
- Whether the defendant has any prior convictions;
- Whether or not the defendant is currently on probation or parole;
- The nature of the person or entity that was a victim of the fraud, and the relationship between the victim and the defendant; and
- The amount of money or property that the plaintiff or victim lost as a result of the fraud.
A defendant’s penalty may also be influenced by the attitude of the community or of the court towards these types of crimes. Say the victim of the fraud was an entity, such as the federal government. In that case, the charges against the defendant may be brought under federal laws instead of state laws, which may result in harsher penalties.
What Should I Do if I Have Been the Victim of a Gifting Club?
If you believe that you have been the victim of a gifting club scheme, you should inform law enforcement or the Federal Trade Commission immediately. A gifting club is a type of pyramid scheme that amounts to criminal fraud.
Should I Contact a Lawyer?
If you have been a victim of a gifting club, you should consult with a fraud lawyer who has experience with fraud issues. Your lawyer can represent your interests and help you recover the investment you lost.