Internet Fraud 18 U.S.C. § 1343

1. Internet Fraud18 U.S.C. § 1343

2. Internet Fraud • The term "Internet fraud" refers generally to any type of fraud scheme that uses one or more components of the Internet (e-mail, message boards, Websites) to present fraudulent solicitations to prospective victims, to conduct fraudulent transactions, or to transmit the proceeds of fraud to financial institutions or to others connected with the scheme

3. Types of Fraud • $240 million lost in 2007

4. Fraud trends • $265 million lost in 2008

5. Auction Fraud • Buyer doesn’t pay/Seller fails to deliver • Seller misrepresents merchandise • Counterfeit merchandise • Empty box

6. Auction Fraud • Recent Case Law • U.S. v. Henckel, 570 F.3d 791 (7th Cir. 2009). • Defrauded successful bidders by sending them inferior goods • Sentencing enhancement for “Mass Marketing” • Defendant Argued • Only one victim per fraud • Court found • Internet auctions solicit numerous persons over the Internet, meeting the definition of “mass marketing”

7. Investment Fraud • Use of spam email or finance site message boards to convince recipients to buy or sell a stock • Benefits scammer who then short sells a stock with inflated value or buys a stock that is now undervalued

8. Investment Fraud

9. Business Opportunity Fraud • Work at home jobs • Fee paid to scammer up front for materials that are never received, or • Scammer sends a bad check to victim, and victim forwards most of the funds on to scammer • Secret shopper, vending/payphone routes, envelope stuffing, medical billing, etc.

10. Other Frauds • Nigerian Letter Fraud • Charity Fraud • Pet Fraud • Adoption Fraud • Romance Fraud

11. 18 U.S.C. § 1343 • (1) Defendant made up a scheme for obtaining money/property by making false promises/statements • (2) Defendant knew that the promises/statements were false • (3) The promises/statements would reasonably influence a person to part w/ money/property • (4) Defendant acted w/ intent to defraud • (5) Defendant used, or caused to be used, the wires to carry out or attempt to carry out an essential part of the scheme

12. 18 U.S.C. § 1343 • Shall be fined under this title or imprisoned not more than 20 years, or both • If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both

13. Access Device Fraud – Credit Cards 18 U.S.C. § 1029

14. The Statute • 18 U.S.C. § 1029 (1)–(6) • (1) “knowingly and with intent to defraud produces, uses, or traffics in one or more counterfeit access devices;” • (2) “knowingly and with intent to defraud traffics in or uses one or more unauthorized access devices during any one-year period, and by such conduct obtains anything of value aggregating $1,000 or more during that period;” • (3) “knowingly and with intent to defraud possesses fifteen or more devices which are counterfeit or unauthorized access ­devices;” • (4) “knowingly, and with intent to defraud, produces, traffics in, has control or custody of, or possesses device-making equipment;” • (5) “knowingly and with intent to defraud effects transactions, with 1 or more access devices issued to another person or persons, to receive payment or any other thing of value during any 1-year period the aggregate value of which is equal to or greater than $1,000;” • (6) “without the authorization of the issuer of the access device, knowingly and with intent to defraud solicits a person for the purpose of— • (A) offering an access device; or • (B) selling information regarding or an application to obtain an access device;”

15. Carding • By definition, it includes the unauthorized use of credit and debit account information to fraudulently purchase goods and services. • Over the years, the term has changed to include “theft and fraudulent use of credit and debit card account numbers including computer hacking, phishing, cashing-out stolen account numbers, re-shipping schemes, and Internet auction fraud.”

16. Carding • What distinguishes carding from other types of identity theft is that carding involves “the large scale theft of credit card account numbers and other financial information.” • What makes carding “large scale” is that it typically involves thousands and sometimes even millions of victims.

17. Carding Forums • Carders, or individuals engaged in criminal carding activities, are often members of at least one website known as a carding forum. • Carding forums facilitate the sale of stolen credit and debit card numbers, compromised identities, and false identifications.

18. Shadowcrew • Shadowcrew was a carding forum from 2002 to October 2004, when they were shut down by the United States Secret Service. • Specifically, Shadowcrew was a global criminal organization that had thousands of members that were dedicated to promoting and facilitating the electronic theft of personal identifying information, credit card and debit card fraud, and the production and sale of false identification documents. • All in all, Shadowcrew was successful in trafficking at least 1.5 million stolen credit card numbers, resulting in approximately $4 million in actual loss to various financial institutions.

19. Obtaining the Information to Sell • Credit information can be bought in bulk from hackers. • Phishing can be done by setting up bogus websites

20. Types of Carding • Carders can either purchase goods for themselves or buy things of value to sell online • These types card fraud are known in the criminal underworld as, “carding online,” “in-store carding,” “cashing,” and/or “gift card vending.” • US v.Conner, 537 F.3d 480 (5th Cir. 2008). • convicted at trial for conspiracy to commit access device fraud and mail fraud

21. Sentencing • Enhancements • Number of Victims • Mass Marketing • Use of Special Skill • Use of Sophisticated Names

22. Enforcement Difficulties • International in Nature • Servers and criminals are distributed throughout globe • Agency cooperation is critical both internally and internationally