What is Mass Marketing Fraud?
Most of us have gotten “spam” (unsolicited email) or received a telemarketer’s call we never asked for pitching us something too good to be true. Savvy people usually recognize a scam when they see or hear one and ignore it. The unfortunate truth is that sometimes, these schemes ensnare unsuspecting believers, causing them to invest money they can ill-afford to lose.
“Mass-marketing fraud” is a worldwide phenomenon that uses mass-media communications to contact, solicit and unlawfully obtain money from others. These schemes use a variety of sources to operate and will use all modes of communication to reel in their prospects, including:
- Mail services;
- E-mail;
- Text (SMS) messaging;
- Phone calls and faxes;
- Websites;
- Radio;
- Television; and
- Directly in person.
Mass-marketing schemes involve the presentation of a fraudulent solicitation to vast numbers of potential victims in an effort to prey upon the most gullible and desperate of people, often on a global scale.
The Major Types of Mass Marketing Fraud
Based on information collected by law enforcement and federal regulatory agencies, mass-marketing fraud schemes fall into three general categories:
- Advance-fee fraud schemes;
- Bank and financial account schemes; and
- Investment opportunity fraud schemes
Advance-Fee Fraud Schemes
Advance-fee schemes are built on the idea that a victim will be promised a substantial payout – such as a million-dollar prize, lottery winnings, a sizeable inheritance, or some other item of significant value – but must pay in advance a tax or other type of fee before the person can receive anything.
According to the U.S. Department of Justice, some of the most common types of advance-fee fraud schemes include:
- Auction and Retail Schemes: These schemes induce their victims to send money for a promised item of high value, but then deliver nothing or only an item far less valuable than what was promised (e.g. counterfeit or altered goods).
- Online “Work-at-Home” and Business Opportunity Schemes: These frauds offer people the opportunity to work from home to earn potentially high income. Typically, they require their victims to pay for start-up materials but fail to deliver the necessary products or information that would be needed to make the work-at-home opportunity a potentially viable business.
- Credit-Card Interest Reduction Schemes: These scams offer to help consumers lower their credit-card interest rates and charge an up-front fee without actually making the promised interest reduction.
- Inheritance Schemes: Victims are contacted claiming they are entitled to a substantial inheritance from a family member or from someone who has died without heirs. The victim is then directed to make advance payments for fees before the inheritance can be distributed.
- Sweepstakes, Lottery & Prize Schemes: In order to claim a substantial lottery winning, sweepstakes or other prize, the victim must first pay phony taxes. Of course, he or she hasn’t won anything.1
Bank and Financial Account Schemes
These types of schemes involve not only fraud but also identity theft – the fraudulent and deceptive collection and use of someone else’s personal information for unlawful financial gain.
“Phishing” is probably the most recognizable form of a fraudulent financial scheme. A “phishing” expedition involves a website disguised to represent a legitimate source such as a reputable bank, financial institution or company. The scheme intends to dupe recipients into disclosing personal and financial information.
Investment Opportunities Schemes
The U.S. Department of Justice categorizes investment fraud that may use mass-marketing schemes in an attempt to manipulate securities markets for personal gain as follows:
- “Pump-and-Dump” Schemes: These schemes purport to offer high yield returns on investments through the release of false and fraudulent information. This type of fraud involves dramatic price increases in thinly traded stocks or stocks of nonexistent companies (the “pump”), then immediately selling off holdings of those stocks (the “dump”) to return substantial profits before the stock price falls back to its usual low level. Other buyers of the stock who are unaware of the falsity of the information become victims of the scheme once the price falls.
- Short-Selling (“Scalping”) Schemes: These schemes take a similar approach to pump-and-dump schemes by releasing false or fraudulent information in an effort to cause price decreases in a particular company’s stock.2
Other investment schemes involve direct solicitation of prospective investors through “cold calling” (i.e. calls to people whom the fraud scheme has not previously contacted) or Internet or phone contacts based on lists of people who were previously contacted by fraud schemes.
Additionally, “Ponzi” or “pyramid” schemes attempt to mass recruit would-be investors, but use a portion of the funds received from the newest investors to pay dividends to earlier investors to give the scheme the appearance of being legitimate.3
When Mass Marketing Fraud is a Federal Crime
Federal law defines fraud as knowingly and intentionally doing any of the following under 18 U.S.C. § 1001:
- Falsifying, concealing or covering up by any trick, scheme or device as material fact;
- Making any materially false, fictitious or fraudulent statement or representation; or
- Making or using any false writing or document knowing it contains any materially false, fictitious or fraudulent statement or entry.
Mass marketing fraud is a federal offense whenever it involves interstate or international commerce, which almost always occurs when computers are involved.
Fraudulent schemes that use telephonic communications such as phone calls, texts, and faxes originating out of another state or country and mass media communication such as radio, television and the Internet are also federal crimes.
Anytime you send printed materials intended to willfully defraud someone via a private mail carrier (e.g. FEDEX) or the United States Postal Service, you are guilty of violating federal law.
Federally prosecuted mass-marketing fraud crimes are generally characterized as:
- Computer fraud;
- Mail fraud; or
- Wire fraud.
Computer Fraud (18 U.S.C. § 1030)
Knowingly and with intent to defraud using a computer to obtain anything worth more than $5,000 in a one-year period is computer fraud under federal law. It is also illegal to intentionally access a computer without authorization or in excess of your authorized use to obtain any of the following:
- Information contained in a financial record of a financial institution or of a card issuer, or contained in a file of a consumer reporting agency on a consumer;
- Information from any department or agency of the United States; or
- Information from any protected computer.
You face up to 10 years in prison, a fine of up to $250,000 ($500,000 if a criminal syndicate is involved), or both if you are convicted of federal computer fraud.
Mail or Wire Fraud (18 U.S.C. §§ 1341; 1343)
Mail or wire fraud includes anything printed or in writing as well as signs, signals, pictures or sounds for the purpose of executing a scheme to defraud.
Federal law under Sections 1341 and 1343 of the U.S. Code prohibits devising or intending to devise any scheme to defraud someone out of money or property using false or fraudulent pretenses, representations or promises as follows:
- When transmitted by means of wire, radio or television communication in interstate or foreign commerce;
- When delivered by and through a private interstate commercial mail carrier or the U.S. Postal Service.
You can be sentenced to serve up to 20 years in prison, fined up to $250,000, or both if you are convicted of mail or wire fraud.
Other Types of Federal Mass Marketing Crimes
Mass marketing fraud often involves a great deal of complexity to scam significant numbers of victims out of substantial amounts of money and may lead to prosecution for other financially-related crimes, including but not limited to the following:
- Identity theft fraud;
- Bank fraud;
- Credit card fraud;
- Mortgage fraud;
- Loan Modification fraud;
- Securities fraud; and
- Money-laundering.
Punishment upon conviction for many financially-related federal offenses can include a sentence of up to 40 years in federal prison and fines up to $1 million.
Contact Wallin & Klarich Today If You Are Facing Mass-Marketing Fraud Charges
If you or someone you love has been arrested on federal charges related to a mass-marketing fraud scheme, you should speak with an experienced federal fraud attorney at Wallin & Klarich today.
Our attorneys at Wallin & Klarich have over 40 years of experience in U.S. District Court successfully defending our clients facing federal charges. Hiring an attorney from Wallin & Klarich to represent you may help you avoid the most serious consequences of a federal offense that could result in decades in prison and substantial fines if you are convicted.
With offices in Los Angeles, Sherman Oaks, Torrance, Tustin, San Diego, Riverside, San Bernardino, Ventura, West Covina and Victorville, our attorneys at Wallin & Klarich are readily available to make certain all of your constitutional rights are protected. We will thoroughly evaluate every aspect of your case to determine the most effective strategy to help you receive the best result possible.
Call us today at (877) 4-NO-JAIL or (877) 466-5245 for a free telephone consultation. We will get through this together.
1. [U.S. Department of Justice: What is Mass-Marketing Fraud?; http://www.justice.gov/criminal/fraud/internet/]↩
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