In general, the same types of schemes that have victimized consumers and investors for many years before the creation of the Internet and e-commerce are now appearing online. The term Internet fraud is used loosely to describe any type of scheme that uses one or more components of the Internet, such as chat rooms, e-mail, or message boards, to do one of the following:
- To present fraudulent solicitations to prospective victims
- To conduct fraudulent transactions
- To transmit the proceeds of fraud to financial institutions or to others connected with the scheme
Most Common Types Internet Fraud
Here are some of the major types of Internet fraud:
- Auction and Retail Schemes – These are the most commonly reported types of Internet fraud. These schemes generally propose to offer high priced merchandise for low prices, and induce the consumer to send money for the promised items, but then receive nothing or something of far lesser value in return.
- Work-at-Home Schemes – Fraudulent schemes often use the Internet to advertise opportunities that will allow individuals to earn thousands of dollars a month in work-at-home ventures. These schemes induce the consumer to send money for start-up materials, but then the materials they receive are usually not adequate for the purposes of starting a successful business.
- Identity Theft – Some forms of Internet fraud involve identity theft. An Internet posting will induce someone to send a driver's license number or a social security number for the purpose of fraud or deception.
- Market Manipulation Scheme – Action taken by the SEC and criminal prosecutors indicate that criminals are using two basic methods under this type of fraud: Pump-and-Dump Schemes which use false or fraudulent information in an effort to cause dramatic price increases in thinly traded stocks or stocks of shell companies, then immediately sell their holdings of those stocks to realize substantial profits, and Scalping Schemes disseminate false or fraudulent information in an effort to cause price decreases in a particular companies stock.
- Credit Card Fraud – Credit card fraud is a variation on auction schemes. In credit card fraud, the con-artist uses unlawfully obtained credit card numbers to order goods and services online.
Prosecuting Fraud Cases
Because jurisdiction can be complicated in cases involving e-commerce, the most active prosecution has been in the federal court system. Backed by the FCC, SEC, and countless statutes, offenders of Internet fraud face a wide variety of fines and, in some cases, federal prison time.
Computer Fraud and Abuse Act
The Computer Fraud and Abuse Act (CFAA) is the federal government's leading anti-hacking law. It prohibits unauthorized access to another person's computer. The law was originally meant to protect the computers owned by the U.S. government and financial institutions. However, the Act has been amended to include practically all computers in the country. Devices such as servers, desktop computers, laptops, cell phones, and tablets are all protected under the Act.
Criminal Penalties Under the CFAA
Below are examples of CFAA violations and the applicable punishments:
- Obtaining National Security Information: Ten years; 20 years maximum for repeat offenders
- Accessing a Computer to Defraud and Obtain Value: 5 years; 10 years maximum for repeat offenders
- Accessing a Computer and Obtaining Information: 1-5 years; 10 years maximum for a first conviction. 1-10 years; 20 years maximum for repeat offenders
- Intentionally Damaging by Knowing Transmission: 1-10 years; 20 years maximum for repeat offenders
- Extortion Involving a Computer: 5 years; 10 years maximum for repeat offenders
- Trafficking in Passwords: 1 year; 10 years maximum for repeat offenders.
Civil Violations Under the CFAA
The CFAA's penalties are mostly for criminal violations. However, in 1994, the Act was expanded to include punishments for civil suits, in addition to criminal prosecution.
Civil violations under the CFAA include the following:
- Obtaining information from a computer through unauthorized access
- Damaging computer data
- Trafficking in a computer password used to access a computer
- Transmitting spam
Federal anti-hacking laws provide civil remedies for hacking victims. These remedies include:
- Injunctive relief
- Seizure of property
- Seizure of the stolen information and the electronic devices used to carry out the hacking.
How Can A Lawyer Help Me With Computer Fraud?
Whether you are the victim of computer fraud or are being accused of the crime, you should consult with an experienced and local fraud lawyer. Again, an attorney will be best suited to helping you understand your legal rights and options according to your state's specific laws regarding fraud. Additionally, your criminal attorney can determine whether there are any legal defenses available to you, and will also be able to represent you in court, as needed.
