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Supreme Court invalidates "right-to-control" theory as a basis for liability under the federal wire fraud statute.

: Created: 23 May 2023

In Ciminelli v. United States, No. 21-1170, Ciminelli was convicted of wire fraud for his role in a scheme to rig the bid process for obtaining state-funded development projects.

In this case, we must decide whether the Second Circuit's longstanding "right to control" theory of fraud describes a valid basis for liability under the federal wire fraud statute, which criminalizes the use of interstate wires for "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises."

Ciminelli v. United States, No. 21-1170, at *4 (May 11, 2023)

The Supreme Court held that the right-to-control theory, which focuses on depriving a victim of valuable economic information, does not constitute a valid basis for wire fraud liability under the federal fraud statutes. Tyler Criminal Defense Blog

“Because "potentially valuable economic in- formation" "necessary to make discretionary economic decisions" is not a traditional property interest, we now hold that the right-to-control theory is not a valid basis for liability under §1343. Accordingly, we reverse the Second Circuit's judgment.” Ciminelli v. United States, No. 21-1170, at *4-5 (May 11, 2023)

The case centered around the Buffalo Billion initiative, a project aimed at investing $1 billion in development projects in upstate New York. Ciminelli, the head of a construction company, was allegedly involved in a scheme along with other individuals to manipulate the bid process to secure lucrative contracts under the initiative. The scheme alleged involved paying bribes and tailoring requests for proposal (RFPs) to favor Ciminelli's company.

Ciminelli and his co-conspirators were indicted on multiple charges, including wire fraud under 18 U.S.C. §1343 and conspiracy to commit wire fraud under §1349. The government relied on the Second Circuit's right-to-control theory, which posits that wire fraud can be established by depriving a victim of potentially valuable economic information necessary for discretionary economic decisions.

The Supreme Court examined the text and historical interpretation of the federal wire fraud statute and concluded that the right-to-control theory does not align with its requirements. The court emphasized that the wire fraud statute is limited in scope to the protection of property rights. While lower federal courts had interpreted the statute to include intangible interests, such as the right to control one's assets or access to honest services, the Supreme Court clarified that the fraud statutes protect only traditional property interests.

The court traced the development of the right-to-control theory, noting that it emerged after a landmark Supreme Court decision, McNally v. United States, in 1987, which confined the fraud statutes to the protection of individual property rights. Congress responded to McNally by enacting §1346, which revived only the intangible right of honest services. “This Court halted that trend in McNally v. United States, 483 U.S. 350, which confined the statutes to the "protect[ion of] individual property rights." Id., at 359, n. 8.” Ciminelli v. United States, No. 21-1170, at *2 (May 11, 2023). Congress's silence regarding other intangible interests indicated that the wire fraud statute should not be expanded to cover the intangible right to control.

“Because the right to valuable economic information needed to make discretionary economic decisions is not a traditional property interest, the Second Circuit's right-to-control theory cannot form the basis for a conviction under the federal fraud statutes. Pp. 4-10.” Ciminelli v. United States, No. 21-1170, at *2 (May 11, 2023).

This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.

3d Cir. Holds District Court Erred in Applying "Crime of Violence" Career Offender Enhancement Based on Prior Conspiracy to Commit Robbery Conviction

: Created: 18 May 2023

In United States v. Henderson, No. 18-1894, at *2-3 (3d Cir. Mar. 29, 2023), Henderson was indicted for possession with intent to distribute 40 grams or more of fentanyl, a crime to which she pleaded guilty without a plea agreement. The District Court applied the career offender enhancement, raising the applicable Guideline range from 70 to 87 months' imprisonment to 188 to 235 months' imprisonment. This enhancement was based on two prior convictions: one for possession with intent to deliver heroin, and the other for conspiracy to commit robbery. The District Court deemed the latter as a "crime of violence," leading to Henderson's appeal against the application of the career offender enhancement. Tyler Criminal Defense Blog

On appeal, the Third Circuit noted that he District Court deviated from the traditional understanding that conspiracy does not qualify as a "crime of violence." The Sentencing Guideline's commentary includes inchoate offenses like conspiracy, yet United States v. Abreu explicitly excluded such offenses from the definition of a "crime of violence."

Abreu objected on the ground that conspiracy to commit a crime of violence requires only an agreement to commit an offense that "has as an element the use, attempted use, or threatened use of physical force against the person of another," U.S.S.G. § 4B1.2(a)(1), and does not itself include that element.

…

In short, the plain text, structure, and purpose of the Guidelines indicate that "there is only one reasonable construction" of "crime of violence" as used in § 2K2.1, Kisor, 139 S. Ct. at 2415, and, just as in § 4B1.2(a), that construction excludes conspiracy offenses. As a result, Abreu's prior conviction for conspiracy to commit second-degree aggravated assault does not qualify him for an enhancement under § 2K2.1(a)(4), and the District Court erred in applying that enhancement.

United States v. Abreu, 32 F.4th 271, 278 (3d Cir. 2022)

In United States v. Preston, the Court deviated from Abreu, suggesting that the elements of the target offense of a conspiracy could subsume the elements of the conspiracy itself, thus making a conspiracy to commit a crime of violence a crime of violence itself. However, this interpretation went against the Supreme Court's decision in United States v. Mathis, which highlighted that a crime's elements are those parts that must be proved beyond a reasonable doubt.

In coming to this conclusion, however, we explicitly noted that it went "beyond the general elements of criminal conspiracy"-an approach disallowed by the Supreme Court in United States v. Mathis. As the Mathis Court noted, a crime's elements are "the constituent parts of a crime's legal definition, which must be proved beyond a reasonable doubt."

United States v. Henderson, No. 18-1894, at *11 (3d Cir. Mar. 29, 2023).

The Third Circuit went on to hold that Henderson's case satisfied all four prongs of the plain error review standard—the error was clear and obvious, affecting substantial rights and impacting the outcome of the proceedings. Despite Henderson receiving a lower sentence than the guideline range, the sentence was above the range that would have otherwise applied without the career offender enhancement.

“Because the District Court plainly erred, we will vacate Henderson's sentence and remand for resentencing. In doing so, we also hold that Preston is overruled by the Supreme Court's decisions in Kisor and Mathis.” United States v. Henderson, No. 18-1894, at *17 (3d Cir. Mar. 29, 2023)

Defendant Submitted Forged Letters to Sentencing Judge Requesting Probation: Second Cir. Affirms Obstruction Enhancement & Denial of Acceptance of Responsibility at Sentencing

: Created: 17 May 2023

In United States v. Strange, No. 21-2923, the United States Court of Appeals for the Second Circuit upheld a sentence imposed by the District Court for the District of Connecticut, which included an obstruction of justice enhancement and denied a sentence reduction for acceptance of responsibility. Tyler Criminal Defense Blog

Strange, a former senior supervisor at Collins Aerospace, was sentenced to 57 months in prison for wire fraud after using a company charitable donation matching program to siphon off approximately $600,000 for personal use.

At sentencing, Strange submitted three letters to the court advocating for leniency. However, the government discovered that Strange had forged these letters. Consequently, the prosecution sought and obtained a two-level obstruction of justice enhancement under U.S.S.G. § 3C1.1 and opposed a three-level reduction for acceptance of responsibility under U.S.S.G. § 3E1.1.

On appeal, Strange argued that the obstruction enhancement was incorrect as the forged letters did not relate to his offense of conviction or any relevant conduct, and were immaterial. The Second Circuit rejected these arguments, affirming that submitting false information capable of influencing the sentence constitutes obstruction of justice under U.S.S.G. § 3C1.1. It held that the letters were material as they would have influenced the court's decision had they been legitimate.

Under U.S.S.G. § 3C1.1, the application of the two-level obstruction enhancement is appropriate if:

(1) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution, or sentencing of the instant offense of conviction, and (2) the obstructive conduct related to (A) the defendant's offense of conviction and any relevant conduct; or (B) a closely related offense.

Strange also contested the denial of the acceptance of responsibility reduction, arguing that he had pleaded guilty and expressed responsibility for his actions. The court disagreed, noting that a guilty plea alone is not sufficient for this reduction, particularly when coupled with conduct that indicates non-acceptance of responsibility, such as obstruction of justice. The court found no error in the District Court's decision to deny the reduction, particularly given the similarities between the fraudulent conduct in the case and the subsequent forgery of letters.

4th Cir. Affirms Application of Firearm Sentencing Guideline Enhancement In Connection with Another Felony Offense--Failure to Stop for a Blue Light

: Created: 15 May 2023

The 4th Circuit affirms application of 4-level firearm sentencing guideline enhancement in United States v. Dix

After a high-speed chase and a crash, the driver, Jason Dix, was arrested and a firearm with ammunition was found in the vehicle. Dix was charged with possession of a firearm by a convicted felon, per 18 U.S.C. § 922(g)(1), and received a 99-month imprisonment sentence. The sentence included an enhancement under U.S.S.G. § 2K2.1(b)(6)(B) for using or possessing a firearm "in connection with another felony offense," which was his failure to stop for a blue light, violating S.C. Code Ann. § 56-5-750.

Dix appealed, challenging the four-level enhancement on procedural and substantive grounds. The Court, however, concluded that while the district court erred in relying on the blue-light offense for the enhancement without providing Dix with prior notice, this error was harmless. It also found no clear error in applying the enhancement given the firearm's proximity to Dix during the blue-light offense. Consequently, the district court's judgment was upheld. Tyler Criminal Defense Lawyer Blog

At sentencing, Dix contested the enhancement both procedurally and substantively. He asserted that he was not provided the required notice for the enhancement, as the presentence report identified "another felony offense" – grand larceny of the vehicle he was driving – as the basis for the enhancement. However, during sentencing, when Dix offered evidence questioning the larceny offense, the government suggested using the blue-light offense for the enhancement, which the court accepted.

Substantively, Dix argued that the firearm was not "used" or "possessed" "in connection with" the blue-light offense as it did not "facilitate" the offense. The government responded that the firearm "emboldened" Dix to evade the deputy sheriff, a claim the district court agreed with.

The sentencing court ruled that Dix was indeed not given the necessary notice per Federal Rule of Criminal Procedure 32(d), (f) and U.S.S.G. § 6A1.2, but deemed this error harmless in the context of the case. It also concluded that the district court didn't err in applying the enhancement, agreeing that the firearm was possessed "in connection with" the blue-light offense. The Court thus affirmed the district court's judgment.

U.S. Supreme Court Overturns Wire Fraud Conviction Against Former Cuomo Aide

: Created: 12 May 2023

The United States Supreme Court recently provided much-needed clarity in an important case concerning the theory of "honest services fraud," overturning the conviction of Joseph Percoco, a former aide to New York Governor Andrew Cuomo.

Joseph Percoco served as the Executive Deputy Secretary to Governor Cuomo from 2011 to 2016. The government alleged that during an eight-month hiatus from this role in 2014, Percoco accepted payments from a real estate development company, owned by Steven Aiello, to assist with its dealings with Empire State Development (ESD), a state agency. Percoco was charged with, among other things, conspiracy to commit honest-services wire fraud related to these activities. Tyler Criminal Defense Blog

The key issue in Percoco's case was whether a private citizen can commit or conspire to commit honest-services wire fraud based on his own duty of honest services to the public. The trial court instructed the jury that a private citizen, like Percoco, could be found to have a duty of honest services to the public if he "dominated and controlled any governmental business" and if "people working in the government actually relied on him because of a special relationship he had with the government." Based on these instructions, the jury convicted Percoco.

On appeal, the Second Circuit affirmed the conviction, referencing its 1982 decision in United States v. Margiotta, where it held that a private individual can commit honest-services fraud if he or she "dominates government." However, the Supreme Court disagreed, ruling that the jury instruction based on the Margiotta decision was in error.

The Supreme Court’s analysis hinged on its 1987 decision in McNally v. United Statesand the subsequent enactment of 18 U. S. C. §1346, which clarified that the wire fraud and mail fraud statutes cover “honest-services fraud.” The Court also considered its decision in Skilling v. United States, which rejected a broad interpretation of §1346 as unconstitutionally vague, noting that it only covers fraudulent schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who had not been deceived.

The Supreme Court rejected the broad interpretation of the duty of honest services that was applied in Percoco's case, noting that such a duty does not extend to all private persons. The Court found that the jury instructions based on the Margiotta theory were too vague, as the public's right to a private person's honest services whenever that private person's influence exceeds some undefined threshold was not clearly defined.

The jury instructions based on the Margiotta theory in Percoco’s case were erroneous. Margiotta’s standard in the instructions—imply- ing that the public has a right to a private person’s honest services whenever that private person’s clout exceeds some ill-defined thresh- old—is too vague. Without further constraint, the jury instructions did not define “the intangible right of honest services” “ ‘with sufficient definiteness that ordinary people can understand what conduct is pro- hibited’ ” or “ ‘in a manner that does not encourage arbitrary and dis- criminatory enforcement.’ ” McDonnell v. United States, 579 U. S. 550, 576. Supreme Court Opinion

District court erred in applying "manager or supervisor" enhancement under §3Bl.l(b)

: Created: 11 May 2023

In United States v. Hunsaker, No. 22-7016 (10th Cir. Apr. 18, 2023), the Tenth Circuit Court of Appeals overturned a district court's ruling to enhance defendant’s sentence under United States Sentencing Guidelines (U.S.S.G.) § 3B1.1(b), which allows for sentence enhancements based on a defendant's role in a crime.

The indictment issued from the Eastern District of Oklahoma implicated Hunsaker and 18 others in a 23-count indictment. Hunsaker was charged in two counts, including conspiracy to traffic 500 grams or more of methamphetamine and possession with intent to distribute 50 grams or more of methamphetamine, both violations of 21 U.S.C. §§ 846, 841(a)(1) and 841(b)(1)(A). Hunsaker pleaded guilty to both counts without any plea agreement.

The Presentence Investigation Report (PSR) identified Hunsaker as the "second in command" of the drug trafficking organization and described him as a "manager or supervisor." The PSR then suggested a 3-level enhancement to Hunsaker's offense level under U.S.S.G. § 3B1.1(b), a provision that permits enhanced sentencing based on the defendant's role in the offense. Tyler Criminal Defense Blog

Section 3B1.1 of the Sentencing Guidelines allows a district court to enhance a defendant's sentence for his aggravating role in the underlying offense. U.S.S.G. § 3B1.1. The court is to determine a defendant's role in the offense on the basis of all "relevant conduct," rather than on the basis of elements and acts cited in the counts of conviction alone. Id. § 3B1.1 intro. cmt. The commentary to § 3B1.1 says that to qualify for an adjustment under this section, "the defendant must have been the organizer, leader, manager, or supervisor of one or more other participants" in the underlying offense. Id. § 3B1.1 cmt. n.2. The commentary lists factors, accurately identified by the district court in this case, relevant to our determination of whether a defendant is a "manager or supervisor" under subsection (b): Factors the court should consider include [1] the exercise of decision making authority, [2] the nature of participation in the commission of the offense, [3] the recruitment of accomplices, [4] the claimed right to a larger share of the fruits of the crime, [5] the degree of participation in planning or organizing the offense, [6] the nature and scope of the illegal activity, and [7] the degree of control and authority exercised over others. United States v. Hunsaker

The district court agreed with the PSR’s findings and applied the role enhancement, resulting in a total offense level of 34 and a criminal history category of II. This led to an advisory guideline range of 168 to 210 months. Hunsaker was sentenced to 168 months' imprisonment.

Given the foregoing precedents, we have no choice but to conclude on the record before us that the district court erred when it enhanced Defendant's offense level by three levels pursuant to U.S.S.G. § 3B1.1(b). We accept the undisputed facts as stated in the PSR and the Government's supplement thereto. These facts, however, simply do not establish that Defendant was a "manager or supervisor" of the DTO within the meaning of § 3B1.1(b). We can locate little, if any, evidence in the record to suggest Defendant managed or supervised "one or more other participants" in the DTO. Id. § 3B1.1 cmt. n.2. But such evidence is what our precedents plainly require before a district court may hold a defendant is a "manager or supervisor" of a criminal conspiracy pursuant to § 3B1.1(b). E.g., Zar, 790 F.3d at 1058; Roberts, 14 F.3d at 523.

United States v. Hunsaker, No. 22-7016, at *12 (10th Cir. Apr. 18, 2023).

Fifth Circuit Upholds Convictions in Mail and Wire Fraud Case

: Created: 05 May 2023

In United States v. Ezenwa, No. 21-20609 (5th Cir. Apr. 24, 2023) (unpublished opinion) the Fifth Circuit affirmed the judgment, finding substantial evidence to support the convictions on all counts.

Maxwell Chibueze Ezenwa recently appealed his convictions for wire fraud, mail fraud, and conspiracy to commit both wire and mail fraud following a bench trial. Ezenwa challenged the sufficiency of the evidence supporting each count of conviction and the district court's proposed verdict form. However, the Fifth Circuit affirmed the judgment, finding substantial evidence to support the convictions on all counts.

The Fifth Circuit held that there was sufficient evidence to support the wire fraud and conspiracy to commit wire fraud convictions based on the testimony of witnesses and documentary evidence. Ezenwa and his coconspirators used stolen credit card information to process fraudulent transactions through their businesses, Lace Warehouse and Lagos Island Cafe. Ezenwa also maintained fake invoices to substantiate fraudulent credit card charges when banks issued chargebacks.

The court also found sufficient evidence to support the mail fraud counts and the conspiracy conviction. Ezenwa and his coconspirator Onuorah convinced women to mail cashier's checks to CAPS Global, another of Ezenwa's companies, or to Ezenwa personally, under the guise of investing the victims' money. Instead, the funds were deposited into the bank accounts of CAPS Global and Onuorah's various businesses, and then wired to themselves or Nigerian companies.

On the mail fraud counts, the evidence was likewise sufficient. See United States v. Evans, 892 F.3d 692, 711 (5th Cir. 2018). Various men, whether or not personally known to Ezenwa, befriended women on dating websites and eventually convinced them, through promises of investment, to mail cashier's checks for substantial sums of money to CAPS Global- another of Ezenwa's companies-or to Ezenwa personally. Rather than invest the victims' money, Ezenwa and coconspirator Onuorah deposited their checks into the bank accounts of CAPS Global and Onuorah's various businesses and then wired the money to themselves or to Nigerian companies. Ezenwa also endorsed one of the victims' checks, for $30,000, to himself and cashed it. Cf. United States v. Freeman, 434 F.3d 369, 377 (5th Cir. 2005). This same evidence supports a conspiracy conviction. See United States v. Mann, 493 F.3d 484, 492 (5th Cir. 2007). That Ezenwa may not have known all other members of the conspiracy is of no moment. See United States v. Gonzalez, 907 F.3d 869, 874 (5th Cir. 2018). The existence of a mail fraud conspiracy involving Ezenwa could be sufficiently inferred from the concert of action in this case. See Sanders, 952 F.3d at 274.

United States v. Ezenwa, No. 21-20609 (5th Cir. Apr. 24, 2023)

Ohio Man Sentenced for Stealing Bitcoin Subject to Forfeiture in Criminal Case

: Created: 03 May 2023

DOJ announced that Gary James Harmon of Cleveland, Ohio, was sentenced to four years and three months in federal prison for stealing over 712 bitcoin. The bitcoin, which was worth approximately $4.8 million at the time of the theft, were the proceeds of the darknet bitcoin mixer Helix and subject to forfeiture in a then-pending criminal case against Harmon's brother, Larry Dean Harmon.

Larry Harmon was arrested in February 2020 for operating Helix, a darknet-based cryptocurrency money laundering service, also known as a "mixer" or "tumbler." Helix allegedly laundered over 350,000 bitcoin, valued at more than $300 million at the time, on behalf of its customers, primarily from darknet markets. Following the arrest, law enforcement seized various assets, including a cryptocurrency storage device that contained Larry Harmon's illegal proceeds generated through the operation of Helix. However, the device's additional security features initially prevented law enforcement from recovering the bitcoin. Crypto Criminal Defense Lawyer Blog

The government alleged that Gary Harmon took advantage of their inability to access the bitcoin on the seized device by using his brother's credentials to recreate the wallets stored on it. The government further alleged he then covertly transferred over 712 bitcoin to his own wallets, stealing the funds and obstructing the pending criminal forfeiture proceeding against his brother. To further conceal the theft, Gary Harmon was alleged to have laundered the proceeds through two online bitcoin mixer services before using the laundered bitcoins to finance large purchases and other expenditures.

As part of his sentence, Gary Harmon agreed to the forfeiture of cryptocurrencies and other properties derived from the fraudulently obtained proceeds, including over 647.41 Bitcoin (BTC), 2.14 Ethereum (ETH), and 17,404,400.64 Dogecoin (DOGE). Due to the increase in market prices, the total value of these forfeitable properties now exceeds $20 million.

"Pig Butchering": How Transnational Criminal Enterprises Use Cryptocurrencies to Facilitate Fraud Schemes

: Created: 01 May 2023

I had the pleasure of speaking this weekend at the New York State Bar Association’s CLE conference at NYU entitled: Deep Dive Into The Metaverse And Web3: The First Global Law Symposium on the topic of money laundering and blockchain crime.

The conference was put on by the State Bar’s Task Force on Emerging Digital Finance and Currency—which is leading the nation in helping to educate and on-board lawyers into digital asset tech law. The featured speakers at this first of its kind Global Law Symposium were some of the top lawyers in the world on the subject of blockchain and web3 technology. I was truly honored to be a part of this amazing event. Crypto Criminal Defense Lawyer Blog

One of the subjects we covered was how transnational criminal organizations profile and target unsuspecting victims through a sophisticated social engineering fraud practice known as “pig butchering”.

What is Pig Butchering?

“The victims in Pig Butchering schemes are referred to as ‘pigs’ by the scammers because the scammers will use elaborate storylines to ‘fatten up’ victims into believing they are in a romantic or otherwise close personal relationship,” according to the affidavit in support of the Los Angeles seizure warrant. “Once the victim places enough trust in the scammer, the scammer brings the victim into a cryptocurrency investment scheme.” DOJ Press Release

"Pig butchering" is an internet fraud scheme that primarily targets individuals looking for romantic relationships online. The term is derived from the practice of raising a pig and feeding it until it is ready for slaughter. Similarly, in this scam, the fraudster (also known as the "pig butcher") gains the trust of their victim (the "pig") over a period of time before eventually defrauding them of their money or personal information.

The FBI noted in its 2023 IC3 Report that a new form of romance scam is on the rise. know as “pig butchering” has overtaken business email compromise (BEC) scams and become the preferred cyber criminal fraud scheme.

Confidence/Romance Fraud: An individual believes they are in a relationship (family, friendly, or romantic) and are tricked into sending money, personal and financial information, or items of value to the perpetrator or to launder money or items to assist the perpetrator. This includes the Grandparent’s Scheme and any scheme in which the perpetrator preys on the complainant’s “heartstrings.” 2023 IC3 Report

How Does Pig Butchering Work?

The pig butchering scheme typically involves the following steps:

Establishing Contact: The fraudster creates a fake online profile on a dating website or social media platform, often using stolen pictures and fabricated personal information. They then initiate contact with potential victims by sending messages expressing interest in forming a relationship.
Grooming the Victim: Once contact has been established, the fraudster works to build trust with the victim through regular communication, sharing personal stories, and even sending gifts. This stage is crucial in establishing an emotional bond, making it more difficult for the victim to suspect foul play.
The Hardship Story: After gaining the victim's trust, the fraudster will introduce a hardship story. This could range from a sudden financial crisis, a sick relative, or legal trouble, ultimately leading to a request for financial assistance from the victim.
Extraction of Money or Information: If the victim decides to help, the fraudster will request money transfers or personal information such as bank account numbers or Social Security numbers, which can be used for identity theft or other fraudulent activities.
Disappearance: Once the fraudster has obtained the desired funds or information, they will typically sever contact with the victim and disappear, leaving the victim emotionally and financially devastated.

After showing the victim some phony realized gains on the initial investment, pig butchers will then use that initial “win” to extract more money from unsuspecting victims. When the victims try and take profits, they are often met with some excuse why the funds are not available. The fraudsters then prey on the emotions of the victims and persuade them to send even more money to an anonymous wallet address.

Victims of pig butchering schemes are very often either embarrassed or refuse to accept that they have been taken advantage of until it’s too late. This hesitation to report the behavior often leads to victims doubling and even tripling-down on their initial fraudulent investment to try and recoup their original losses. The fraudsters are very good at creating new “opportunities” for these victims to invest additional money to try and either make back losses on their initial investment or to try and gain access to the original investment that is typically somehow been locked-up in inaccessible.

This is just one of the many examples of how transnational criminal enterprises can use blockchains to facilitate fraud. Another type of crypto fraud involves the recruitment of sometimes unsophisticated parties to assist in the movement of cash from fraud schemes overseas in exchange for a commission. Fraudsters will recruit individuals to receive large bulk cash, run that cash through their bank accounts, and then move the cash to a centralized crypto currency exchange. The fraudsters will then instruct these individuals to send the money in the form of crypto to a wallet address connected to the transnational fraud organization.

These transactions often trigger bank alerts that are reported to law enforcement. Once law enforcement gets involved they usually are able to very easily trace the money back to the individual who deposited the illicit cash proceeds. These individuals then face the possibility of criminal prosecution for wire fraud, money laundering and acting as an unlicensed money services business.

Sadly, these unwitting pawns are often the only individuals that the government can find and prosecute for these fraud schemes. It’s rare that the government can reach back overseas and successfully find and arrest the transnational fraud players who received the laundered crypto funds. The local facilitators of these laundering schemes are therefore often left suffering the brunt of the consequences for these schemes that can result in felony convictions, prison or probation sentences and an order to make full restitution for the losses suffered by the victims.

Eleventh Circuit Holds That "Inchoate Offenses" Like Conspiracy Do Not Qualify As "Controlled Substance Offenses" Under the Career Offender Guideline

: Created: 19 April 2023

In United States v. Dupree, No. 19-13776, at *23 (11th Cir. Jan. 18, 2023), the Eleventh Circuit held that inchoate offenses like conspiracy do not qualify as "controlled substance offenses" for the purposes of the career offender enhancement under § 4B1.1(a) of the Sentencing Guidelines.

“Inchoate crimes involve "[a] step toward the commission of another crime, the step in itself being serious enough to merit punishment." Inchoate Offense, Black's Law Dictionary (11th ed. 2019). "The three inchoate offenses are attempt, conspiracy, and solicitation." Id.” United States v. Dupree, No. 19-13776, at *5 n.1 (11th Cir. Jan. 18, 2023).

Dupree argued that the definition of "controlled substance offense" in § 4B1.2(b) unambiguously excludes inchoate offenses, and the court should not defer to the commentary's broader definition, which includes such offenses. The Eleventh Circuit agreed with Dupree, relying on the framework established by the Supreme Court for determining the impact of the Guidelines' commentary on their interpretation. Tyler Criminal Defense Lawyer Blog

“We begin, as Kisor instructs, with the text of § 4B1.2. After applying our traditional tools of statutory interpretation, we conclude that the plain language definition of "controlled substance offense" in § 4B1.2 unambiguously excludes inchoate offenses.” Id.; citing Kisor v. Wilkie, 139 S.Ct. 2400 (2019).

The Eleventh Circuit held that the definition of "controlled substance offense" in § 4B1.2(b) does not include inchoate offenses like conspiracy and attempt. To the extent that this holding conflicts with the prior precedent set in Weir and Smith, the Eleventh Circuit overruled that precedent.

Under today's holding, Dupree's conviction for conspiracy to possess with intent to distribute heroin and cocaine in violation of § 846 is not a controlled substance offense because the plain text of § 4B1.2(b) unambiguously excludes inchoate crimes. Dupree must be resentenced without application of the career offender enhancement.

United States v. Dupree, No. 19-13776, at *22 (11th Cir. Jan. 18, 2023).

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