In United States v. Naranjo, the defendant’s wire fraud conviction resulted from a multi-million dollar scheme where he solicited investors for a chain of check cashing and pay-day loan stores known as the “Loan Shoppe” by offering high interest rates. The wire fraud statute Title 18 U.S.C. §1341 makes it a federal crime to use the telephone or any other interstate wired device to advance a fraud. It is commonly used federal statute in federal criminal white collar cases. Here Naranjo raised 1.5 million dollars through this fraud. Viewed in a light most favorable to the government, the evidence was sufficient for a reasonable jury to find Naranjo intended to operate a fraudulent scheme.
The evidence showed that money raised did not finance a legitimate business. These were the facts that supported the jury’s finding of a fraudulent scheme:
• The check cashing and payday loan business had no state license;
• The defendant hid his connection to the business by omitting his name on corporate records and license applications;
• He told his salesmen that the business was profitable when it made no profit;
• Only a small portion of investor funds went into expansion of the Loan Shoppe;
• High rates of return were promised yet few if any actually received;
• A majority of investor funds went to debt service and sales commissions without informing investors; and • The defendant personally made over $450,00 from a business that did not generate any profit.
The court of appeals found the evidence supported a finding that it was a ponzi scheme with considerable overhead and large payments to Naranjo.
The concealment money laundering statute prohibits financial transactions conducted for the purpose of concealing unlawfully obtained funds in violation of 18 U.S.C. § 1956(a)(1). Evidence showed three cash withdrawals for large sums of money from the business which occurred contemporaneously with the deposits from victim investors, which supported the concealment convictions. Converting illegally obtained funds into cash was proof of an attempt to hide the source of the funds and the defendant’s connections to them.
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