INTERNET FRAUD
A crime in which the perpetrator develops a
scheme using one or more elements of the INTER-
NET to deprive a person of property or any inter-
est, estate, or right by a false representation of a
matter of fact, whether by providing misleading
information or by concealment of information.
As increasing numbers of businesses and
consumers rely on the Internet and other forms
of electronic communication to conduct trans-
actions; illegal activity using the very same media
is similarly on the rise. Fraudulent schemes con-
ducted via the Internet are generally difficult to
trace and prosecute, and they cost individuals
and businesses millions of dollars each year.
From computer viruses to Web site hacking
and financial FRAUD, Internet crime became a
larger concern than ever in the 1990s and early
2000s. In one sense, this situation was less a
measure of growing pains than of the increasing
importance of the Internet in daily life. More
users surfing the Web, greater business reliance
upon E-MAIL, and the tremendous upsurge in
electronic commerce have raised financial
stakes. A single virus outbreak in 1999 was
blamed for more than $80 million in damage,
while Web site hacking in early 2000 purport-
edly cost hundreds of millions more. Adding
new wrinkles were complaints about rampant
fraud on popular online auction sites. Together,
the problems drew tough rhetoric from U.S. offi-
cials, who announced new initiatives, deployed
cyber-crime units, made numerous arrests, and
even pursued international manhunts.
According to a U.S. JUSTICE DEPARTMENT
Web site devoted to the topic, Internet fraud
refers to any type of scheme in which one or
more Internet elements are employed in order to
put forth “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.” As pointed out in a report prepared by
the National White Collar Crime Center and the
FEDERAL BUREAU OF INVESTIGATION (FBI) in
2001,major categories of Internet fraud include,
but are not limited to, auction or retail fraud,
SECURITIES fraud, and IDENTITY THEFT.
Securities fraud, also called investment
fraud, involves the offer of bogus stocks or high-
return investment opportunities, market
manipulation schemes, pyramid and Ponzi
schemes, or other “get rich quick” offerings.
Identity theft, or identity fraud, is the wrongful
obtaining and use of another person’ personal
data for one’s own benefit; it usually involves
economic or financial gain for the perpetrator.
In its May 2002 issue, Internet Scambusters
cited a study by GartnerG2 that demonstrated
online merchants lost $700 million to Internet
fraud in 2001. By comparison, the report
showed that “online fraud losses were 19 times
