Define: Fraud

Fraud refers to the intentional deception or misrepresentation made by an individual or entity with the intent to gain a benefit or advantage, or to cause harm to another party. It typically involves false statements, concealment of facts, or other deceptive practices that induce another person to act in a manner detrimental to their interests. Fraud can take various forms, including financial fraud, such as securities fraud or insurance fraud, as well as consumer fraud, identity theft, and other forms of deceitful conduct. In legal terms, fraud is considered a civil wrong or a criminal offence, depending on the circumstances and the laws of the jurisdiction. To prove fraud, it is generally necessary to demonstrate the following elements: a false representation or omission of material fact, knowledge of the falsity or recklessness in making the misrepresentation, intent to deceive, and reliance by the victim on the false representation resulting in harm or injury. Penalties for fraud may include civil remedies such as restitution or damages, as well as criminal sanctions such as fines, imprisonment, or other legal consequences.

Fraud is the intentional deception by one person committed against another person, which creates a misrepresentation.

There also must be some type of loss, generally monetary.

There are many types of fraud, but fraudulent activities can usually be grouped into three basic categories: government, employee, and consumer.

Under the common laws of the United States, fraud includes the following:

1. There is a representation of facts.
2. The statement or representation is untrue.
3. The statement must be important or relevant.
4. The speaker must realise the statement is not true.
5. The speaker must intend for the statement to be relied on.
6. The hearer does not realise the statement is not true.
7. The listener relies on the information to make a decision.
8. The hearer does not have a reason to believe the statement is not true.
9. The hearer has suffered loss or damage.

A common type of fraud is identity theft. In this case, it is not necessarily illegal to lie to someone about your name, but if you steal another person’s identity and cause financial loss to that person due to your lies, then this is considered fraud. Fraud can be considered a criminal offence or a civil offence. If you sue someone for fraud, you may win your case even if they are not criminally prosecuted.

For most people, the act of lying is considered fraudulent, but in a legal sense, lying is only one small element of actual fraud.

A salesman may lie about his name, eye colour, place of birth, and family, but if he has not said any lie about the product he sells, then he will not be found guilty of fraud. deliberate misrepresentation of the product’s condition must be present, and there must be an occurrence of monetary damages.

Involvement of Complicated financial transactions in Fraud Cases

Complicated financial transactions are involved in many fraud cases that are conducted by ‘white-collar criminals’, business professionals with specialised knowledge and criminal intent. By an unscrupulous investment broker, an opportunity to purchase shares in precious metal repositories may be presented to clients, for example. Such credibility is given to him by his status as a professional investor, which can lead to a justified belief among potential clients.

When does a Fraud victim sue a Broker?

Those investors, by whom it is believed that the opportunity is legitimate, contribute substantial amounts of cash and in return, they also receive authentic-looking bonds.

If it is known by the investment broker that no such repositories existed and he has still received payments for worthless bonds, then victims may sue him for fraud.

Proving fraud is not an easy task

It is not easy to prove fraud in a court of law. Laws concerning fraud may vary from state to state, but in general, there are many conditions that must be met. One of the most important things that has to be proven is a deliberate misrepresentation of the facts.

Was this fact known by the seller beforehand—that the product was defective or the investment was worthless? Sometimes a product might be sold by some employees of a large company, or they may offer a service without personal knowledge of a deception.

The account representative by whom a fraudulent insurance policy has been sold on behalf of an unscrupulous employer may not have known at the time of the sale that the policy was bogus. If the accuser wants to prove fraud, then he must demonstrate that the accused had prior knowledge and that the facts have been voluntarily misrepresented by him.

Another important element that has to be proved in a fraud case is justifiable or actual reliance on the expertise of the accused. If a stranger approached you and asked you for ten thousand dollars to invest in a vending machine business, then you would most likely walk away. But if a well-dressed man, for whom an investment seminar has been held, has mentioned his success in the vending machine world, you might rely on his expertise and perceived success in making the decision to invest in his proposal.

After that, if a few months have elapsed and the person has not contacted you or hasn’t delivered any vending machines, then you might reasonably assume that fraud has occurred. In a court of law, you are required to testify that your investment decision was partially based on a reliance on his expertise and experience.

The element of fraud that tends to prevent successful prosecution is the obligation to investigate. It is the responsibility of potential investors or customers to fully investigate a proposal before any money exchanges hands.

What if the fraud case is not reported to court on time?

If an investor fails to take appropriate measures at the time of the proposal, then it can seriously weaken a fraud case in court later. It can be claimed by the accused that the alleged victim had every opportunity to discover the potential for fraud and had failed to investigate the matter thoroughly.

Fraud victims should consult a legal professional

If you have realised that you are a victim of fraud, then you should consult a legal professional and collect all tangible evidence of damages. You have to keep in mind that fraud is not easily proven in a court of law, although the court of public opinion may be squarely on your side.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 9th April, 2024.