What Is Internet Fraud? Schemes, Federal Penalties & Recovery

Internet fraud is any scheme that uses websites, email, messaging apps, or other online tools to trick people into handing over money, personal information, or property. Federal prosecutors usually charge it under the wire fraud statute, 18 U.S.C. § 1343, which carries up to 20 years in prison for each fraudulent communication sent across state lines.¹ In 2024, the FBI’s Internet Crime Complaint Center logged more than 859,000 complaints reporting $16.6 billion in losses, a record high.²

The Most Common Internet Fraud Schemes

Online fraud takes many shapes, but a handful of patterns show up again and again in federal enforcement data.

Phishing and Spoofed Messages

Phishing uses fake emails, texts, or websites built to look like they come from a bank, a government agency, or a trusted company. The messages manufacture urgency — a locked account, a suspicious charge, a package problem — to push you into entering a password, Social Security number, or card number on a page the scammer controls.

Business Email Compromise

Business email compromise targets employees who handle payments. Scammers either break into an executive’s email account or imitate it convincingly, then instruct staff to wire money to an account the scammer owns. BEC complaints reported to IC3 accounted for roughly $2.77 billion in losses in 2024.²

Romance Scams

Romance fraud begins on dating apps, social platforms, or private messaging. After weeks or months of building a relationship, the scammer asks for money, usually citing a medical emergency, travel costs, or a short-term business bind. In 2024, nearly 18,000 victims reported about $672 million in losses from romance scams.² Some victims are also recruited as “money mules,” asked to receive stolen funds in their own bank accounts and forward them elsewhere.³ Moving money for a scammer can expose the victim to federal money laundering charges.

Cryptocurrency Investment Fraud

Law enforcement calls this scheme “pig butchering.” It blends romance and investment fraud: the scammer cultivates a personal or professional relationship, then steers the victim toward a fake crypto trading platform that shows fabricated returns.⁴ Victims deposit more and more, sometimes draining retirement accounts or borrowing against their homes, only to find they cannot withdraw anything. Cryptocurrency-related fraud drove $9.3 billion in reported losses in 2024.²

Investment and Pump-and-Dump Schemes

Scammers push false information about a stock or other asset through social media, online forums, or private groups, driving the price up. Once enough buyers pile in, they sell their own shares at the inflated price and vanish, leaving everyone else with a worthless position.

Retail and Auction Fraud

Sellers list items on e-commerce or auction platforms at attractive prices, collect payment, and ship nothing. Listings often use stolen photos and fake reviews to pass as legitimate. Buyers who pay with wire transfers, gift cards, or cryptocurrency rarely recover their money, because those payment methods are hard or impossible to reverse.

How Federal Law Treats Online Fraud

No federal statute uses the phrase “internet fraud.” Instead, online schemes are prosecuted under the wire fraud statute, which makes it a crime to send any communication across state or international lines as part of a plan to cheat someone out of money or property.¹ Because internet traffic routinely crosses state borders through servers scattered around the country, nearly all online fraud meets the interstate requirement.

Each fraudulent message can be charged as its own count. A single phishing email, a fake investment site, or one deceptive auction listing is enough on its own. Prosecutors do not have to show the victim actually lost money; devising the scheme and using an electronic communication to carry it out is enough.⁵

Internet fraud cases rarely involve just one charge. Prosecutors commonly stack related offenses:

The Computer Fraud and Abuse Act, 18 U.S.C. § 1030, covers unauthorized access to computers and networks, including hacking into accounts, deploying malware, and using stolen login credentials. Trafficking in stolen passwords also violates this law when the activity affects interstate commerce. Both the FBI and the Secret Service can investigate.⁶
Aggravated identity theft under 18 U.S.C. § 1028A applies when someone uses another person’s name, Social Security number, or date of birth during a fraud-related felony. A conviction adds a mandatory two years in prison, served after the sentence for the underlying fraud, and probation is not available. If the fraud is tied to terrorism, the add-on rises to five years.⁷
Money laundering under 18 U.S.C. § 1956 applies when someone moves or hides fraud proceeds, often through shell companies, crypto wallets, or overseas accounts. It carries up to 20 years in prison and a fine of up to $500,000 or twice the laundered amount, whichever is greater.⁸

Federal Penalties

Wire fraud carries up to 20 years in federal prison per count, and each fraudulent communication can be a separate count.¹ A defendant who sent dozens of scam emails can face stacked sentences on each one.

The ceiling jumps in two situations. If the fraud affects a financial institution such as a bank or credit union, or involves benefits tied to a presidentially declared disaster or emergency, the maximum rises to 30 years in prison and a fine of up to $1,000,000.¹

What to Do if You’ve Been Scammed

Speed matters. Once a scammer withdraws the money or moves it offshore, recovery becomes much harder. Work through these steps in order.

Call your bank or payment provider now. If you sent a wire transfer, ask the sending bank to recall it. For credit card payments, open a chargeback dispute. The faster you act, the better the chance the funds can be frozen before withdrawal.
File a complaint at ic3.gov. Include transaction records, screenshots of messages, email headers, and any account numbers or cryptocurrency wallet addresses the scammer used. IC3’s Recovery Asset Team works with banks to freeze fraudulent domestic wires; in 2023 it helped freeze over $538 million, with a 71 percent recovery rate.⁹
Report identity theft to the FTC. If your personal information was exposed, go to IdentityTheft.gov and generate an Identity Theft Report. That report proves to businesses and credit bureaus that someone stole your identity and locks in legal rights such as having fraudulent accounts closed and blocking false information from your credit report.¹⁰
Place a fraud alert or credit freeze. Contact any one of the three major credit bureaus (Equifax, Experian, or TransUnion) to set a fraud alert; that bureau must notify the other two. A credit freeze goes further and blocks new accounts from being opened in your name.
Preserve everything. Save emails, chat logs, transaction confirmations, and screenshots. Do not delete communications with the scammer, even embarrassing ones. Investigators rely on that material to build cases and trace stolen funds.

Civil Options for Recovering Money

Criminal prosecution punishes the scammer; it does not automatically pay you back. Victims sometimes have their own path to recovery.

The Computer Fraud and Abuse Act gives victims a private right of action for unauthorized computer access, provided losses total at least $5,000 within a one-year period.⁶ If you meet that threshold, you can seek compensatory damages and court orders to stop ongoing harm. The deadline is two years from the date of the unauthorized access or from when you discover the breach, whichever comes later.

For smaller losses, especially from retail or auction scams, small claims court is often the practical venue. State limits vary, typically running from $2,500 to $25,000, and the process is designed to work without a lawyer. State fraud statutes may also support a lawsuit, with filing deadlines generally running from two to six years. A local attorney can help you decide which path fits and whether the scammer is traceable enough — and solvent enough — to make a judgment worth pursuing.

1
Office of the Law Revision Counsel. 18 USC 1343 – Fraud by Wire, Radio, or Television
2
Internet Crime Complaint Center. 2024 IC3 Annual Report
3
Federal Bureau of Investigation. Money Mules
4
Federal Bureau of Investigation. How the FBI Is Saving Victims From Cryptocurrency Investment Fraud
5
Department of Justice Archives. 941 18 USC 1343 – Elements of Wire Fraud
6
Office of the Law Revision Counsel. 18 USC 1030 – Fraud and Related Activity in Connection With Computers
7
Office of the Law Revision Counsel. 18 USC 1028A – Aggravated Identity Theft
8
Office of the Law Revision Counsel. 18 USC 1956 – Laundering of Monetary Instruments
9
Department of Justice. Domestic Financial Fraud Kill Chain Process
10
Federal Trade Commission. Identity Theft Recovery Steps