FTC Fraud Referral Criminal.

The Federal Trade Commission (FTC) focuses on civil consumer-protection violations. However, when the FTC uncovers evidence of intentional fraud, meaning a clear intent to deceive or defraud consumers, this can trigger a criminal referral. An FTC investigation is civil, but documented evidence of knowing fraud can prompt referral to prosecutors who decide whether criminal charges follow.

The FTC is not a criminal prosecution agency and cannot file criminal charges in federal district court. Instead, it works with other agencies through its Criminal Liaison Unit (CLU). The CLU connects the FTC’s consumer protection enforcement arm with criminal law-enforcement agencies, including the U.S. Department of Justice, U.S. Attorneys’ Offices, and other federal, state, and local authorities.

How the FTC Criminal Liaison Unit Operates

The Criminal Liaison Unit’s primary purpose is to help criminal law-enforcement authorities pursue consumer-fraud prosecutions. The CLU works by:

• Identifying cases that qualify as criminal fraud and assembling the supporting evidence.
• Packaging evidence for referral to federal prosecutors, often facilitating “parallel prosecution” where civil and criminal actions are handled simultaneously.
• Collaborating with attorneys at the DOJ, U.S. Attorneys’ offices, and other federal agencies to ensure targeted prosecution of fraudulent activities.

When the FTC initiates a referral, it provides the DOJ with a summary of the case and a set of supporting documents. Prosecutors then make an informed decision about pursuing criminal charges.

Federal criminal fraud prosecutions are a collaborative effort. FTC attorneys work alongside the DOJ and U.S. Attorneys, ensuring that the evidence gathered during civil investigations informs criminal charges. These prosecutors review the case and determine whether criminal charges are appropriate based on the evidence of intent to defraud.

Spodek Law Group includes attorneys and consultants. We provide strategic defense counsel by proactively engaging with the FTC Criminal Liaison Unit and federal prosecutors to stop investigations from escalating to criminal prosecution when possible.

Which Evidence Can Move an FTC Fraud Matter Toward Criminal Prosecution?

Under the FTC Act, a consumer fraud case will typically be pursued under one of two theories: deception or unfairness. A deception theory usually alleges material conduct that is likely to mislead consumers who act reasonably under the circumstances. An unfairness theory alleges conduct that causes or is likely to cause substantial injury to consumers, which consumers cannot avoid through reasonable action. If federal prosecutors find evidence of criminal intent and the other elements of a federal fraud offense, this can move the FTC matter toward criminal prosecution.

The Standard of Proof in FTC Fraud Cases

While civil litigation requires only a preponderance of the evidence (the government must show that the evidence “more likely than not” supports its theories), criminal cases carry a much higher burden of proof. At trial, federal prosecutors must prove beyond a reasonable doubt that the defendant is guilty of the charges against them. However, at the grand jury stage, prosecutors only need to prove probable cause in order to secure an indictment.

The Types of Evidence Used to Prove Consumer Fraud

In both civil and criminal fraud investigations, federal agents rely on a variety of sources of evidence, such as:

• Victim Statements: FTC fraud cases often begin with statements from victims who have come forward. While these statements are crucial to the FTC’s civil case, they can also help establish criminal guilt. For example, a victim’s testimony that they were misled can be evidence relevant to the defendant’s intent to defraud.
• Undercover Sales Calls and Purchases: FTC investigators work alongside law enforcement agents to collect evidence through undercover sales calls and purchases. Evidence obtained from these methods can demonstrate fraudulent conduct and be used both in civil and criminal matters.
• Certified Bank, Business, and Telephone Records: In addition to victim statements and undercover information, law enforcement personnel can use the records of financial institutions, businesses, and telecommunications carriers to build fraud cases. These certified records can be used to prove fraudulent conduct and prove that defendants knowingly participated in a fraud.
• Email and Social Media Posts: Digital communication channels, both public and private, can serve as additional sources of evidence.
• Other Documentary and Testimonial Evidence: Depending on the circumstances, federal prosecutors and FTC investigators can pursue additional forms of documentation, testimony, and other evidence to pursue their consumer fraud cases.

What Does an FTC CID Reveal About Your Role and Immediate Duties?

When the FTC initiates a consumer fraud investigation, its attorneys may use civil investigative demands (CIDs) to seek documents, testimony, and written answers. CIDs can request written reports or answers to agency questions. A CID recipient may be a witness or third party, and not necessarily the target of the investigation.

Understanding CIDs Under the FTC Act

The FTC Act Section 20 authorizes the issuance of CIDs for investigations involving unfair-or-deceptive-practice violations. This section includes the FTC’s authority to investigate a wide range of fraud-related allegations under its consumer-protection mandate, such as deceptive marketing in the e-commerce sector.

Similar to subpoenas, a CID is non-public and is issued to seek relevant information. Receiving a CID does not establish that the recipient is the target of the FTC’s inquiry; the FTC also sends CIDs to third parties with relevant information. However, if you receive a CID, the best way to protect yourself is to gather any relevant information and seek defense counsel from our law firm.

FTC Subpoenas for Consumer Fraud Investigations

The FTC relies on subpoenas for its consumer fraud investigations as well. A subpoena is a compulsory request that can be directed at targets, witnesses, and other third parties; its disclosure may be restricted in appropriate circumstances. As we discuss with our clients, federal agencies cannot generally use subpoenas to force disclosure of privileged information.

Recipients of FTC subpoenas and CIDs may petition the FTC under Rule 2.10 to limit or quash the subpoena or CID. In cases involving government overreach or other compelling grounds, CIDs and other subpoenas can be challenged in federal court.

If you have received an FTC subpoena or CID for an investigation and are worried that you might be the target, our consumer fraud defense attorneys can help. We can work to determine the scope of the FTC’s investigation and the most efficient way to ensure compliance while avoiding unnecessary exposure.

What Financial and Operational Exposure Can an FTC Investigation Create Before Criminal Charges?

FTC staff who handle consumer fraud investigations may recommend that the Commission initiate administrative proceedings before an agency administrative law judge. In many cases, the administrative process involves FTC staff acting as prosecutors, with a judge from the agency serving as the adjudicator.

FTC attorneys may also seek injunctive relief in federal district court. The FTC has the authority to seek injunctive relief when it has reason to believe that violations of law are occurring or are imminent and that interim relief would be in the public interest.

FTC Consumer Fraud Enforcement Relief

FTC enforcement includes pursuing appropriate relief based on the circumstances of each case. This relief can include, but is not limited to:

• Preliminary and permanent injunctions
• Civil monetary penalties
• Consumer redress or restitution where authorized by the applicable statute
• Other relief as permitted under the FTC’s investigative and enforcement authority In consumer fraud investigations, this means that FTC attorneys can seek all or some of these relief items based on the FTC’s assessment of the case and its available authority to take enforcement action.

Asset-Freeze Orders for Consumer Fraud Cases

FTC attorneys have the authority to seek asset-freeze orders in appropriate consumer fraud cases. Asset-freeze orders can be sought and obtained without prior notice to the defendants, which prevents defendants from dissipating or transferring assets in anticipation of enforcement action. For example, if the FTC reasonably believes that defendants may divert funds to other entities or are unwilling to comply with court-ordered consumer redress, then an asset-freeze order may be warranted.

Temporary Receiverships for Consumer Fraud Investigations

Similar to asset-freeze orders, temporary receiverships can also be sought and obtained without prior notice in appropriate circumstances. In these cases, an independent receiver is appointed by a federal district court to manage defendants’ assets and operations on behalf of the FTC, its interests, and the interests of affected consumers. Temporary receiverships allow the FTC and the federal court to maintain control over defendants’ business operations and financial assets while the FTC’s consumer fraud case moves forward.

If You Want Someone to Look at Your Case

Reading about a charge is not the same as having someone read your file. Spodek Law Group keeps an attorney on call around the clock, and the first consultation costs nothing and runs as long as your questions do. The number is 888 348 8028.