What happens if you unknowingly participated in fraud?

| by Max Soni

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek, who has many, many years of experience handling criminal defense cases. We’ve represented thousands of clients since 1976, with over 50 years of combined legal experience across our team. You might know us from the Netflix series about Anna Delvey, or from our work on the Ghislaine Maxwell juror misconduct case – both cases that captivated national attention and resulted in coverage from the NY Post, Newsweek, and Bloomberg.

This article explains what happens when you unknowingly participated in fraud, how prosecutors evaluate intent, and what defenses exist when you had no idea you were involved in something illegal. Federal fraud charges don’t require you to mastermind a scheme – participation alone can bring charges, and that’s why understanding the legal landscape matters right now.

Federal prosecutors charge fraud cases every single day. Wire fraud, securities fraud, bank fraud – the list goes on. Most people assume fraud requires intentional deception, calculated lies, a deliberate plan to steal money. That’s partially true. Intent is a required element. But here’s what catches people off guard: participation in a fraud scheme can lead to charges even when you didn’t know the underlying activity was fraudulent.

You worked for a company that turned out to be running a Ponzi scheme. You processed transactions for what you believed was a legitimate business. You signed documents your boss told you were routine. Months or years later, federal agents knock on your door with questions about financial crimes you didn’t know existed.

That scenario plays out more often than you’d think – and it creates serious legal problems that require immediate attention from someone who understands how federal prosecutors build these cases.

Intent Is the Centerpiece of Every Fraud Case

Federal fraud statutes require prosecutors to prove you acted with intent to defraud. According to Department of Justice guidelines, the government must show beyond a reasonable doubt that you knowingly and willfully intended to deceive a victim. That’s the standard. Lacking intent means lacking the crime itself.

Intent is also the hardest element for prosecutors to prove because it involves your state of mind – something that exists only inside your head. They can’t open your brain and extract your thoughts. They build circumstantial cases using emails, text messages, witness statements, financial records, and patterns of behavior. They argue that your actions demonstrate guilty knowledge even if you claim innocence.

This is where things get complicated. Prosecutors don’t need direct evidence that you knew about the fraud. They can argue you should have known, or that you deliberately avoided learning the truth. “Willful blindness” is a legal doctrine that treats intentional ignorance the same as actual knowledge. If you suspected something was wrong but deliberately didn’t ask questions, prosecutors can argue that counts as intent.

We’ve defended clients who genuinely had no idea their employer was defrauding investors. They processed paperwork, answered phones, managed databases – routine tasks that seemed completely legitimate. The fraud happened above their pay grade, orchestrated by executives they never interacted with. But when the indictment came down, their names were listed alongside the masterminds because they participated in the scheme’s mechanics.

Good Faith Defense Works When You Can Prove It

Good faith is a complete defense to fraud charges. If you acted with an honest belief that your conduct was legal and your statements were truthful, that negates fraudulent intent entirely. It’s not a partial defense or mitigating factor – it results in acquittal if the jury believes you.

The good faith defense in mail and wire fraud cases requires showing an absence of intent to defraud. You relied on incorrect information from a supervisor. You trusted representations from colleagues with more experience. You made decisions based on what you reasonably believed to be true at the time.

Proving good faith means building a factual record that demonstrates your honest belief. Emails where you asked clarifying questions. Meetings where you raised concerns. Documentation showing you followed company policies and consulted with others before taking action. The more evidence showing you acted transparently and sought guidance, the stronger your good faith defense becomes.

But there are limits. Honest belief in the ultimate success of an investment doesn’t excuse false representations about current earnings or assets. You can’t claim good faith if you told investors a company had 10,000 customers when you knew it had 100 – even if you genuinely believed the company would eventually reach 10,000. Belief in future success doesn’t justify present lies.

Mistake of law isn’t a defense either. “I didn’t know that was illegal” doesn’t work in fraud cases. The law assumes you know basic legal obligations, and ignorance of criminal statutes isn’t a get-out-of-jail-free card. What matters is whether you intended to deceive people, not whether you understood the technical legal elements of wire fraud or securities violations.

Prosecutors Evaluate Your Role and Knowledge Level

Not everyone involved in a fraud scheme faces the same charges or exposure. Federal prosecutors make charging decisions based on your role, your knowledge, and the strength of evidence showing intent. Low-level participants who can demonstrate lack of knowledge often avoid prosecution entirely, or face reduced charges compared to scheme organizers.

We represented a client in a case involving investment fraud where our client worked in customer service, handling routine inquiries and account questions. The company’s executives were fabricating financial statements and lying to investors about returns. Our client had no access to the real books, no involvement in creating false documents, and no reason to suspect the statements sent to investors were fraudulent. Prosecutors ultimately declined to charge our client after we presented evidence showing the limited scope of responsibilities and genuine lack of knowledge about the fraud.

That outcome required proactive legal work before charges were filed – something most people don’t realize is possible. If you’re under investigation, you’re not required to wait for an indictment. Experienced defense counsel can engage with prosecutors early, present exculpatory evidence, and argue against charges before the government makes a final decision.

Federal prosecutors have limited resources and focus on defendants who played meaningful roles in fraud schemes. If the evidence shows you were a peripheral participant with no knowledge of wrongdoing, prosecutors often move on to bigger targets. But that doesn’t happen automatically – it requires someone making that argument persuasively with supporting documentation.

What You Should Do If You’re Under Investigation

Federal investigations move slowly, but charging decisions happen fast once prosecutors decide to act. If federal agents contact you, if you receive a grand jury subpoena, if colleagues mention being questioned about your employer’s business practices – those are red flags requiring immediate legal consultation.

Don’t talk to investigators without counsel present. The natural instinct is to explain your innocence, to clarify misunderstandings, to cooperate fully because you have nothing to hide. That instinct destroys cases. Federal agents are skilled interrogators trained to extract statements that seem harmless but create problems later. Even truthful statements can be twisted or taken out of context in ways that make you appear guilty.

We’ve seen countless cases where early cooperation without legal guidance resulted in statements that prosecutors later used as evidence of guilty knowledge. A client tries to be helpful, answers questions about routine business operations, and inadvertently provides information that gets characterized as proof they knew about the fraud. Once those statements exist, they’re nearly impossible to overcome at trial.

Hiring experienced federal defense counsel immediately gives you the best chance of avoiding charges or minimizing exposure. At Spodek Law Group, we’ve handled federal fraud cases for decades – from wire fraud to securities violations to complex financial crimes. We know how prosecutors think because some of our attorneys are former federal prosecutors who built these cases from the other side.

Your future depends on decisions you make right now, during the investigation phase, before any charges are filed. Waiting until you’re indicted limits your options dramatically. By that point, prosecutors have already decided you’re guilty and invested significant resources in building a case against you. Changing their minds becomes exponentially harder.

If you unknowingly participated in fraud, you have defenses – but only if you assert them correctly with someone who understands federal criminal procedure. We’re available 24/7 to discuss your situation, evaluate the evidence, and develop a strategy that protects your rights while demonstrating your lack of criminal intent. Contact us immediately if you’re facing investigation or charges.