Legal Sidebari

Overseas Crime in the United States
July 29, 2022
How do you commit a crime in the United States when you have never been here? According to the
United States Court of Appeals for the Fourth Circuit (Fourth Circuit) in United States v. Elbaz, you can
commit a crime in the United States without being physically present by phoning it in, even though the
crime in question, wire fraud, only applies domestically. Specifically, the Fourth Circuit recently held that
the wire fraud statute could be applied to a defendant’s domestic conduct in using wires located in the
United States to defraud victims in the United States without having to be physically present in the United
States.
Background
Lee Elbaz operated a global “binary option” scheme from Israel. Elbaz and her associates invited victims
to place a bet on the possible value of an asset at a given time. After victims had been enticed to
participate in the scam, Elbaz and her retention agents based in Israel reassured them, discouraged
withdrawals, and encouraged further investments. The scheme cost victims more than $100 million,
including millions from victims located in the United States.
A federal grand jury indicted Elbaz for wire fraud and conspiracy to commit wire fraud based on three
wire transmissions sent to victims in Maryland. Federal authorities arrested Elbaz when she arrived in
New York on vacation. Elbaz was convicted following a jury trial in the U.S. District Court for Maryland.
The district judge sentenced her to 22 years in prison and ordered her to pay $28 million in restitution.
She appealed the conviction and restitution order arguing, among other things, (1) that the wire fraud
statute under which she was convicted does not punish overseas conduct, and that the statute was
impermissibly applied to convict her for extraterritorial conduct; and (2) that the restitution order issued
against her improperly counted the foreign losses of the entire global scheme.
With regard to Elbaz’s first challenge, the Supreme Court has declared that, “[a]bsent clearly expressed
congressional intent to the contrary, federal laws will be construed to have only domestic application.”
The Court presumed that “[w]hen a statute gives no clear indication of extraterritorial application, it has
none.” The Court further explained that the wire fraud statute, which makes no specific extraterritorial
statement, does encompass wire communications transmitted “in interstate or foreign commerce.” Having
determined a statute has no extraterritoriality, the Court has held that the second step in order to rebut the
presumption is to determine whether a case “involves a domestic application of the statute,” a task that
entails examination of the focus of the statute.
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Elbaz’s restitution challenge rested on her argument that, upon conviction, a federal court must order a
defendant to pay restitution to the victims of certain crimes, but that the restitution order in her case was
improper. She asserted that the district court erred in considering her foreign conduct and losses to foreign
victims when calculating the restitution owed.
Fourth Circuit
The Fourth Circuit rejected Elbaz’s request to vacate her conviction but agreed with her challenge to the
restitution award. The court acknowledged at the outset of its opinion that the wire fraud statute has no
extraterritorial application. Having made that determination, the court next turned to step two, which is to
“identify the wire-fraud statute’s ‘focus.’” The court held that the focus of the statute is the protection of
wire communications and explained that the statute proscribes fraudulent wire use where the message is
transmitted or received. The court determined that, in this case, “the transmissions were received by
victims in Maryland using wires in Maryland. So Elbaz’s convictions are all permissible domestic
applications of the wire fraud statute.” As for the conspiracy conviction, the court explained that
conspiracy occurs wherever an act in its furtherance takes place “which may include a place where ‘the
defendant has never set foot,’” i.e., Maryland.
Elbaz fared slightly better with her restitution challenge. The court recognized that when calculating
Elbaz’s term of imprisonment, the district court could consider related “relevant conduct,” such as the
losses suffered by foreign victims of the global scheme. The court held that restitution, however, is
limited to victim losses attributable to the defendant’s crime of conviction, in this case wire fraud and
conspiracy committed in the United States.
Congressional Considerations
In the past, Congress has explicitly called for extraterritorial application of a particular criminal statute,
such as those involving money laundering and the theft of trade secrets. Congress might address the wire
fraud’s extraterritorial application in much the same manner, although legislation to do so does not appear
to have been introduced thus far.


Author Information

Charles Doyle

Senior Specialist in American Public Law




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