Bob Smithers and Joe Cramer ran a finance company called Beat the Street, LLC. Bob was the CEO, Joe was the COO. Beat the Street sold interest-bearing investments to clients with the promise of extraodinarily high interest payments for five years, at which point the principal would be repaid. Most of the business was conducted over the phone and internet. To the clients, nothing seemed suspicious or nefarious. Rather than investing the clients' money, however, Smithers and Cramer were using the money to fund their lavish lifestyles. They paid interest to existing investors with money paid by new clients. As long as they could keep bringing in new investors, they could keep the scheme going.

Eventually, Bob and Joe ran out of new investors to recruit and were unable to pay promised interest payments. Clients complained to the FBI, which investigated and found that Bob and Joe had taken in over $400 million from 7,000 individual investors and paid out only $100 million in interest payments over the course of 10 years. When the company's assets were seized by the FBI, there was only $10 million in assets left. The federal government charged Bob and Joe with securities and wire fraud.

1. According to the textbook, what are the 5 elements of criminal fraud?
2. Given the facts above, do you think Bob and Joe are guilty of criminal fraud? If so, explain how they fulfilled all 5 elements. If not, explain how the elements do not apply to them.

Answer rating: 100% (QA)

Based on the textbook definition of the 5 elements of criminal fraud and the information provided ab... View the full answer