Procurement Fraud Defense: On the Law-Enforcement Horizon

With DOGE and fraud, waste, and abuse at the forefront of most public statements by Trump Administration officials, it is a near certainty that an uptick in federal investigations and indictments for procurement fraud cases will follow. Defending procurement fraud cases requires knowledge of the relevant statutes, know-how in deconstructing them, and trial skills.

Investigated Conduct

Procurement fraud covers a range of conduct in connection with government contracting, which is defined broadly. Common examples include:

• Billing the U.S. government for goods or services not provided;

• Overcharging the U.S. government for goods or services;

• False certifications that goods or services conform to federal requirements, when in fact the goods do not or are otherwise defective; and

• Paying bribes to government officials in exchange for confidential information or contract awards.

Federal Criminal Statutes in Procurement Fraud Cases

Here’s a list of the most commonly charged federal offenses in indictments for procurement fraud:

• Conspiracy: 18 U.S.C. § 1349 or 18 U.S.C. § 371, generally criminalize the “agreement” to commit an offense under Title 18 (normally wire fraud)

• Wire Fraud: 18 U.S.C. § 1343, generally criminalizes a “scheme to defraud” or using false or fraudulent representations to obtain money and doing so with the intent to defraud

• Major Fraud against the United Sates: 18 U.S.C. § 1031, similarly criminalizes a “scheme to defraud” the United States involving a contract (or other identified financial arrangement) over $1,000,000

• False Claims: 18 U.S.C. § 287, criminalizes knowingly presenting a false or fraudulent claim to a department or agency

• Theft of Government Property: 18 U.S.C. § 641, which criminalizes the theft or misuse of U.S. government property or funds, with the intent to deprive the government of its use or value

• Kickbacks: 41 U.S.C. § 8702, criminalizes knowingly and willfully providing, offering, soliciting, or accepting any kickback (anything of value) in connection with a federal contract

Defending Procurement Fraud Cases

Defending a procurement fraud case is similar to defending any other white-collar fraud case. A successful defense strategy often turns on putting forward evidence on the following issues:

• Attacking Fraudulent Intent: Most of the above-referenced statutes require an “intent to defraud.” Proving this intent is the most difficult part of any procurement fraud case and where many prosecutions falter.

• Attacking False Representations: The false representation in a procurement fraud case is often not black and white, especially hwere the representation relates to contracting terms or vague or open-ended obligations.

• Attacking “Materiality”: The representation must have been material to the government agency. And government officials are susceptible to effective cross-examination that the underlying fraud was either blessed by government, ignored or not important in the grand scheme of things.

• Lack of Motive: A “target” of the investigation may not have benefitted financially in a meaningful sense from the alleged fraud, either because the contracting benefit flowed to the individual’s company or because the contract did not directly benefit the individual’s compensation

Trial Skills

Ideally, a skilled advocate can point out the above flaws in a procurement fraud case and convince DOJ to decline to proceed on one or more of those bases. If not, showing these issues to the jury is critical and is generally done through skilled cross examination of government witnesses.

DOJ Cryptocurrency Enforcement Memo: Shifting Priorities and Protecting “Retail Investors”

On April 7, 2025, the Department of Justice (DOJ) released a memo that highlights its priorities in cryptocurrency investigations and cases. Under the new guidance, DOJ will focus its resources on cases involving clear victimization of retail investors, such as investment frauds, hacks, rug pulls, and smart-contract exploitation. On the flip side, it will not devote resources to investigating cryptocurrency exchanges for criminal offenses that are regulatory in nature.

DOJ’s Goal: Protecting Retail Investors

One of the most significant takeaways from the 2025 DOJ cryptocurrency enforcement memo is the Department’s clear prioritization of cases involving retail investor harm. DOJ will focus on investigating and prosecuting:

• Hacks of cryptocurrency exchanges or wallets,

• Fraudulent investment schemes and rug pulls,

• Exploitation of vulnerabilities in smart contracts to steal digital assets, and

• Criminal conduct involving theft, fraud, or market manipulation directly harming individual investors.

This tact from DOJ mirrors recent moves at other agencies, including the SEC, to reorient enforcement away from regulatory technicalities and toward misconduct that results in financial losses for individuals.

Low Priority Investigations: “Regulatory” Offenses

DOJ also discouraged prosecutors from investigating and charging seemingly regulatory infractions in the crypto space, including:

• Investigations of exchanges, mixing services, and tumblers for violations of 18 U.S.C. § 1960 (unlicensed money transmitting) or Bank Secrecy Act (BSA) obligations, unless other criminal conduct is involved.

• Technical licensing failures or registration lapses, absent deliberate criminal intent and victimization.

DOJ's Neutrality on Whether Tokens Are Securities or Commodities

DOJ also instructed prosecutors to avoid inserting DOJ in the debate of whether whether a digital asset is a "security" or "commodity." Under the new memo:

• DOJ prosecutors should not bring charges that require litigation over a token’s classification under the Securities Act or Commodity Exchange Act.

• Title 15 offenses, including offenses for securities fraud, market manipulation or both, will generally not be pursued unless there is clear, provable fraud resulting in victim harm.

• Instead, DOJ will instead prioritize traditional white-collar offenses, including wire fraud, money laundering, and other offenses under Title 18 that do not require any proof that a token is a security or a commodity.

Will DOJ Follow Through on Cryptocurrency Enforcement Changes?

The practical impact of this guidance remains to be seen. DOJ claims it wants to pursue cases the victimize retail investors. As with any policy shift, the "proof will be in the pudding" as new cases are filed—or declined—in the coming months. Industry participants should monitor enforcement trends carefully to assess whether DOJ’s shift toward investor-focused prosecutions becomes a reality.

---

Scott Armstrong, a former senior supervisor and Assistant Chief at DOJ’s Fraud Section in DC, represents clients facing government investigations and allegations of impropriety in the cryptocurrency market. At McGovern Weems, Scott draws on his trial experience in cryptocurrency cases to offer strategic defense to individuals in all corners of the cryptocurrency market. If you are involved in a government investigation relating to cryptocurrency fraud, reach out to Scott Armstrong.