New York is currently hosting two of the most high-profile fraud cases in recent memory. In state court, New York Attorney General Letitia James is suing Donald Trump, his two adult sons and the Trump Organization for years allegedly spent defrauding banks, insurances companies and tax agencies. Down the street, federal prosecutors are trying to convict Sam Bankman-Fried for allegedly perpetrating a multibillion-dollar fraud while creating a cloud of suspicion over the entire crypto industry.
Whereas a criminal conviction would likely result in jail time, losing a civil trial would “only” force Trump to pay millions in damages and suffer other business penalties.
Trump’s fraud lawsuit is civil, unlike his four pending criminal cases and last year’s criminal fraud conviction of the Trump Organization. Here, the primary differences between civil and criminal fraud turn on the burden of proof that the government must satisfy (higher in criminal cases, with further protections for the defendants) and on the consequences of losing. Whereas a criminal conviction would likely result in jail time, losing a civil trial would “only” force Trump to pay millions in damages and suffer other business penalties. These penalties can be massive: After ruling against Trump last week on one element of the case, the court ordered the immediate dissolution of all of his New York-based business entities.
It is vitally important that we hold those who commit white-collar crimes accountable. That phrase, “white-collar crime,” has turned out to be equal parts evocative and elusive ever since sociologist Edwin Sutherland coined it over 80 years ago. These days, it is often used to describe a wide swath of misconduct carried out by or through businesses — think bribery, money laundering, insider trading or tax fraud — all of which might be pursued either criminally or civilly. But whether civil or criminal, fraud is still fraud. And myths that minimize the damage of white-collar crime are as harmful as they are easily disproven.
One of the biggest myths is the misperception that there are no “real” victims of white-collar crime. In fact, white-collar crime is far more destructive than many of us appreciate. Let’s start with what we know: The economic impact from business crimes is at least an order of magnitude greater than street crime. When the FBI estimated the impact in 2010, it determined that white-collar crime annually costs the national economy upward of $600 billion (close to $1 trillion when adjusted for inflation) — almost 20 times as much harm as can be traced to all other crimes combined.
This harm can be hard to see if you don’t know where to look. For one thing, fraud often goes on for years before it is uncovered. The allegations against Trump date back to at least 2014, and that’s only because New York law limits how far back the attorney general’s lawsuit can reach. (He has denied any wrongdoing.) But such cases are difficult to investigate and prove. Those who have been defrauded, then, might not easily discover they’ve been exploited, which in turn makes it difficult to put a human face on the fallout. Meanwhile, some of the most immediate victims aren’t always sympathetic. We aren’t hard-wired, it turns out, to feel sorry for big banks and tax agencies. But even if you don’t feel bad for these companies when they are defrauded, remember that they invariably pass the costs of fraud onto customers in the form of higher costs, and onto employees in the form of layoffs.
So yes, fraud is a massive problem. But it’s incredibly juvenile to use ubiquity as a rationalization for its existence. The last bastion of scoundrels and 6-year-olds, this excuse tells you more about someone’s worldview than the world. As an empirical claim, it is entirely unsupported. Yes, white-collar crime is more significant than we realize, but business is not an euphemism for fraud. The majority of contracts are honestly (if aggressively) negotiated, property rights are generally respected, and outright deception is taken as an insult rather than the way we do things around here. Trust, not deception, is the currency of markets.
Indeed, the centrality of trust to the business world is so ever-present that it’s easy to forget. You buy a cup of coffee in the morning and trust that it’s not tainted; that your credit card company will honor the charge; that your bank will transfer payment next week; etc. If we couldn’t rely on these basic transactions, costs would skyrocket and systems would crumble. When Hobbes decried life in the state of nature as “nasty, brutish, and short,” this is what he had in mind — a world without trust, without the capacity for cooperation.
Being a public figure can bring unwanted attention for alleged criminals. But white-collar offenders are not being unfairly singled out when they are held accountable for their misdeeds. Unfortunately, that perception is more a reflection of the sorry state of white-collar enforcement today. We don’t need to be letting fraudsters off the hook. Rather, we need to take enforcement more seriously.
Again, look at the data. The number of white-collar prosecutions has steadily declined for decades; the Department of Justice now prosecutes about half as many cases as it did in 2002. This is a bipartisan trend: even while President Joe Biden’s administration promises to beef up corporate enforcement efforts, 2022 produced the lowest enforcements results in two decades. The federal government has convicted about 140 companies per year — the vast majority of which are private businesses with less than 50 employees. We can’t know for certain exactly how many violations go uncaught, but one recent study estimates that large companies uncover approximately two substantiated claims of corporate misconduct per week.
How do we do better? Funding is one answer. Investigating and charging fraud is slow, tedious work. Enforcers need the resources, expertise and mandate to prioritize and publicize these cases. But the challenges run beyond enforcement. Because sure, some sophisticated frauds are hard to discover. But let’s be honest: Trump’s alleged behavior appears more brazen than brilliant. Tripling the square footage of your penthouse on disclosure forms isn’t exactly subtle.
Many areas of business law prioritize anonymity and downplay disclosures in ways that make detecting even basic frauds difficult. A deeper challenge is that many areas of business law prioritize anonymity and downplay disclosures in ways that make detecting even basic frauds difficult. For example, several scholars recently uncovered a “worryingly widespread” trend they call “insider giving.” Instead of illegally trading on insider information, wealthy individuals have instead been making “suspiciously well-timed” charitable donations that net them massive tax deductions. Essentially an overlooked version of insider trading, insider giving was made possible by lax charitable reporting rules, which the SEC has thankfully fixed. Congress, too, is finally trying to make it harder to create anonymous corporations and trusts that have long been a hot spot for money laundering, international sanctions violations and other kinds of dirty money. These are good steps, but plenty more can be done to tackle low-hanging fruit. Finally, we need to remember that, counterintuitive as it might seem, we need punishment to make cooperation possible. If you know that fraudsters will be held to account when they break the rules, you can sit down at the negotiating table confident that the basic components of the market are in place. At its core, fraud hijacks and undermines the trust upon which the marketplace, and society generally, are built. Trust is a public good — and it is difficult to get back once it’s gone. We would do well to remember that when we start to wonder whether white-collar crime is really so bad.
Will Thomas
Will Thomas is an assistant professor of business law at the University of Michigan Ross School of Business, and a leading scholar on matters of corporate and white-collar crime. 
