Wire Fraud Has No Economic-Loss Requirement After Kousisis: Discount-Diversion Misrepresentations Are Actionable

Introduction

In United States v. Byramji Moneck Javat (11th Cir. May 5, 2026) (unpublished), the Eleventh Circuit addressed a recurring fraud-theory dispute in “diversion” cases: whether a purchaser who lies to obtain export-only discounts—but pays the agreed invoice price—commits federal wire fraud. The case arose from a “discount-diversion” scheme in which Byramji Moneck Javat induced manufacturers to sell goods at steep export-only prices by falsely claiming the goods would be sold abroad (including to the U.S. military in Afghanistan), while selling domestically for profit. Luis Alberto Soto, a customs broker, served as the logistics partner—exporting goods to Dubai, reimporting them through Miami, submitting false import documentation, and helping conceal the domestic destination.

On appeal, Javat and Soto challenged (among other issues) the sufficiency of the indictment and proof of a “scheme to defraud,” the admission of Rule 404(b) evidence, exclusion of defense expert testimony, sentencing enhancements (including loss and victim counts), restitution methodology, and multiple forfeiture rulings. Two corporate entities (Calh Holding Corp. and Pennco, LLC) separately contested substitute-asset forfeiture of real properties.

Summary of the Opinion

The court affirmed Javat’s and Soto’s convictions, sentences, restitution, and forfeiture orders, holding—most notably—that the defendants’ “no economic harm” theory was foreclosed by the Supreme Court’s decision in Kousisis v. United States, which abrogated the Eleventh Circuit’s earlier distinction in United States v. Takhalov. The panel further upheld: (i) admission of Soto’s prior-act emails under Rule 404(b); (ii) exclusion of Soto’s proffered “FDA/gray market” expert as irrelevant; (iii) guideline loss calculations using a lost-profits/discount-differential methodology; (iv) substantial restitution based on similar calculations; and (v) forfeiture, including a money judgment and substitute assets.

The panel remanded for the limited purpose of correcting clerical omissions in Javat’s criminal judgment to incorporate the forfeiture order and money judgment, relying on Rule 32.2 and Rule 36.

Analysis

1) Precedents Cited

A. Defining “scheme to defraud” after Supreme Court intervention

  • Kousisis v. United States, 605 U.S. 114 (2025): The controlling authority. The panel treated Kousisis as rejecting an “economic-loss requirement” in wire fraud and holding that a scheme to obtain money or property by false pretenses violates 18 U.S.C. § 1343 even if the defendant does not seek to make the victim “economically worse off.” This was the central doctrinal pivot for the motion-to-dismiss and sufficiency challenges.
  • United States v. Takhalov, 827 F.3d 1307 (11th Cir. 2016), abrogated by Kousisis v. United States, 605 U.S. 114 (2025): The defendants relied on Takhalov’s “scheme to deceive” vs. “scheme to defraud” framework. The panel held the reliance misplaced because Kousisis expressly rejected the approach as inconsistent with statutory text.
  • United States v. Bruchhausen, 977 F.2d 464 (9th Cir. 1992): Soto invoked it to argue the case involved only “right-to-control” type harm. The panel found it both (i) undermined by Kousisis and (ii) factually distinguishable because the evidence here showed the manufacturers did not receive “full price” absent fraud.
  • Ciminelli v. United States, 598 U.S. 306 (2023): Raised by Javat to frame the case as an impermissible “right to control” prosecution. The panel rejected that framing, emphasizing the indictment alleged obtaining property (goods) by false representations—not merely depriving the manufacturers of decision-making autonomy.

B. Guilty-plea waiver and what constitutes a “jurisdictional defect” in an indictment

  • United States v. Tomeny, 144 F.3d 749 (11th Cir. 1998): Provided the key waiver rule—an unconditional guilty plea waives non-jurisdictional defects.
  • United States v. Leonard, 4 F.4th 1134 (11th Cir. 2021): Used to define when an indictment defect is “jurisdictional” (i.e., when the indictment fails to charge an offense against U.S. laws).
  • United States v. Brown, 752 F.3d 1344 (11th Cir. 2014): Supplied the Eleventh Circuit’s three-category taxonomy for jurisdictional defects, which the panel applied to conclude the indictment charged an offense within the wire-fraud statutes’ sweep.
  • United States v. Peter, 310 F.3d 709 (11th Cir. 2002) (discussing Cleveland v. United States, 531 U.S. 12 (2000)): Javat analogized his case to Peter, where the charged conduct was later held outside the mail-fraud statute. The panel distinguished Peter because no Supreme Court case had removed discount-by-misrepresentation schemes from § 1343’s scope.

C. Evidentiary rulings and the defense-case right

  • United States v. Edouard, 485 F.3d 1324 (11th Cir. 2007) and United States v. Ramirez, 426 F.3d 1344 (11th Cir. 2005): Provided the admissibility framework for Rule 404(b) prior acts; similarity increased probative value on intent/knowledge.
  • United States v. Perry, 14 F.4th 1253 (11th Cir. 2021): Supported admitting embedded third-party statements not for their truth but for effect on the defendant; also emphasized limiting instructions reduce prejudice from Rule 404(b) evidence.
  • Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993): Cited for the proposition that expert testimony not tied to an issue in the case is irrelevant and “non-helpful.”
  • United States v. Svete, 556 F.3d 1157 (11th Cir. 2009) (citing Durland v. United States, 161 U.S. 306 (1896)): Anchored the rejection of “victim could have protected itself” and “victim negligence” themes—fraud turns on defendant’s intent, not victim’s reasonableness.
  • United States v. Hurn, 368 F.3d 1359 (11th Cir. 2004); United States v. Mitrovic, 890 F.3d 1217 (11th Cir. 2018); United States v. Scheffer, 523 U.S. 303 (1998); United States v. Frazier, 387 F.3d 1244 (11th Cir. 2004) (en banc): Together framed why excluding irrelevant expert testimony did not violate the constitutional right to present a complete defense; courts retain broad authority to enforce evidentiary rules.

D. Sentencing, restitution, and forfeiture authorities

  • United States v. Annamalai, 939 F.3d 1216 (11th Cir. 2019) and United States v. Medina, 485 F.3d 1291 (11th Cir. 2007): Supported the “reasonable estimate” approach for loss in fraud cases.
  • United States v. Stein, 846 F.3d 1135 (11th Cir. 2017): Invoked by defendants to argue failure of causal proof; distinguished because the record here showed reliance on misrepresentations and no intervening causes.
  • United States v. Cavallo, 790 F.3d 1202 (11th Cir. 2015) and United States v. Futrell, 209 F.3d 1286 (11th Cir. 2000): Used to align restitution approximation with guideline loss methodology.
  • United States v. Farias, 836 F.3d 1315 (11th Cir. 2016): Supported harmless-error treatment of Rule 32.2 notice/inclusion defects when the defendant had notice and opportunity to contest forfeiture.
  • Honeycutt, v. United States, 581 U.S. 443 (2017) and United States v. Goldstein, 989 F.3d 1178 (11th Cir. 2021): Guided the panel’s analysis of whether proceeds were “jointly acquired” (and thus forfeitable) versus acquired by a coconspirator “alone.”
  • Via Mat Int'l S. Am. Ltd. v. United States, 446 F.3d 1258 (11th Cir. 2006) and United States v. 900 Rio Vista Blvd., 803 F.2d 625 (11th Cir. 1986): Controlled third-party standing in forfeiture; “bare legal title” without dominion/control does not establish Article III injury.

2) Legal Reasoning

A. The court’s core fraud holding: “bargained-for price” is no longer a safe harbor

The panel’s most consequential reasoning appears in its treatment of the defendants’ claim that the manufacturers “received exactly what they bargained for.” Under the old defense framing, if the seller received the invoice price and the buyer simply lied about collateral facts (destination, end-user), the conduct could be characterized as “deception” without “fraud.”

Relying on Kousisis v. United States, the panel rejected the premise that wire fraud requires proof that the scheme sought to cause the victim an economic loss. The panel treated the statutory test as the Supreme Court articulated it: a scheme to obtain money or property by means of false representations. Here, the “property” was the manufacturers’ goods obtained at export-only pricing through false representations.

This reasoning is not merely semantic. It reframes discount-diversion schemes as paradigmatic property fraud: the misrepresentation is the mechanism by which the defendant obtains more property value (the price differential embedded in the goods transaction) than the victim intended to convey on the stated terms.

B. Knowledge/intent proof for the logistics intermediary

Soto’s central defense was that he did not know the manufacturers were being lied to. The court upheld the verdict by combining (i) direct scheme evidence (Soto’s role in export/reimport, false Customs documents, “this is where the supplier believes cargo is going” email), and (ii) Rule 404(b) emails from other transactions showing Soto previously performed materially similar concealment and “proof of exportation” work.

The panel emphasized that exporting and immediately reimporting goods is economically irrational in normal commerce—making it circumstantial evidence of illicit purpose—especially coupled with premium compensation and concealment steps (removing labels, searching for trackers, falsifying forms).

C. Sentencing and restitution: lost-profit/discount differential as “pecuniary harm”

The court approved measuring guideline “loss” and MVRA restitution as the approximate value of fraudulently induced discounts, reasoning that the manufacturers lost the opportunity to sell at their domestic price (or at least not at export-only pricing). The panel treated this as a reasonable estimate supported by trial testimony and business records.

Notably, the court did not require manufacturer-by-manufacturer proof of cost structures to show “out-of-pocket” loss; instead it treated the discount as the economic harm proximately caused by the misrepresentation.

D. Forfeiture mechanics: notice, incorporation, and money judgments

On forfeiture, the panel applied a pragmatic, notice-focused approach. Even assuming Rule 32.2(a) required exact statutory citation, the incorrect citation was harmless because the government identified the error pre-plea, invoked the correct statute before sentencing, and Javat litigated the merits.

The panel also addressed a common Rule 32.2(b)(4)(B) problem: judgments that omit specific forfeiture language or fail to reference a money judgment. The court treated the omission (if any) as correctable under Rule 36, and remanded to clean up the judgment.

Finally, the panel reaffirmed Eleventh Circuit precedent that forfeiture money judgments are authorized for § 981(a)(1)(C) forfeitures.

E. Third-party challenges: straw ownership defeats Article III standing

Calh and Pennco lost not because third parties can never contest forfeiture, but because the court found they were “straw owners” holding bare title for Javat’s benefit. Under United States v. 900 Rio Vista Blvd. and Via Mat Int'l S. Am. Ltd. v. United States, lack of dominion/control translates into no concrete injury from forfeiture, and thus no standing.

3) Impact

  • Wire-fraud doctrine in the Eleventh Circuit recalibrates to Supreme Court text. The decision operationalizes Kousisis v. United States in a commercial setting: discount or eligibility misrepresentations can constitute wire fraud even where the victim is paid the invoiced price.
  • Discount-diversion prosecutions become easier to plead and prove. Post-Kousisis, the government need not litigate “economic loss” as a distinct element to survive dismissal or sufficiency review (though loss remains critical at sentencing and restitution).
  • Sentencing/restitution leverage increases via lost-discount valuation. The court’s endorsement of discount-based loss and restitution calculations can materially drive enhancements and restitution exposure, especially in high-volume wholesale diversion cases.
  • Forfeiture litigation becomes more notice- and harmlessness-centric. Technical errors (wrong statute citation; judgment incorporation gaps) are less likely to undo forfeiture where defendants had functional notice and the chance to contest.
  • Corporate title-holding entities face heightened scrutiny. The straw-owner standing analysis signals that entities created to hold assets for a defendant may be dismissed early in ancillary proceedings absent evidence of independent dominion and control.

Complex Concepts Simplified

  • “Scheme to defraud” (wire fraud): After Kousisis v. United States, the focus is whether the defendant devised a scheme to obtain money or property by false representations—not whether the victim necessarily suffered (or the defendant intended) an “economic loss” in the older, narrower sense.
  • Rule 404(b) evidence: Prior acts can be admitted not to show “he’s the kind of person who does this,” but to show intent, knowledge, or absence of mistake—especially where those are the core disputed issues.
  • Guidelines “loss” vs. MVRA restitution: Loss drives offense-level enhancements; restitution compensates victims. Both can be estimated reasonably, and courts may use business records and discount differentials to approximate harm.
  • Forfeiture money judgment: A personal judgment for the value of criminal proceeds; if the proceeds are unavailable, the government may seek substitute assets to satisfy it.
  • Ancillary proceedings & standing: Third parties can challenge forfeiture, but they must show a real injury. Mere paper title—without actual control—may not be enough if the entity is a straw holder.

Conclusion

The Eleventh Circuit’s decision is most significant for how it applies Kousisis v. United States to reject the defense claim that paying the agreed price immunizes misrepresentation-based procurement from wire-fraud liability. In doing so, the court strengthens federal fraud coverage of discount-diversion schemes, validates discount-based loss and restitution methodologies, and reinforces forfeiture practice that prioritizes functional notice and permits clerical correction of judgment defects. The opinion also underscores that logistics intermediaries can be convicted where the surrounding conduct—false paperwork, concealment steps, and “proof of exportation” mechanics—supports a finding of knowing participation in the fraud.