The White Collar Appeal: Fourth Circuit Chips Away at Ciminelli, Closes Its Eyes to Cleveland

• In the latest case seeking to identify the bounds of federal mail and wire fraud, the Fourth Circuit narrowly construed Ciminelli while glossing over longstanding Supreme Court precedent from Cleveland.
• In United States v. Golestan, a case involving a scheme to obtain IP addresses from the nonprofit that administers, allocates, and assigns them in the United States, the Fourth Circuit affirmed the conviction on the basis that the Supreme Court’s 2023 Ciminelli decision did nothing more than invalidate the right-to-control theory of fraud.  In doing so, however, the court failed to engage with the striking similarity between Golestan and Cleveland v. United States, in which the Supreme Court held that a scheme to obtain video poker licenses from a state agency was not federal wire fraud.
• The upshot is that Golestan creates an odd dichotomy in which the same conduct may or may not be fraud depending on whether the victim is a governmental entity.  Anyone who deals regularly with nonprofits, self-regulatory organizations, or other nongovernmental entities that perform a quasi-regulatory function should take note.

Background

In the United States, a nonprofit called the American Registry for Internet Numbers (“ARIN”) is responsible for the assignment of IP addresses, the unique identifiers assigned to each device that connects to the Internet.  As relevant here, ARIN controlled a finite set of a certain kind of IP address—IPv4 addresses—that are more compatible with a wider array of networks and infrastructure and thus more valuable to website owners. 

Amir Golestan ran a company called Micfo LLC, which provided Internet hosting services including allocation of IP addresses.  To obtain more of the valuable IPv4 addresses from ARIN, Golestan created fictitious companies and submitted requests to ARIN in the name of fictitious officers of those companies.  Through this scheme, Golestan and Micfo obtained approximately 1.3 million IPv4 addresses, which they used to generate $3.3 million in profits from customers.

Golestan moved to dismiss the indictment, arguing that IP addresses are not “property” within the meaning of the wire fraud statute.  The district court denied the motion, crediting the government’s argument that the right to use and assign an IP address satisfies the relevant definition of property.  Golestan ultimately pleaded guilty midtrial, then sought to withdraw his guilty plea once the Supreme Court heard argument in Ciminelli v. United States, 598 U.S. 306 (2023).  (See our prior discussion of Ciminelli.)  The district court, however, refused to let Golestan withdraw his guilty plea and later sentenced him to 60 months’ imprisonment and forfeiture and restitution of more than $3.3 million.

Holding

The Fourth Circuit affirmed the denial of Golestan’s effort to withdraw his guilty plea, holding that Ciminelli does not establish his legal innocence.  In the Fourth Circuit’s view, Ciminelli had a “narrow” holding that invalidated only the right-to-control theory of fraud that previously existed within the Second Circuit.  The Fourth Circuit explained that Golestan deprived ARIN of IP addresses, not the right to control IP addresses, thereby rendering Ciminelli inapplicable. 

In its analysis, however, the court briefly mentioned Cleveland v. United States, 531 U.S. 12 (2000).  Cleveland involved false statements in video poker license applications.  Holding that the licenses were not “property” within the meaning of the federal fraud statutes, the Supreme Court explained that (1) the state’s core concern in the licenses was regulatory; (2) although the licenses generate significant revenue for the state, it is only upon issuance of the license that the state realizes income—the licenses have no capacity to generate revenue if they remain in the hands of the state; and (3) the defendants paid the state the full amount of the licensing fees.  The Golestan court, however, construed Cleveland as limited to cases involving “intangible assets that are an extension of a state’s regulatory power,” which the Supreme Court has “resisted considering … as property.” 

Key Takeaways

A cert petition might find a sympathetic audience at the Supreme Court.  The similarities between Golestan and Cleveland are striking.  ARIN’s role in allocating and administering IP addresses mirrors the state’s role in Cleveland—both have authority to allocate an ownership interest, but the ownership interest itself holds no economic value in the hands of the allocating authority.  Moreover, ARIN’s function here was to regulate the allotment of a means of communication to the public, a regulatory function similar to deciding who should receive a license.  And although not technically an arm of the state, ARIN is a nonprofit that exercises the quasi-governmental function of facilitating the operation of the Internet. Golestan’s failure to address the obvious parallels to Cleveland and its relegation of Cleveland to state licensing decisions thus creates an odd dichotomy: the conduct at issue in Golestan constitutes fraud because ARIN is a nonprofit, but the same conduct would not have been fraud had ARIN been a government agency. 

Companies should be take into account the odd dichotomy that Golestan creates.  The Golestan decision creates risks for businesses subject to self-regulatory organizations or other nonprofits that perform a quasi-governmental function similar to ARIN.  The Fourth Circuit’s analysis suggests that digital resources allocated through nonprofit entities may trigger federal criminal exposure if obtained through misrepresentations.  Organizations should review their existing compliance programs and due diligence procedures to make sure they adequately control for representations made to such entities.  

Defendants advocating for an expansive view of Cleveland will have to finesse Golestan.  Defendants facing fraud charges under similar facts—where intangible interests hold no economic value in the hands of the victim—should focus on analogizing their circumstances to Cleveland.  For defendants within the Fourth Circuit, they will have to (1) argue that Golestan’s discussion of Cleveland was nonbinding dicta, and (2) do everything they can to distinguish the intangible interests in their case from IP addresses.  As discussed in our prior post, the Second Circuit’s recent decision in United States v. Chastain, 145 F.4th 282 (2d Cir. 2025), emphasizes the importance that the object of the fraudulent scheme have economic value in the hands of the victim.  And of course, Cleveland, as well as Ciminelli and Kelly v. United States, 590 U.S. 391 (2020), provide ample support for the same argument.