Yes, H1B Fraud can led to arrest and jail time.
This happened about 1 week ago. Seven people arrested for H1b Visa Scam.
Here are the details and you can read the rest of the article from the original source
According to the US Government, American businessman Nilesh Dasondi used his New Jersey-based Cygate Software and Consulting to apply for H-1B visas for Indians who had no background in computing. One of the rules for H-1B visas is that it should only be allocated if there are no Americans to do the job.
As Nilesh owns an IT company, there was a plausible cover for such a scheme. Once the Indians made their way on H-1B visas, they were officially shown as employees of Cygate Software and Consulting, when in reality they were working in non technical jobs like managing a greeting card store.
In return, the Indians gave Nilesh Dasondi a cut of their earnings from non-technical job. … read more
First, false pay stubs, paychecks and health insurance payments were created and submitted to the government as “proof” of the employment of the three as computer experts at Cygate….read more
More H1B Fraud Arrest in May 2013 : Source
In a move that demonstrates the determination of federal authorities in Texas to prosecute H-1B visa fraud, six top officials working for Dibon Solutions, an IT consulting company near Dallas, were arrested last week on a charge of conspiracy to commit visa fraud and 10 related wire fraud charges.
According to an indictment that was filed under seal in the U.S. District Court for the Northern District of Texas on Feb. 20, the six defendants conspired to engage in the fraudulent activity from Feb. 2008 to Feb. 2011.