To defraud is to con someone out of money. Defrauding is a sneaky crime.
If you know that a fraud is some kind of a scam, then you're on the way to understanding what defraud means. If someone defrauds you, they are cheating you out of money. Ponzi schemes—also known as pyramid schemes—are a type of defrauding. A guy trying to sell you a bridge is a type of defrauding, as is a foreign prince asking for money via email. Be wary!