The problem is that fraudsters won't be "producing", but instead will be stealing from others. They need to be in prison not because it's a punishment but because they cannot be trusted to participate in society honestly.

However, I don't think it's practical to get fraudsters to pay back all the money in most cases as they won't be able to. What we need is a faster way to detect and imprison fraudsters to limit the damage they do. Also, most people don't respond to the "size" of punishments, but more to the likelihood that they will be caught.