The points you make are very interesting, but might I remind you that the concept of currency arose to facilitate the exchange of physical items (an exchange that was handled before by the bartering system). Use of currency, and later cheques, allowed the long distance transfer of value (money). So, while I might not actually own that $20 bill, I find it very useful to exchange it for a physical good I might want (such as a pizza, for example). And if I do burn it (not in the presence of the US marshal, of course), then I am depriving myself of the possibility of that exchange (violation of federal laws against defacing money aside). You mention fractional reserve; this practice effectively increases the money supply, even though the physical objects (gold, silver, diamonds, etc.) don't exist in large enough amounts to absolutely guarantee it. Trust is required for the system to work well; if there is no trust, and no one is willing to lend money, then the global economy will grind to a halt.
In other words, unless you believe that the entire system of economics based on the exchange of currency should be done away with (and have the world return to a bartering system of some sort), then it is not the consumer that has perpetrated fraud on John E.. Rather, it is Ellis who is perpetrating the fraud, as he is providing a machine that does not actually produce the effects that it is supposed to produce, and is thus of lesser value to the consumer than the amount of value the consumer transferred to Ellis in order to obtain the machine.
In essence, currency (in any form) serves as a medium of exchange and a motivator to produce physical goods. This is precisely what causes John E. to design and build his machine; in principle, a good thing, as he continues the tradition of invention and profit-making that drives the world economy. The problem is, the machine doesn't deliver on its promises. . .