"Someone’s the money out of your account. Learn how to protect your assets from financial swindlers.”
                  –The U.S Financial Education Foundation.  
Frivolous Lawsuits
Identity Theft
Financial Fraud

What is Financial Fraud?

Financial Fraud is a deception carried out for the purpose of achieving personal or institutional gain while causing injury to other parties. For example, selling a new security when issuers conceal important facts related to the use is a fraud. Like this, financial fraud can take numerous different shapes, and fraudsters wear tons of different masks. From Ponzi scheme that shocks the world, tax fraud that steals money from our nation’s coffers, credit card fraud that strikes broadly, and the list goes on.

Types of Financial Fraud


Affinity Fraud, Scams & Schemes

Affinity Fraud includes investment scams take place in identifiable groups, such as religious or ethnic communities, the elderly or professional groups. The schemers who attempt to raise affinity scams are the members of the group or pretend to be members of the group. Schemers often recruit respected community or religious leaders within the group to promote the fraud by convincing people that a fraudulent investment is justifiable and worthwhile. To find more about the Affinity Fraud, click here.

The Ponzi Scheme
Named after the first famous schemer, Charles Ponzi, the schemes use money collected from new 'investors' (i.e., victims), rather than profits from the purported underlying business venture, to pay the high rates of return promised to earlier victims. This arrangement gives victims the impression that there is a legitimate, money-making enterprise behind the perpetrator's story when, in reality, victim monies are the only source of funding. To find more about the Ponzi Scheme, click here.

The Pyramid Scheme
As in Ponzi schemes, the money collected from newer victims of the fraud is paid to earlier victims to provide a veneer of legitimacy. In pyramid schemes, however, the victims themselves are induced to recruit further victims through the payment of recruitment commissions. To find more about the Pyramid Scheme, click here.

How to protect yourself

-  Check out everything regardless of how trustworthy the person seems who promotes the investment.
-  Never fall for investment that promise spectacular profits or “guaranteed” returns
-  Be suspicious of any investment opportunity that is not written.
-  Never rush into putting money into investment before you have identified or justified investment.

For more information please visit U.S Securities and Commission Exchange’s website:


Advance Fee Fraud

Advanced fee fraud occurs when victim is persuaded to advance sums of money in anticipation of receiving something of greater value, such as a loan contract, investment or gift, but receives nothing or little in return. Among variations, Nigerian letter (419 Scam), Spanish Prisoner scam, and Black money scam are the most popular types of this fraud.

Nigerian letter (419 Scam)
Name after violation of Sec. 419 of Nigerian Criminal Code, the 419 scam coalesce the impersonation fraud with advanced fee scheme to persuade potential victim to pay contacting them via a letter, email, or fax. Schemers represent themselves as Nigerian or foreign government officers and offer the victims the ‘opportunity’ to share in a percentage of millions of dollars, asking for certain amount of fund transfer into foreign bank accounts. Schemers provide detailed amounts to release the restricted fund including taxes, bribes to government officials, and legal fees, which are promised to be reimbursed after the fund is released. When victims make investments, the funds won’t return in most case.

Here’s the example of Nigerian Letter, and you can find more Information related to 419 Scam at Federal Bureau of Investigation

Scanned Email

Spanish Prisoner Scam
In its original form, schemer (Confidence man) tells the victim (target) that he is connected to a wealthy person who has been imprisoned in Spain due to false identity. The prisoner can’t reveal his identity, and asked him to raise some funds to secure his release. The Schemer persuade victim to give some money with a promise of generous reward such as high return on investment and/or marriage with prisoner’s beautiful sister or daughter when the prisoner is released. However, when victim turns in the money, schemers ask for more funds because of unexpected difficulties, and keep requires more money until victim is underfunded.

Black Money Scam (Wash Wash Scam)
The con artists (schemers) persuade victim for investment on piles of banknote sized paper or real money in a trunk which has been dyed black to take the victim’s money. The victim is persuaded to pay for chemical to wash the money or bank note with a promise of high return on investment. Here’s an example of Black money Scam, which resulted more than $2.5 million dollars of loss.

Tips to avoid the scam

If the offer of an "opportunity" appears too good to be true, it probably is. Follow common business practice. For example, legitimate business is rarely conducted in cash on a street corner.

Know who you are dealing with. If you have not heard of a person or company that you intend to do business with, learn more about them. Depending on the amount of money that you intend to spend, you may want to visit the business location, check with the Better Business Bureau, or consult with your bank, an attorney, or the police.

Make sure you fully understand any business agreement that you enter into. If the terms are complex, have them reviewed by a competent attorney.

Be wary of businesses that operate out of post office boxes or mail drops and do not have a street address, or of dealing with persons who do not have a direct telephone line, who are never "in" when you call, but always return your call later.
Be wary of business deals that require you to sign nondisclosure or no circumvention agreements that are designed to prevent you from independently verifying the bona fides of the people with whom you intend to do business. Con artists often use no circumvention agreements to threaten their victims with civil suit if they report their losses to law enforcement.

You can find more information related to Advanced Fee Fraud at Federal Bureau of Investigation or U.K. Metropolitan Police.



Corporate Fraud

Corporate fraud engages in accounting schemes which manipulates the financial data to conceal the real financial condition of the corporation from investors, auditors, and analyst. The corporation can keep the artificially inflated stock share price based on fraudulent performance indicators by manipulating financial data. Corporation fraud not only threatens the investors but also whole U.S Economy.

Types of Corporation Fraud

        1.  Falsification of financial information, including:
             a. False accounting entries;
             b. Bogus trades designed to inflate profit or hide losses; and,
             c. False transactions designed to evade regulatory oversight.

        2.  Self-dealing by corporate insiders, including:
             a. Insider trading;
             b. Kickbacks;
             c. Backdating of executive stock options;
             d. Misuse of corporate property for personal gain; and,
             e. Individual tax violations related to self-dealing.

        3.  Obstruction of justice designed to conceal any of the above-noted types of criminal conduct, particularly when the obstruction impedes the inquiries of the SEC, other regulatory agencies, and/or law enforcement agencies.

(Source: FBI 2010 Financial Crime Report)


Enron Scandal

Enron, a company that once represented the pinnacle of corporate success, is now a symbol of corporate accounting fraud that can go horribly wrong in the corporate world. When Enron went bankrupt due to after damage of frauds, it resulted at least $ 25 billion loss on investors as its stock dropped, $ 1 billion loss in retirement funds, and $7.2 billion on civilians. Enron manipulated its financial statements in order to inflate its earnings and stock prices by using following frauds.

        1.  The abuse of mark to market accounting
        2.  The improper use of off-balance sheet entities which is used to
             a. Understate debt
             b. Overstate earnings via:
                 - Related-party sales
                 - Loans disguised as sales
                 - Related-party management fees
                 - Contrived put options purporting to lock in profits on investments in shares
                 - Mark-to-market revaluations of assets via references to contrived sales to these contrived entities
                 - Recognition of profits on its own stock that was issued to off-blance-sheet entities
        3. Misclassification of “prepays” as sales
(Source: Business Fairy Tales)

For more information:

  • Please read the press released from Securities Exchange Commission entitled, SEC CHARGES ANDREW S. FASTOW, FORMER CHIEF FINANCIAL OFFICER OF ENRON, WITH FRAUD or Business Fairy Tales.


Credit Card Fraud

Credit card fraud includes all the terms for theft and fraud committed using a credit card or similar payment mechanism as a fraudulent source of funding in a transaction. It can range from using a stolen credit card to creating chargeback fraud, which use fraudulent payment information to get merchandise. The rise of internet commerce has amplified the victims of credit card frauds as unsafe or fraudulent online transactions not only boosts credit card fraud but also leaks personal information.

Dollar Loss
Despite small percentage in total credit card sales as 0.07%, credit and charge card fraud incur the loss more than $500 million a year because of massive size of total credit card sales.

Who pays for the loss?
Even if you haven’t been defrauded yourself, the cost of goods and services increase to cover up the loss from credit and charge card frauds, which means everyone pays for the loss.

Types of Credit Card Fraud

Stolen Credit Cards and Numbers

Stolen credit card fraud, one of the most common credit card fraud, occurs when criminals uses either a stolen credit card or credit card numbers attempt to purchase items or make payments under the cardholders’ liabilities. Criminals can credit cards and credit card number from stealing the actual cards, collecting physical receipts that you throw away, intercepting the credit cards in the mail, or stealing the credit card numbers from your online transactions

Counterfeit Credit Card Fraud
Counterfeit credit card fraud makes financial loss to a business which provides goods or services to a customer who pays with a counterfeit credit card with fake numbers, name, and other fraudulent information. It is impossible for goods and services providers to receive payments as the counterfeit credit card is not actually linked to physical account.

Identity Theft
Identity theft in credit card fraud leads criminals to create a fake identification to charge or takeover someone else’s account. Criminals may steal documents such as utility bills and bank statements to learn personal background and can use these information to set up new accounts or takeover existing accounts. For example, when criminals have sufficient information, they call bank to cancel the victim’s credit card, and request bank to issue a new credit card to him or her.

Business credit card fraud
Credit card fraud against business can be simple. Criminals purchase goods or services demanding a chargeback and neglect to pay for purchases or provide falsified payment information.

Skimming is stealing someone else’s credit cards information used in legitimate transactions, which usually set up by dishonest employee or merchant. The criminal can collect customer’s credit card information using original receipt or skimmer (small electric device that stores hundreds of credit card numbers that has been swiped through payment machine). In other case, criminals use skimmer installed ATM (Automated Teller Machine) to collect the credit card number and pin number.

For more information:

Please read an article posted on Georgia Governor’s office of consumer affairs entitled, Credit Card Skimming.


How to protect yourself


-  Sign your cards as soon as they arrive.
-  Carry your cards separately from your wallet, in a zippered compartment, a business card holder, or another small pouch.
-  Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place.
-  Keep an eye on your card during the transaction, and get it back as quickly as possible.
-  Void incorrect receipts.
-  Destroy carbons.
-  Save receipts to compare with billing statements.
-  Open bills promptly and reconcile accounts monthly, just as you would your checking account.
-  Report any questionable charges promptly and in writing to the card issuer.
-  Notify card companies in advance of a change in address.


-  Lend your card(s) to anyone.
-  Leave cards or receipts lying around.
-  Sign a blank receipt. When you sign a receipt, draw a line through any blank spaces above the total.
-  Write your account number on a postcard or the outside of an envelope.
-  Give out your account number over the phone unless you're making the call to a company you know is reputable. If you have questions about a company, check it out with your local consumer protection office or Better Business Bureau.

For more protection regarding protection:

Securities and Commodities Fraud

Securities fraud can be described as deceptive practices in the commodity and stock markets. The Securities Act of 1933 and the Securities Exchange Act of 1934 prohibit the use of manipulative or deceptive devices, making false statements in order to increase market share, conspiracy and other acts of unfair market practices

Securities Act of 1933, 15 U.S.C. Sec 77a to 77aa,1 982.
Securities Exchange Act of 1934, 15 U.S.C. Sec 78a to 78k,1982..1

Securities regulators and other prominent groups have estimated that securities and commodities fraud totals approximately $40 billion per year. Federal Bureau of Investigations’ economic crime unit stated that the securities market in the United States has huge impact on nation’s wealth based on enormous number of individual investors exceeding 250 million. The bigger the market is, the more opportunity for criminal activities exists.


Types of Securities and Commodities Fraud
(source:FBI Financial Crime Report)

Market Manipulation
Market manipulation schemes, commonly referred as ‘pump and dumps’, manipulate the price of a targeted security by creating artificial pressure for a targeted security, generally issued by low volume trader in over the counter securities market that is largely controlled by the fraud perpetrators. When the artificially increased trading volume inflates the price of the security (i.e., the “pump”), the fraud perpetrators quickly sell off the inflated security into the market (i.e., the “dump”), resulting in illicit gains to the schemers and losses to innocent investors. Usually, the trading volume is amplified by inducing unwitting investors to purchases the shares of the security through false or deceptive sales practices and/or public information releases.

High Yield Investment Fraud
High yield investment fraud schemes take diversified forms, but offers low or no risk investment that guarantee usually high rate of return all the times. Following schemes are popular high yield investment fraud.

The Ponzi Scheme
Named after the first famous schemer, Charles Ponzi, the schemes use money collected from new 'investors' (i.e., victims), rather than profits from the purported underlying business venture, to pay the high rates of return promised to earlier victims. This arrangement gives victims the impression that there is a legitimate, money-making enterprise behind the perpetrator's story when, in reality, victim monies are the only source of funding. To find more about the Ponzi Scheme, click here.

The Pyramid Scheme
As in Ponzi schemes, the money collected from newer victims of the fraud is paid to earlier victims to provide a veneer of legitimacy. In pyramid schemes, however, the victims themselves are induced to recruit further victims through the payment of recruitment commissions. To find more about the Pyramid Scheme, click here.

Prime Bank Scheme
Victims are induced to invest in financial instruments, allegedly issued by well-known institutions, which offer risk-free opportunities for high rates of return; benefits which are allegedly the result of the perpetrator's access to a secret worldwide exchange ordinarily open only to the world's largest financial institutions.

Advance Fee Fraud
Advanced fee fraud encompasses a broad variety of schemes which are designed to induce their victims into remitting up-front payments in exchange for the promise of goods, services, and/or prizes. In the securities and commodities fraud context, victims are informed that in order to participate in a promising investment opportunity, they must first pay various taxes and/or fees. For more detailed information, click here (Connect to advanced fee fraud page).

Hedge Fund Fraud
Hedge funds are private investment partnerships that usually recruited only high net worth individual investors willing to meet significant minimum investment thresholds. It’s not well regulated industry, but exponentially growing as it’s introduced to middle class investors through ancillary investments (e.g., pension funds.). The relative lack of regulatory has led the industry venerable to fraud by managers resulting illegal activities including overstating and/or misappropriating fund assets, overcharging for fund management fees, insider trading, marketing timing, and late trading.

Commodities Fraud
These schemes usually involve the deceptive or fraudulent sale of commodities investments. In most case, false or deceptive sales practices are used to solicit victim funds for commodities transactions that either never occur or are different from original sales pitches. On other hand, schemers may attempt to illegally manipulate the market for a commodity by such actions as fraudulently reporting price information or inflating price of the targeted commodity by artificially.

Foreign Exchange Fraud
These schemes are characterized by the use of false or deceptive sales practices, alleging high rates of return for minimal risk, to induce victims to invest in the foreign currency exchange market. In such instances, the touted transactions either never occur, are inconsistent with the original sales pitches or executed for the sole purpose of generating excessive trading commissions in breach of fiduciary responsibilities to the victim client. Alternatively, individual corrupt currency traders employed by large financial institutions may attempt to manipulate foreign currency exchange prices in an effort to generate illicit trading profits for their own enrichment.

Broker Embezzlement
Broken embezzlement involves illegal and unauthorized actions by brokers to steal directly from their clients. Such schemes can be placed by forging of client documents, doctoring of account statements, unauthorized trading/funds transfer activities, or other conduct in breach of the broker's fiduciary responsibilities to the victim client.

Late-Day Trading
These schemes involve the illicit purchase and sale of securities after regular market hours. Such trading is restricted in order to prevent individuals from profiting on market moving information which is released after the close of regular trading. Unscrupulous traders attempt to illegally exploit such opportunities by buying or selling securities at the market close price, secure in the knowledge that the market moving information will generate illicit profits at the opening of trading on the following day.

Examples of well known fraudulent securities

"Limited Edition" Treasury Securities
Some foreign individuals and groups are trying to sell fictitious U.S. Treasury securities referred to as "Limited Edition" Treasury securities. As part of this scheme, entities such as broker-dealers and banks are being approached to act as fiduciaries for transactions. The proposal to sell these fictitious securities makes misrepresentations about the way marketable securities are bought and sold, and it also misrepresents the role that we play in the original sale and issuance of our securities.

U.S. Treasury Bills - One Year "Fresh Cut"
These fictitious securities are being offered for sale. A person who said he was a consultant to less developed or Third World countries offered an individual these securities. This transaction was for $500 billion - an astounding amount in itself. In another incident, a large government securities dealer was contacted to enter into a transaction involving these securities. We never issued any Treasury bills that were named One-Year "Fresh Cut."

"U.S. Dollar Bonds"
We get many inquiries, mostly from the Far East, about these bonds being issued in the 1930s or early 1940s by the CIA to help Chiang Kai-Shek fight the communists. It is alleged that they have been buried in caves by his generals and their heirs and have recently been unearthed. They are now being fraudulently offered at a fraction of their face value. These securities are not genuine and do not bear provisions that even remotely resemble U.S. Treasury securities. Click to view,

Fraudulent "Federal Notes" or "Bonds"
These bogus securities are commonly known as "Morganthaus." Henry Morganthau, Jr. was Secretary of the Treasury in 1934. These "federal notes" are not currency, nor are they bearer bonds. They are crude forgeries that appear to have originated out of the Philippines. The story being told is that the United States shipped them to Philippine freedom fighters during World War II to help with the war effort. Some "investors" have brought them to us in so-called "Federal Reserve" metal boxes, along with other related certificates, such as:

- Global Immunity (file size 277K, JPG file uploaded 12/12/02),
- FDIC Insurance (file size 261K, JPG file uploaded 12/12/02),
- Gold Bullion (file size 325K, JPG file uploaded 12/12/02),
- Shipping manifests,
- "Gold" coins.

These crude forgeries were likely made by inserting images of $100, $1,000, and even $1 bills into a computer program, then altering the amounts to read $100 million or $500 million, and adding coupons in both English and Chinese script. Most were printed on modern color printers or copiers, which did not exist in 1934 - when these bogus notes are alleged to have been issued. The U. S. Treasury did not issue securities (bonds) in $100 million or $500 million denominations during the period alleged in this fraud. The largest Federal Reserve note ever printed was $100,000 and was only used inside the banking system. For more information on this currency item, please review the FAQ at http://www.treas.gov/education/faq/currency/denominations.shtml .

"Defacto" Treasury Securities
This term usually appears in offers to assign, rent, or lease U.S. Treasury securities to an offeree for a fee, for a certain time period. These securities are bogus, since we have never issued any "defacto" Treasury securities.

Philippine Victory Notes
We have received inquiries about Philippine Treasury Certificates of Deposit and their relationship to Philippine Victory Notes. The Philippine Government issued Philippine Treasury Certificates, Victory Series 66, commonly known as Philippine Victory Notes, in 1944. These currency notes were for use only in the Philippines, which at the time was a dependency of the United States, and were obligations of the Philippine Treasury. The 500 Peso Philippine Victory Notes were demonetized by the Philippine government on December 31, 1957, and were withdrawn from circulation. At that point, other denominations of the Philippine Victory Notes, Victory Series 66, were no longer regarded as legal tender but could be exchanged or replaced at par, without charge, for legal currency until July 30, 1967. After that date, Series 66 was considered demonetized. If these notes are presented to you and purported to have current value today, it is a scam.
(Source: Treasury Direct)

Example Cases

Dale L. Graybill, dba Waldorf Corporation (New Haven):

Dale L. Graybill, former owner of the Waldorf Corporation, induced people to invest in his trading programs and promised investment returns of up to 25 percent per month at little or no risk. Graybill falsely represented to investors that he had special access to exclusive, government-backed trading programs that were originally opened only to the very wealthy, but which he could make available to them. When new investor money was received, Graybill diverted the new investor funds in order to pay previous investors and for his own personal gain. In conjunction with numerous other individuals, Graybill defrauded approximately 480 investors. On June 15, 2005, Graybill pled guilty to mail fraud and making and subscribing a false 2002 tax return. Graybill was sentenced to 48 months' incarceration and ordered to pay $10.6 million in restitution.

Bayou Management (New York):
Bayou was a Connecticut-based hedge fund founded in 1996 by James G. Marquez and Samuel Israel, III which, at its height, claimed assets under management in excess of $450 million. Marquez, Israel, and former Bayou Chief Financial Officer Daniel E. Marino had been providing investors with false earnings and fraudulent financial statements from almost the fund's inception; resulting in client losses in excess of $400 million. On July 27, 2005, investors were informed of Bayou's closure and the disbursement of investor funds which, in fact, never occurred. On September 29, 2005, Marino pled guilty to conspiracy, mail, wire, and investment advisor fraud and was sentenced on January 29, 2008, to 20 years' incarceration. On December 14, 2006, Marquez pled guilty to conspiracy and investment advisor fraud and was sentenced on January 22, 2008, to 51 months' incarceration and $6.26 million in restitution. On April 14, 2008, Israel pled guilty to conspiracy, mail fraud, and investment advisor fraud as well as a criminal forfeiture allegation seeking the forfeiture of $450 million. On April 14, 2008, Israel was sentenced to 20 years in federal prison and ordered to pay $300 million in restitution.

Gary L. McNaughton, dba The Haven Equity Company (Cleveland):
From 1999 to 2003, Gary L. McNaughton, doing business as The Haven Equity Company (Haven Equity), defrauded over 200 investors in the United States and abroad via a Ponzi scheme where he claimed to be selling investors securities and investments in the form of promissory notes and demand notes. McNaughton informed the investors that their funds would be invested with an individual in Canada who used a unique trading strategy to generate returns. McNaughton promised investors returns that ranged from 15 percent to 35 percent with no risk on their investments. The U.S. victims were defrauded of approximately $17 million. McNaughton engaged in an affinity fraud, whereby he preyed on a group of investors—church members—by taking advantage of their trust and faith in bringing the new investments to Haven Equity. Some investors did not receive a monthly interest check, but instead rolled their interest back into their investments. McNaughton provided the investors with promissory notes and demand notes that denoted the amount invested and the interest payment the investor would receive. McNaughton operated a Ponzi scheme using new investor funds to pay previous investors their guaranteed monthly returns, as well as pay his personal expenses. McNaughton was indicted on November 14, 2006, on securities fraud, mail fraud, and money laundering charges. McNaughton pled guilty and was sentenced to 63 months in prison.

Mortgage Fraud

Mortgage fraud is a growing problem throughout the U.S. People who want their home's equity to be greater than the mortgage loan on the home, and with housing booms going on throughout the U.S., there are people who try to capitalize on the situation, and make an easy profit.

Types of Mortgage Fraud

Fraud for property involves a borrower lying about income or assets in order to qualify for a loan to buy a home in which he plans to live, but which he might resell at a profit if his income does not increase to enable him to keep making his payments. The most common activities involving fraud for property include the following:

Income Fraud
The loan applicant overstates his or her income to qualify for a mortgage or for a larger loan amount.

Employment Fraud
The loan applicant reports fictitious employment or other sources including position and length of the employment as a verification of his fictitious or overstated income.

Concealment of Liabilities
The loan applicant fails to disclose all of his or her obligations such as mortgage loans on other properties or newly acquired credit card debts in order to lower debt to income ratio, which is a key determinant of loan application approval.

Identity Theft
A fictitious/stolen identity may be used on the loan application. The applicant may be involved in an identity theft scheme: the applicant's name, personal identifying information, and credit history are used without the true person's knowledge.

Appraisal Fraud
The applicant or a loan originator is capable of arranging with an appraiser to overstate appraisal value in order to generate cash proceeds or make up for no down payment. The value can be understated to reduce the price of foreclosed home or to induce a lender to decrease the amount mortgage owed during mortgage modification.

Silent Second
The loan applicant can provide down payment or closing costs with undisclosed second mortgage to primary lender. In this case, the primary lender believes that the down payments or closing costs are paid by applicant’s own money, when in fact, it is borrowed.

Altering the Applicant’s Credit History

Cash-back Scheme (Undisclosed Kickbacks)
The applicant can receive cash back that is not disclosed to the lender by presenting fictitious or inflated sales price to a lender so that the lender grants excess of the actual purchase price.

Fraud for profit may involve a number of persons such as sellers, loan originators, real estate brokers, appraisers, builders and developers, who conspire to inflate property values and therefore loan amounts. Fraud for profit can tame many forms, including the following:

Occupancy Fraud
The loan applicant presents an investment property as primary residence in order to obtain more favorable terms or lower interest rates than was warranted.

Sales of property that is made salable on by Concealing Undesirable Traits
(e.g., environmental contamination, building restrictions, easements, etc)

Straw buyers/Nominee Loans
A nominee allows the borrowers to use the nominee’s name and credit history to apply for a loan, and the identity of the borrower is concealed.

Air Loans
It’s a loan that is secured by non existing property (air), leaving the lender without collateral. The schemer invents borrowers and properties, establishes fraudulent account for payments and maintains custodial accounts for escrows. The schemer may even set up an office with a bank of telephones, each phone representing employer, appraiser, credit agency, etc., for verification purposes.

Foreclosure Schemes
The perpetrator identifies homeowners who are at risk of defaulting on loans, or whose houses are already in foreclosure. Perpetrators mislead the homeowners into believing they can save their homes in exchange for a transfer of the deed and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner. The three most used foreclosure schemes are identified as: phantom help; bust-out; and the bait and switch.

Significant Cases

Cornelius Robinson (San Antonio): Cornelius Robinson, a former Austin, Texas resident who was convicted at trial for masterminding a multi-million dollar mortgage fraud scheme, was sentenced August 29, 2008, by the U.S. District Court for the Western District of Texas, to 327 months in federal prison and ordered to pay $918,971 in restitution. In addition to Robinson, the overall conspiracy involved 16 named co-defendants who either pled guilty or were convicted at trial; at least 33 properties; 19 financial institutions; and over $4.5 million in claimed losses. Most of the named co-defendants were unqualified "straw buyers" who were involved in purchasing and selling the properties, as well as several licensed real estate agents, a licensed attorney, and a personal banker. From September 1999 to 2008, Robinson and his co-defendants participated in a scheme to defraud mortgage lenders, including federally-insured financial institutions, by using real estate "flips" on real estate located in the Austin and San Antonio, Texas area. The defendants purchased property at one price and would immediately sell or "flip" the property to a "straw buyer" at a higher price. In doing so, the mortgage lenders were deceived as to the true nature of the transaction and the financial status of the straw buyers because of false statements and verifications provided to them. The straw buyers did not make the subsequent monthly mortgage payments, and all of the properties went into foreclosure proceedings.

Jacob Kim (Newark): On December 3, 2008, Jacob Kim, of Palisades Park, New Jersey, was sentenced to 12 years in prison for orchestrating a bank fraud scheme involving millions of dollars of fraudulent home equity and business lines of credit. Kim had pled guilty on July 28, 2008, was also ordered to make restitution in the amount of $10,485,114, which represented the losses incurred by the financial institutions.

Kim, who was the president of American Macro Growth (AMG), was indicted in June, 2007, along with four AMG employees and eight AMG clients. At his plea hearing, Kim admitted he engaged in a conspiracy with AMG employees and clients to fraudulently obtain millions of dollars in home equity and business lines of credit from at least 16 different lenders in northern New Jersey between February 2004, and November 2005. Kim also admitted receiving $59,519 in commission payments from one AMG client for assisting the client in obtaining lines of credit from 10 different banks, which totaled approximately $1.35 million, by using the same property as collateral for each of the loans. The scheme relied on the closing of multiple home equity lines of credit or Home Equity Lines of Credit (HELOCs), in a short period of time so that the earlier lenders' security interests would not be publicly recorded at the time, when later lenders closed on subsequent loans. Kim used falsified income tax returns and submitted those returns on behalf of his clients, as well as instructing his employees in the means and methods of perpetrating the scheme. Sixteen other individuals, comprised of four former AMG employees, 11 former AMG clients, and Jacob Kim's wife, have either been sentenced or are scheduled to be sentenced for their part in the scheme.

Michael Guy Carey (Dallas): On June 3, 2008, Michael Guy Cary of Hollywood, Florida, pled guilty in connection with his role in an extensive mortgage fraud scheme. Between August, 2004, and May, 2006, Cary purchased and sold 211 homes in the Eastern District of Texas using a variety of fraudulent transactions. Cary purchased the homes directly from home builders after which he arranged the transfers of the deeds into names deceptively similar to that of the home builders. Once the transfers had been completed, Cary had real estate appraisers artificially inflate the values of the homes and arranged their subsequent sale to out-of-state investors, who believed they were purchasing the homes directly from the home builders, and who qualified for mortgage loans on these inflated amounts based on fraudulent loan applications. Richard Kirkpatrick of Fort Worth, Texas, also pled guilty on June 3, 2008 to providing the inflated appraisals on 89 of the 211 homes.

On November 24, 2008, Cary was sentenced to 60 months in federal prison and ordered to forfeit approximately $6.1 million. Kirkpatrick was sentenced the same day to 31 months and agreed to forfeit his appraiser's license.

For more examples of fraud:

Tips to Protect Yourself

  • Get referrals for real estate and mortgage professionals. Check the licenses of the industry professionals with state, county, or city regulatory agencies.
  • If it sounds too good to be true, it probably is. An outrageous promise of extraordinary profit in a short period of time signals a problem.
  • Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques.
  • Look at written information to include recent comparable sales in the area, and other documents such as tax assessments to verify the value of the property.
  • Understand what you are signing and agreeing to, Do not sign any blank forms. If you do not understand, re-read the documents, or seek assistance from an attorney or third party.
  • Make sure the name on your application matches the name on your identification.
  • Review the title history of the home you are anticipating to purchase, to determine if the property has been sold multiple times within a short period. It could mean that this property has been "flipped," and the value falsely inflated.
  • Know and understand the terms of your mortgage. Check your personal information against the information as listed on the loan documents to ensure it is accurate and complete.
  • Never sign any loan documents that contain "blanks." This leaves you vulnerable to fraud.
  • Check out the tips on the Mortgage Bankers Association's website at Stop Mortgage Fraud for additional advice on avoiding mortgage fraud.


For more Information
• Check out 2008 Mortgage Fraud Report “Year in Review” from Federal Bureau of Investigation for additional information


Insurance Fraud (non-health insurance)

When people buy, use, sell, or underwrite insurance, Insurance fraud occurs as a deliberate deception committed against or by an insurance company, insurance agent, or consumer for the purpose of unjustified financial gain. Nationwide, insurance industry collects massive premiums over $1 trillion in year, and the massive size of industry contributes the cost of insurance fraud by providing more opportunities and bigger incentives for committing illegal activities.

Cost of Fraud
The total cost of insurance fraud (non-health insurance) is estimated to be more than $40 billion per year. That means Insurance fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums. (Source: FBI Financial Fraud Report

Types of Insurance Fraud

Intrinsic Fraud

Premium Diversion/ Unauthorized Entities
Premium Diversion, the most common type of insurance fraud, involves insurance agents and brokers diverting policyholder premiums for their own benefit. Usually, insurance agents or brokers fail to send premiums to the underwriter and keep the premium payments for personal use. Additionally, the numbers of unauthorized insurance companies which collect premiums and not reimburse the claims are exponentially growing.

Fee Churning
In fee churning, a series of intermediaries take commissions through reinsurance agreements. The initial premium of policyholders is reduced by commissions by reinsurance activities until theirs is no balance left. Usually, the companies left to pay claims are often ghost or non existing companies, which can’t pay for the policyholders’ claims. This fraud is tough to recognize since each transaction looks legitimate while it is a fraud in cumulative term.

Asset Diversion
This fraud occurs during merging or acquisition the existing insurance companies. It often involves acquiring control of insurance company with borrowed funds. After purchase, the subject uses the assets of the acquired company to pay off the debt, while the remaining assets can then be diverted to the subject.

Workers’ Compensation Fraud
Small business owners have an incentive to shop workers compensation insurance, and this has led some entities which purport to provide workers’ compensation insurance at reduced premium cost, and misappropriate funds without even providing insurance to workers. This fraud scheme led injured and deceased workers without compensation coverage to pay their medical bills.

Property Insurance Fraud
Sometime people destroy or burn buildings, cars or other properties intentionally when those properties are worth less than the payments or tough to sell in order to collect insurance payments. Beside insurance fraud, it is a criminal which carries additional penalties including fine and jail.

Automobile Insurance Fraud - False Vehicle Registration
Some people illegally register their vehicles in the area where the insurance companies provide cheaper auto insurance rate, which leads discount on their insurance premiums. It’s a crime and could also lead insurance companies denying a claim in the event of accident.

Automobile Insurance Fraud - Crash for Cash
It’s an orchestrated crash that perpetrators leads random unaware strangers to crash the perpetrators using techniques such as ‘rear-end shunt’, which the driver in front suddenly slams on the brakes with disabled rear brakes, and ‘decoy rear- end shunt’, when the perpetrator prepares two cars, the car in front cause the second car to brake sharply so that random driver will crash into second car, then first car drives off.
The perpetrators file a claim on random driver’s insurance for overstated reimbursement often including falsified medical expenses and automobile fix expense.

Automobile Insurance Fraud - Staged Accident
Staged Accident involves lawyers, doctors, and “runner” who stage car accidents. When a runner crash into the accident, the sophisticated team file a claim to insurance company for payment,

Life Insurance Fraud

Viatical Settlement Fraud

Viatical settlement fraud occurs when misrepresentations of viatical companies’ information including expectancies of insured parties and guaranteed high rate of return to allure investors to deposit investment funds at viatical companies.

Significant Cases

Hurricane Katrina Related Fraud (Sacramento):
In the wake of Hurricane Katrina, The American Red Cross established a national call center in Bakersfield, California to process and disburse relief funds to victims of the disaster. After the Red Cross noticed a disproportionate amount of disbursements in the immediate Bakersfield area when compared to the rest of the state, an investigation was launched. It is estimated that $500,000 was lost due to fraud conducted by workers at the call center. As of December 1, 2006, a total of 73 individuals have been indicted in the case, including 24 Red Cross contract employees, 61 subjects who have pled guilty to various felony charges, including charges of wire fraud and false statements and 25 subjects have been sentenced. A Hurricane Katrina Fraud Task Force, consisting of FBI, DOJ, U.S. Attorneys' Offices, Office of Inspector General, U.S. Secret Service, the Federal Trade Commission, the Securities and Exchange Commission and various state and local law enforcement agencies has been initiated to address frauds relating to the Hurricane. (Source: FBI)

Mutual Benefits Corporation MBC)(MIAMI):
Mutual Benefits Corporation (MBC) was a viatical settlement company offering interests in insurance policies to investors worldwide. Over 28,000 investors worldwide were defrauded of approximately $956 million by the principals of MBC, who misrepresented the investment and failed to disclose prior regulatory actions. Additionally, MBC falsified the life expectancies of the insured and paid kickbacks to physicians for signing fraudulent documents that were provided to investors. In October 2006, Peter Lombardi, former MBC President, pled guilty to Securities Fraud. As a part of his plea agreement, Lombardi has agreed to be responsible for $956 million in restitution to the victim investors in this fraud. The SEC and IRS assisted in this investigation.

Source: FBI

For more Information:

Check out Federal Bureau of Investigation’s financial crime report to further explore more about insurance fraud.


Health Care Fraud

Healthcare fraud involves individuals or corporations to collect health care reimbursement under false pretenses. Fraud on Medicare and Medicaid programs frauds are the most visible instances.

Cost of Health Care fraud

In 2007, $2.26 trillion was spent on health care, and 3% of all health care spending—or $68 billion—is lost to health care fraud, as estimated by The National Health Care Anti-Fraud Association (NHCAA).

Type of Health Care Fraud

Phantom Billing
Billing for services that were never rendered—either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding claims with charges for procedures or services that did not take place.

Billing for more expensive services or procedures than were actually provided or performed—i.e., falsely billing for a higher-priced treatment than was actually provided (which often requires the accompanying "inflation" of the patient's diagnosis code to a more serious condition consistent with the false procedure code).

Fraudulent Billing
Performing medically unnecessary services solely for the purpose of generating insurance payments—seen very often in nerve-conduction and other diagnostic-testing schemes.

Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments—widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as "nose jobs” are billed to patients' insurers as deviated-septum repairs.

Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.

Falsifying a patient’s diagnosis to justify tests, surgeries or other procedures that aren’t medically necessary.

Billing each step of a procedure as if it were a separate procedure.

Kickback or waiting deductibles
Accepting kickbacks for patient referrals.
Waiving patient co-pays or deductibles and over-billing the insurance carrier or benefit plan

(Source: NCHAA)

FBI: Largest Health Care Fraud Settlement in Its History: Pfizer to Pay $2.3 Billion for Fraudulent Marketing


Columbia/HCA fraud case:
Officials in Miami reported breaking a Medicare fraud ring that they say spanned five states, used 29 fake storefronts and tried to steal $100 million from Medicare and Medicare Advantage


How to Prevent Health Care Fraud

  • Protect your health insurance ID card like you would a credit card. In the wrong hands, a health insurance card is a license to steal. Don’t give out policy numbers to door-to-door salespeople, telephone solicitors or over the Internet. Be careful about disclosing your insurance information and if you lose your insurance ID card, report it to your insurance company immediately.
  •  Report fraud. Call your insurance company immediately if you suspect you may be a victim of health insurance fraud. Many insurers now offer the opportunity to report suspected fraud online through their Website.
  • Be informed. Be informed about the health care services you receive, keep good records of your medical care, and closely review all medical bills you receive.
  • Read your policy and benefits statements. Read your policy, Explanation of Benefits (EOB) statements and any paperwork you receive from your insurance company. Make sure you actually received the treatments for which your insurance was charged, and question suspicious expenses. Are the dates of service documented on the forms correct? Were the services identified and billed for actually performed?
  • Beware of “free” offers. Is it too good to be true? Offers of free health care services, tests or treatments are often fraud schemes designed to bill you and your insurance company illegally for thousands of dollars of treatments you never received.

For more information about Medicare protection:

Welfare Fraud

Welfare Fraud is defined as diversified intentional misuse of state welfare system by concealing certain information or providing fraudulent or false information to claim welfare benefit. Welfare fraud range from failure to reporting additional income, failure to disclose information about household family members, claiming imaginary dependents, to providing wrong information about the ‘inability’ to work. Some people even misrepresent their condition as ill or injured to claim welfare benefits.

Example of Welfare Fraud

  • The executive director of the Illinois Legislative Advisory Committee on Public Aid in 1977 claimed that Linda Taylor of Chicago used 14 aliases to obtain $150,000 for medical assistance, cash assistance and bonus cash food stamps. He claimed that she went from district to district with many disguises, using more than 100 aliases. She is believed to form the basis of Ronald Reagan's "welfare queen".
  • Dorothy Woods, who claimed 38 non-existent children.
  • Esther Johnson, who was sentenced to four years in state prison when accused of "collecting $240,000 for more than 60 fictitious children".
  • Arlens Otis was indicted in Cook County, Illinois for "613 counts of illegally receiving $150,839 in welfare funds between July 1972 and February 1978."
  • Un-named woman (60) of the Roma people illegally received in excess of $1,400,000 by deceiving the Norwegian welfare authority for 23 years. Techniques used were some 17 fictitious grandchildren, and claiming son was autistic (nursing him through the age of 13 in meetings with welfare workers). Court case pending (Oct 2009).


1. Associated Press, Mar. 8, 1977, AM cycle, Chicago (available on LEXIS)
2. "Woman's Aid Claims for 38 children Are Examined". New York Times, Special. 1980-12-21. pp. 31.
3. Associated Press, June 13, 1979, AM cycle, Compton, CA (available on LEXIS)
4. Associated Press, May 8, 1978, AM cycle, Chicago (available on LEXIS)
5. http://www.vg.no/nyheter/innenriks/artikkel.php?artid=527223

Charity Fraud

Charity Fraud involves schemers who solicit donations in the name of non-existing or fraudulent charities. Charity schemes often occur during the holidays or in the aftermath of disaster, when philanthropy is most common. Furthermore, Charity Fraud not only includes fictitious charities but also fraudulent business acts including improper use or stealing the donation funds raised in the name of charity.

How to avoid Charity Fraud

Research the organization
When approached by an organization you are unaware of or not familiar with, do some background research before you make donation. You can contact Better Business Bureau, Wise Giving Alliance, which provides information on charities that have been the subject of donor inquiries and also offers tips about charitable giving.

Better Business Bureau, Wise Giving Alliance
(703) 276-0100

Ask for documentation
If you are not familiar with the charitable organization, request documents such as annual reports and financial statements to prove the existence of the organization.

Make Payment to the Organization
Always make your checks payable to the organization to prevent your donation being funded to individual.

Telemarketing Fraud

Telemarketing schemers conduct fraudulent sales over the phone, especially targeting the poor and elderly.

Common types of Telemarketing Fraud
Advanced Fee Fraud
Pyramid Scheme
Charity Fraud
Overpayment Fraud

Victims are overpaid for an online auctions or classified advertising with a counterfeit check or money order, and asked to wire back some of the excess.

Ponzi scheme
Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. It allures the new investors by offering returns that are either abnormally high or unusually consistent.

The largest Ponzi Scheme: Bernard Madoff Invest Securities

Introduction: $65 Billion of liabilities due to Scheme

Madoff conducted the largest Ponzi scheme in history through the fraudulent investment adviser activities of Bernard Madoff Investment Securities LLC for the last two decades resulted in approximately$65 billion of liabilities including the amounts missing from the client accounts and fabricated gains.

Madoff’s Investment advisory service

Madoff promised its clients and future clients to invest in a basket of Standard and Poor’s 100 Index, a collection of the 100 largest publicly traded companies in terms of their market capitalization and offered modest but steady returns of 10% per year to his clients. He advertised the investment method as ‘too complicated to understand for outsiders’ and kept the financial statements guarded. Considered as ‘exclusive fund’ backed up with his extensive background as former chairman of NASDAQ, Madoff fund was raised huge amounts of money from diversified clients including Banks, Corporations, and Individuals. When stock market plunged due to Lehman Brother’s bankruptcy in 2008, his investors wanted to redeem their investment, and he faced difficulty to raise $ 7 billion of redemption and confessed to his senior partners on December 2008. That was the end of Madoff’s Ponzi scheme.

Result: 150 years in jail with restitution of $170 billion

He confessed on Dec, 2008, and he was sentenced to 150 years in prison with restitution of $170 billion on June 29, 2009.
For more information, check out SEC litigation release against Bernard Madoff


Pyramid Schemes
In original “pyramid” scheme, participants solicit money solely by recruiting new participants into the program with a promise of sky rocking high rate of return on investment in a short term of period. The schemers can depict the program as legitimate multi level marketing program by creating great length. However, schemers just use collected fund from new recruits to pay off existing investor despite their claims to have legitimate products or services. Nonetheless, the pyramid will collapse since promoters cannot raise enough funds to pay existing investors at some point when the schemes get too big. As a result, the investors will lose their money.

For more Information related to pyramid scheme, please check please visit the Federal Trade Commission’s website and read their brochures entitled, Profits in Pyramid Schemes? Don’t Bank on It!.



Cramming is the practice of placing unauthorized, misleading, or deceptive charges on your telephone bill. Crammers rely on confusing telephone bills in an attempt to trick consumers into paying for services they did not authorize or receive, or that cost more than the consumer was led to believe.

Cramming Charges: What They Look Like

  • Charges for services that are explained on your telephone bill in general terms such as “service fee,” “service charge,” “other fees,” “voicemail,” “mail server,”“calling plan,” “psychic,” and “membership;”
  • Charges that are added to your telephone bill every month without a clear explanation
    of the services provided – such as a “monthly fee” or “minimum monthly usage fee;”
  • Charges for an authorized service, but you were misled about its actual cost.

(Source; Federal Communications Commission)


New E-Scams & Warnings

To report potential e-scams, please go the Internet Crime Complaint Center and file a report. Note: the FBI does not send mass e-mails to private citizens about cyber scams, so if you received an e-mail that claims to be from the FBI Director or other top official, it is most likely a scam.

If you receive unsolicited e-mail offers or spam, you can forward the messages to the Federal Trade Commission at spam@uce.gov.

Below are some recent scams and warnings.

U.S. Law Firms Continue to be the Target of Counterfeit Check Scheme

03/12/12—The Internet Crime Complaint Center (IC3) continues to receive reports of counterfeit check schemes targeting U.S. law firms. The scammers contact lawyers via e-mail, claiming to be overseas and requesting legal representation in collecting a debt from third parties located in the U.S. The law firms receive a retainer agreement and a check payable to the law firm. The firms are instructed to deposit the check, take out retainer fees, and wire the remaining funds to banks in China, Korea, Ireland, or Canada. After the funds are wired overseas, the checks are determined to be counterfeit.

In a slight variation of the scheme’s execution, the victim law firm receives an e-mail from what appears to be an attorney located in another state requesting assistance for a client. The client needs aid in collecting a debt from a company located in the victim law firm’s state. In some cases, the name of the referring attorney and the debtor company used in the e-mail were verified as legitimate entities and were being used as part of the scheme. The law firm receives a signed retainer agreement and a check made payable to the law firm from the alleged debtor. The client instructs the law firm to deposit the check and to wire the funds, minus all fees, to an overseas bank account. The law firm discovers after the funds are wired that the check is counterfeit.

Law firms should use caution when engaging in transactions with parties who are handling their business solely via e-mail, particularly those parties claiming to reside overseas. Attorneys who agree to represent a client in circumstances similar to those described above should consider incorporating a provision into their retainer agreement that allows the attorney to hold funds received from a debtor for a sufficient period of time to verify the validity of the check.

If you have been a victim of an internet scam or have received an e-mail that you believe was an attempted scam, please file a complaint at www.IC3.gov.

New Variation on Telephone Collection Scam Related to Delinquent Payday Loans

02/21/12—The Internet Crime Complaint Center (IC3) continues to receive complaints from victims of payday loan telephone collection scams. As previously reported in December 2010, the typical payday loan scam involves a caller who claims the victim is delinquent on a payday loan and must make payment to avoid legal consequences.

Callers pose as representatives of the FBI, “Federal Legislative Department,” various law firms, or other legitimate-sounding agencies and claim to be collecting debts for companies such as United Cash Advance, U.S. Cash Advance, U.S. Cash Net, or other Internet check-cashing services. The fraudsters relentlessly call the victim’s home, cell phone, and place of employment in attempts to obtain payment. The callers refuse to provide information regarding the alleged payday loan or any documentation and become verbally abusive when questioned.

The IC3 has observed variations of this scam in which the caller tells the victim that there are outstanding warrants for the victim’s arrest. The caller claims that the basis of the warrants is non-payment of the underlying loan and/or hacking. If it’s the latter, the caller tells the victim that he or she is wanted for hacking into a business’ computer system to steal customer information. The caller will then demand payment via debit/credit card; in other cases, the caller further instructs victims to obtain a prepaid card to cover the payment.

The high-pressure collection tactics used by the fraudsters have also evolved. In one recent complaint, a person posed as a process server and appeared at the victim’s job. In another instance, a phony process server came to a victim’s home. In both cases, after claiming to be serving a court summons, the alleged process server said the victim could avoid going to court if he or she provided a debit card number for repayment of the loan.

If you are contacted by someone who is trying to collect a debt that you do not owe, you should:

  • Contact your local law enforcement agencies if you feel you are in immediate danger;
  • Contact your bank(s) and credit card companies;
  • Contact the three major credit bureaus and request an alert be put on your file;
  • If you have received a legitimate loan and want to verify that you do not have any outstanding obligation, contact the loan company directly;
  • File a complaint at www.IC3.gov.

Timeshare Marketing Scams

01/25/12—Timeshare owners across the country are being scammed out of millions of dollars by unscrupulous companies that promise to sell or rent the unsuspecting victims’ timeshares. In the typical scam, timeshare owners receive unexpected or uninvited telephone calls or e-mails from criminals posing as sales representatives for a timeshare resale company. The representative promises a quick sale, often within 60-90 days. The sales representatives often use high-pressure sales tactics to add a sense of urgency to the deal. Some victims have reported that sales representatives pressured them by claiming there was a buyer waiting in the wings, either on the other line or even present in the office.

Timeshare owners who agree to sell are told that they must pay an upfront fee to cover anything from listing and advertising fees to closing costs. Many victims have provided credit cards to pay the fees ranging from a few hundred to a few thousand dollars. Once the fee is paid, timeshare owners report that the company becomes evasive—calls go unanswered, numbers are disconnected, and websites are inaccessible.

In some cases, timeshare owners who have been defrauded by a timeshare sales scheme have been subsequently contacted by an unscrupulous timeshare fraud recovery company as well. The representative from the recovery company promises assistance in recovering money lost in the sales scam. Some recovery companies require an up-front fee for services rendered, while others promise no fees will be paid unless a refund is obtained for the timeshare owner. The IC3 has identified some instances where people involved with the recovery company also have a connection to the resale company, raising the possibility that timeshare owners are being scammed twice by the same people.

If you are contacted by someone offering to sell or rent your timeshare, the IC3 recommends using caution. Listed below are tips you can use to avoid becoming a victim of a timeshare scheme:

  • Be wary if a company asks you for up-front fees to sell or rent your timeshare.
  • Read the fine print of any sales contract or rental agreement provided.
  • Check with the Better Business Bureau to ensure the company is reputable.

To obtain more information on Internet schemes, visit www.LooksTooGoodToBeTrue.com.

Anyone who believes they have been a victim of this type of scam should promptly report it to the IC3’s website at www.IC3.gov. The IC3’s complaint database links complaints together to refer them to the appropriate law enforcement agency for case consideration.

Situational Alert Regarding Charitable Contribution Schemes

08/26/11—In light of Hurricane Irene, the public is reminded to beware of fraudulent e-mails and websites claiming to conduct charitable relief efforts. To learn more about avoiding online fraud, please see “Tips on Avoiding Fraudulent Charitable Contribution Schemes” at: http://www.ic3.gov/media/2011/110311.aspx.

Malicious Software Features Usama bin Laden Links to Ensnare Unsuspecting Computer Users

The Internet Crime Complaint Center (IC3) urges computer users to not open unsolicited (spam) e-mails, including clicking links contained within those messages. Even if the sender is familiar, the public should exercise due diligence. Computer owners must ensure they have up-to-date firewall and anti-virus software running on their machines to detect and deflect malicious software.

The IC3 recommends the public do the following:

  • Adjust the privacy settings on social networking sites you frequent to make it more difficult for people you know and do not know to post content to your page. Even a “friend” can unknowingly pass on multimedia that’s actually malicious software.
  • Do not agree to download software to view videos. These applications can infect your computer.
  • Read e-mails you receive carefully. Fraudulent messages often feature misspellings, poor grammar, and nonstandard English.
  • Report e-mails you receive that purport to be from the FBI. Criminals often use the FBI’s name and seal to add legitimacy to their fraudulent schemes. In fact, the FBI does not send unsolicited e-mails to the public. Should you receive unsolicited messages that feature the FBI’s name, seal, or that reference a division or unit within the FBI or an individual employee, report it to the Internet Crime Complaint Center at www.ic3.gov.

E-Mails Containing Malware Sent to Businesses Concerning Their Online Job Postings

01/19/2011—Recent FBI analysis reveals that cyber criminals engaging in ACH/wire transfer fraud have targeted businesses by responding via e-mail to employment opportunities posted online. 

Recently, more than $150,000 was stolen from a U.S. business via unauthorized wire transfer as a result of an e-mail the business received that contained malware. The malware was embedded in an e-mail response to a job posting the business placed on an employment website and allowed the attacker to obtain the online banking credentials of the person who was authorized to conduct financial transactions within the company. The malicious actor changed the account settings to allow the sending of wire transfers, one to the Ukraine and two to domestic accounts. The malware was identified as a Bredolab variant, svrwsc.exe. This malware was connected to the ZeuS/Zbot Trojan, which is commonly used by cyber criminals to defraud U.S. businesses. 

The FBI recommends that potential employers remain vigilant in opening the e-mails of prospective employees. Running a virus scan prior to opening any e-mail attachments may provide an added layer of security against this type of attack. The FBI also recommends that businesses use separate computer systems to conduct financial transactions.  

For more information on this type of fraud and prevention tips, please refer to previous public service announcements at the links below:

Anyone who believes they have been a target this type of attack should immediately contact their financial institutions and local FBI office and promptly report it to the IC3’s website at www.ic3.gov. The IC3’s complaint database links complaints together to refer them to the appropriate law enforcement agency for case consideration. The IC3 also uses complaint information to identify emerging trends and patterns.

Telephone Collection Scam Related to Delinquent Payday Loans

12/01/2010—The IC3 receives a high volume of complaints from victims of payday loan telephone collection scams. In these scams, a caller claims that the victim is delinquent in a payday loan and must repay the loan to avoid legal consequences. The callers purport to be representatives of the FBI, Federal Legislative Department, various law firms, or other legitimate-sounding agencies. They claim to be collecting debts for companies such as United Cash Advance, U.S. Cash Advance, U.S. Cash Net, and other Internet check cashing services.

One of the most insidious aspects of this scam is that the callers have accurate information about the victims, including Social Security numbers, dates of birth, addresses, employer information, bank account numbers, and names and telephone numbers of relatives and friends. The method by which the fraudsters obtained the personal information is unclear, but victims often relay that they had completed online applications for other loans or credit cards before the calls began.

The fraudsters relentlessly call the victim’s home, cell phone, and place of employment. They refuse to provide to the victims any details of the alleged payday loans and become abusive when questioned. The callers threaten victims with legal actions, arrests, and in some cases physical violence if they refuse to pay. In many cases, the callers even resort to harassment of the victim’s relatives, friends, and employers. 

Some fraudsters instruct victims to fax a statement agreeing to pay a certain dollar amount, on a specific date, via prepaid visa card. The statement further declares that the victim would never dispute the debt. 

These telephone calls are an attempt to obtain payment by instilling fear in the victims. Do not follow the instructions of the caller.

If you receive telephone calls such as these, you should:

  • Contact your banking institutions;
  • Contact the three major credit bureaus and request an alert be put on your file;
  • Contact your local law enforcement agencies if you feel you are in immediate danger;
  • File a complaint at www.IC3.gov.

Fraudulent Notification Deceives Consumers Out of Thousands of Dollars

11/29/2010—The IC3 continues to receive reports of letters and e-mails being distributed pursuant to prize sweepstakes or lottery schemes. These schemes use counterfeit checks that bear legitimate-looking logos of various financial institutions to fool victims into sending money to the fraudsters.
Fraudsters tell victims they won a sweepstakes or lottery, but to receive a lump sum payout, they must pay the taxes and processing fees upfront. Fraudsters direct individuals to call a telephone number to initiate a letter of instructions. The letter alleges that the victim may elect to take an advance on the winnings to make the required upfront payment. The letter includes a check in the amount of the alleged taxes and fees, along with processing instructions. Ultimately, victims believe they are using the advance to make the required upfront payment, but in reality they are falling prey to the scheme.

The victim deposits the check into their own bank, which credits the account for the amount of the check before the check clears. The victim immediately withdraws the money and wires it to the fraudsters. Afterwards, the check proves to be counterfeit and the bank pulls the respective funds from the victim’s account, leaving the victim liable for the amount of the counterfeit check plus any additional fees the bank may charge.

Persons may fall victim to this scheme due to the allure of easy money and the apparent legitimacy of the check the fraudsters include in the letter of instruction. The alleged cash prizes and locations of the financial institutions vary.

Tips to avoid being scammed:

  • A federal statute prohibits mailing lottery tickets, advertisements, or payments to purchase tickets in a foreign lottery.
  • Be leery if you do not remember entering a lottery or sweepstakes.
  • Beware of lotteries or sweepstakes that charge a fee prior to delivering your prize.
  • Be wary of demands to send additional money as a requirement to be eligible for future winnings.

If you have been a victim of this type of scam or any other cyber crime, you can report it to the IC3 at www.IC3.gov. The IC3 complaint database links complaints for potential referral to law enforcement for case consideration. Complaint information is also used to identify emerging trends and patterns to alert the public to new criminal schemes.

Holiday Shopping Tips

11/15/2010—This holiday season, the FBI reminds shoppers that cyber criminals aggressively create new ways to steal money and personal information. Scammers use many techniques to fool potential victims, including conducting fraudulent auction sales, reshipping merchandise purchased with stolen credit cards, and selling fraudulent or stolen gift cards through auction sites at discounted prices.
Fraudulent Classified Ads and Auction Sales
Internet criminals post classified ads and auctions for products they do not have and make the scam work by using stolen credit cards. Fraudsters receive an order from a victim, charge the victim’s credit card for the amount of the order, then use a separate, stolen credit card for the actual purchase. They pocket the purchase price obtained from the victim’s credit card and have the merchant ship the item directly to the victim. Consequently, an item purchased from an online auction but received directly from the merchant is a strong indication of fraud. Victims of such a scam not only lose the money paid to the fraudster, but may be liable for receiving stolen goods.
Shoppers may help avoid these scams by using caution and not providing financial information directly to the seller, as fraudulent sellers will use this information to purchase items for their schemes. Always use a legitimate payment service to ensure a safe, legitimate purchase.
As for product delivery, fraudsters posing as legitimate delivery services offer reduced or free shipping to customers through auction sites. They perpetuate this scam by providing fake shipping labels to the victim. The fraudsters do not pay for delivery of the packages; therefore, delivery service providers intercept the packages for nonpayment and the victim loses the money paid for the purchase of the product.
Diligently check each seller’s rating and feedback along with their number of sales and the dates on which feedback was posted. Be wary of a seller with 100 percent positive feedback, with a low total number of feedback postings, or with all feedback posted around the same date and time. 
Gift Card Scam
Be careful when purchasing gift cards through auction sites or classified ads. It is safest to purchase gift cards directly from the merchant or retail store. If the gift card merchant discovers that your card is fraudulent, the merchant will deactivate the gift card and refuse to honor it for purchases. Victims of this scam lose the money paid for the gift card purchase.
Phishing and Smishing Schemes
In phishing schemes, a fraudster poses as a legitimate entity and uses e-mail and scam websites to obtain victims’ personal information, such as account numbers, user names, passwords, etc. Smishing is the act of sending fraudulent text messages to bait a victim into revealing personal information.
Be leery of e-mails or text messages that indicate a problem or question regarding your financial accounts. In this scam, fraudsters direct victims to follow a link or call a number to update an account or correct a purported problem. The link directs the victim to a fraudulent website or message that appears legitimate. Instead, the site allows the fraudster to steal any personal information the victim provides.
Current smishing schemes involve fraudsters calling victims’ cell phones offering to lower the interest rates for credit cards the victims do not even possess. If a victim asserts that they do not own the credit card, the caller hangs up. These fraudsters call from TRAC cell phones that do not have voicemail, or the phone provides a constant busy signal when called, rendering these calls virtually untraceable.
Another scam involves fraudsters directing victims, via e-mail, to a spoofed website. A spoofed website is a fake site that misleads the victim into providing personal information, which is routed to the scammer’s computer.
Phishing schemes related to deliveries are also rampant. Legitimate delivery service providers neither e-mail shippers regarding scheduled deliveries nor state when a package is intercepted or being temporarily held. Consequently, e-mails informing of such delivery issues are phishing scams that can lead to personal information breaches and financial losses. 


Here are some tips you can use to avoid becoming a victim of cyber fraud:

  • Do not respond to unsolicited (spam) e-mail.
  • Do not click on links contained within an unsolicited e-mail.
  • Be cautious of e-mail claiming to contain pictures in attached files, as the files may contain viruses. Only open attachments from known senders. Scan the attachments for viruses if possible.
  • Avoid filling out forms contained in e-mail messages that ask for personal information.
  • Always compare the link in the e-mail with the link to which you are directed and determine if they match and will lead you to a legitimate site.
  • Log directly onto the official website for the business identified in the e-mail, instead of “linking” to it from an unsolicited e-mail. If the e-mail appears to be from your bank, credit card issuer, or other company you deal with frequently, your statements or official correspondence from the business will provide the proper contact information.
  • Contact the actual business that supposedly sent the e-mail to verify if the e-mail is genuine.
  • If you are asked to act quickly, or there is an emergency, it may be a scam. Fraudsters create a sense of urgency to get you to act quickly.
  • Verify any requests for personal information from any business or financial institution by contacting them using the main contact information.
  • Remember if it looks too good to be true, it probably is.

To receive the latest information about cyber scams, sign up for e-mail alerts on this website. If you have received a scam e-mail, please notify the IC3 by filing a complaint at www.ic3.gov.

Involvement in Criminal Activity Through Work-From-Home Scams

10/20/10—Consumers continue to lose money from work-from-home scams that assist cyber criminals move stolen funds. Worse yet, due to their deliberate or unknowing participation in the scams, these individuals may face criminal charges. Work-from-home scam victims are often recruited by organized cyber criminals through newspaper ads, online employment services, unsolicited emails or “spam” ,one and social networking sites advertising work-from-home opportunities. Once recruited, however, rather than becoming an employee of a legitimate business, the consumer is actually a “mule” for cyber criminals who use the consumer’s or other victim’s accounts to steal and launder money. In addition, the consumer’s own identity or account may be compromised by the cyber criminals.  More

Cyber Criminals Take Over Corporate Accounts

10/20/10—Cyber criminals are targeting the financial accounts of owners and employees of small and medium sized businesses, resulting in significant business disruption and substantial monetary losses due to fraudulent transfers from these accounts. Often these funds may not be recovered. More

Claims of Being Stranded Swindle Consumers Out of Thousands of Dollars

07/01/10—The IC3 continues to receive reports of individuals’ e-mail or social networking accounts being compromised and used in a social engineering scam to swindle consumers out of thousands of dollars. Portraying to be the victim, the hacker uses the victim’s account to send a notice to their contacts. The notice claims the victim is in immediate need of money due to being robbed of their credit cards, passport, money, and cell phone; leaving them stranded in London or some other location. Some claim they only have a few days to pay their hotel bill and promise to reimburse upon their return home. A sense of urgency to help their friend/contact may cause the recipient to fail to validate the claim, increasing the likelihood of them falling for this scam.

If you receive a similar notice and are not sure it is a scam, you should always verify the information before sending any money.

If you have been a victim of this type of scam or any other Cyber crime, you can report it to the IC3 website at www.IC3.gov. The IC3 complaint database links complaints for potential referral to the appropriate law enforcement agency for case consideration. Complaint information is also used to identity emerging trends and patterns.

Fraudulent Telephone Calls Allow Fraudsters Access to Consumer Financial and Brokerage Accounts

06/21/10—The FBI Newark Division released a warning to consumers concerning a new scheme using telecommunications denial-of-service (TDoS) attacks.

The FBI determined fraudsters compromised victim accounts and contacted financial institutions to change the victim profile information (i.e., e-mail addresses, telephone numbers, and bank account numbers).

The TDoS attacks used automated dialing programs and multiple accounts to overwhelm victims’ cell phones and land lines with thousands of calls. When victims answered the calls they heard dead air (nothing on the other end), an innocuous recorded message, advertisement, or a telephone sex menu. Calls were typically short in duration but so numerous that victims changed their phone numbers to terminate the attack.

These TDoS attacks were used as a diversion to prevent financial and brokerage institutions from verifying victim account changes and transactions. Fraudsters were afforded adequate time to transfer funds from victim brokerage and financial online accounts.

Protection from TDoS attacks and other types of fraud requires consumers to be vigilant and proactive. In Newark’s Public Service Announcement (PSA), they recommend the following guidelines for consumers to protect themselves:

  • Implement security measures for all financial accounts by placing fraud alerts with the major credit bureaus if you believe they were targeted by a TDoS attack or other forms of fraud.
  • Use strong passwords for all financial accounts and change them regularly.
  • Obtain and review your annual credit report for fraudulent activity.

If you were a target of a TDoS attack, immediately contact your financial institutions, notify your telephone provider, and promptly report it to the IC3 website at www.ic3.gov. The IC3 complaint database links complaints to assist in referrals to the appropriate law enforcement agency for case consideration. The complaint information is also used to identity emerging trends and patterns.

- The Latest Phone Scam: Targets Your Bank Account
- FBI Newark Public Service Announcement

Rental and Real Estate Scams

03/12/10—Individuals need to be cautious when posting rental properties and real estate on-line. The IC3 continues to receive numerous complaints from individuals who have fallen victim to scams involving rentals of apartments and houses, as well as postings of real estate online.

Rental scams occur when the victim has rental property advertised and is contacted by an interested party. Once the rental price is agreed-upon, the scammer forwards a check for the deposit on the rental property to the victim. The check is to cover housing expenses and is, either written in excess of the amount required, with the scammer asking for the remainder to be remitted back, or the check is written for the correct amount, but the scammer backs out of the rental agreement and asks for a refund. Since the banks do not usually place a hold on the funds, the victim has immediate access to them and believes the check has cleared. In the end, the check is found to be counterfeit and the victim is held responsible by the bank for all losses.

Another type of scam involves real estate that is posted via classified advertisement websites. The scammer duplicates postings from legitimate real estate websites and reposts these ads, after altering them. Often, the scammers use the broker’s real name to create a fake e-mail, which gives the fraud more legitimacy. When the victim sends an e-mail through the classified advertisement website inquiring about the home, they receive a response from someone claiming to be the owner. The “owner” claims he and his wife are currently on missionary work in a foreign country. Therefore, he needs someone to rent their home while they are away. If the victim is interested in renting the home, they are asked to send money to the owner in the foreign country.

If you have been a victim of Internet crime, please file a complaint at http://www.IC3.gov/.

New Twist on Counterfeit Check Schemes Targeting U.S. Law Firms

01/21/10—The FBI continues to receive reports of counterfeit check schemes targeting U.S. law firms. As previously reported, scammers send e-mails to lawyers, claiming to be overseas and seeking legal representation to collect delinquent payments from third parties in the U.S. The law firm receives a retainer agreement, invoices reflecting the amount owed, and a check payable to the law firm. The firm is instructed to extract the retainer fee, including any other fees associated with the transaction, and wire the remaining funds to banks in Korea, China, Ireland, or Canada. By the time the check is determined to be counterfeit, the funds have already been wired overseas.

In a new twist, the fraudulent client seeking legal representation is an ex-wife “on assignment” in an Asian country, and she claims to be pursuing a collection of divorce settlement monies from her ex-husband in the U.S. The law firm agrees to represent the ex-wife, sends an e-mail to the ex-husband, and receives a “certified” check for the settlement via delivery service. The ex-wife instructs the firm to wire the funds, less the retainer fee, to an overseas bank account. When the scam is executed successfully, the law firm wires the money before discovering the check is counterfeit.

All Internet users need to be cautious when they receive unsolicited e-mails. Law firms are advised to conduct as much due diligence as possible before engaging in transactions with parties who are handling their business solely via e-mail, particularly those parties claiming to reside overseas.

Please view an additional public service announcement posted to the IC3 website regarding a similar Asian extortion scheme. Individuals who receive information pertaining to counterfeit check schemes are encouraged to file a complaint at www.IC3.gov.

Mystery/Secret Shopper Schemes

01/20/10—The IC3 has been alerted to an increase in employment schemes pertaining to mystery/secret shopper positions. Many retail and service corporations hire evaluators to perform secret or random checks on themselves or their competitors, and fraudsters are capitalizing on this employment opportunity.

Victims have reported to the IC3 they were contacted via e-mail and U.S. mail to apply to be a mystery shopper. Applicants are asked to send a resume and are purportedly subject to an extensive background check before being accepted as a mystery shopper. The employees are sent a check with instructions to shop at a specified retailer for a specific length of time and spend a specific amount on merchandise from the store. The employees receive instructions to take note of the store’s environment, color, payment procedures, gift items, and shopping/carrier bags and report back to the employer. The second evaluation is the ease and accuracy of wiring money from the retail location. The money to be wired is also included in the check sent to the employee. The remaining balance is the employee’s payment for the completion of the assignment. After merchandise is purchased and money is wired, the employees are advised by the bank the check cashed was counterfeit, and they are responsible for the money lost in addition to bank fees incurred.

In other versions of the scheme, applicants are requested to provide bank account information to have money directly deposited into their accounts. The fraudster then has acquired access to these victims’ accounts and can withdraw money, which makes the applicant a victim of identity theft.

Tips you can use to avoid becoming a victim of employment schemes associated with mystery/secret shopping:

  • Do not respond to unsolicited (spam) e-mail.
  • Do not click on links contained within an unsolicited e-mail.
  • Be cautious of e-mail claiming to contain pictures in attached files, as the files may contain viruses. Only open attachments from known senders. Virus scan all attachments, if possible.
  • Avoid filling out forms contained in e-mail messages that ask for personal information.
  • Always compare the link in the e-mail to the link you are actually directed to and determine if they match and will lead you to a legitimate site.
  • There are legitimate mystery/secret shopper programs available. Research the legitimacy on companies hiring mystery shoppers. Legitimate companies will not charge an application fee and will accept applications online.
  • No legitimate mystery/secret shopper program will send payment in advance and ask the employee to send a portion of it back.

Individuals who believe they have information pertaining to mystery/secret shopper schemes are encouraged to file a complaint at www.IC3.gov.

Haitian Earthquake Relief Fraud Alert

01/13/10—The FBI today reminds Internet users who receive appeals to donate money in the aftermath of Tuesday’s earthquake in Haiti to apply a critical eye and do their due diligence before responding to those requests. Past tragedies and natural disasters have prompted individuals with criminal intent to solicit contributions purportedly for a charitable organization and/or a good cause.

Therefore, before making a donation of any kind, consumers should adhere to certain guidelines, to include the following:

  • Do not respond to any unsolicited (spam) incoming e-mails, including clicking links contained within those messages.
  • Be skeptical of individuals representing themselves as surviving victims or officials asking for donations via e-mail or social networking sites.
  • Verify the legitimacy of nonprofit organizations by utilizing various Internet-based resources that may assist in confirming the group’s existence and its nonprofit status rather than following a purported link to the site.
  • Be cautious of e-mails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
  • Make contributions directly to known organizations rather than relying on others to make the donation on your behalf to ensure contributions are received and used for intended purposes.
  • Do not give your personal or financial information to anyone who solicits contributions: Providing such information may compromise your identity and make you vulnerable to identity theft.

Anyone who has received an e-mail referencing the above information or anyone who may have been a victim of this or a similar incident should notify the IC3 via www.ic3.gov.


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