And they have the audacity to blame Bitcoin for being used in illegal activities when they are losing Billions of dollars in fiat to these criminals.
I know this type of criminal activities isn't new BUT how come they have this loose security? Imagine 100 Billions dollars stolen right under their noses, or perhaps it's done by an insider? because it seems that someone has tried to hide the reports regarding the funds until it reached this absurd amount.
Topic: How billions in pandemic aid was swindled by con artists and crime syndicates (Read 210 times)
February 26, 2021, 11:22:57 PM
February 20, 2021, 02:33:33 PM
This isnt something new actually where funds that should be allocated into its real usage would potentially go into the pockets of those officials who are sitting on the top
and other potentially who do have access on said funds or making out things that do really make out advantage for them without even thinking on where those funds
should really be allocated on.They dont care about conscience or whatsoever and what they do mind off is on to their own pocket.Talking about switching blockchain tech
integration or switch up on where transparency can really be seen but there are still cons but somehow this is much better than on fiat transactions.
and other potentially who do have access on said funds or making out things that do really make out advantage for them without even thinking on where those funds
should really be allocated on.They dont care about conscience or whatsoever and what they do mind off is on to their own pocket.Talking about switching blockchain tech
integration or switch up on where transparency can really be seen but there are still cons but somehow this is much better than on fiat transactions.
February 20, 2021, 01:39:54 PM
I read in some articles that 90% of the funds allocated to confront COIVD-19 pandemic in African countries have been used out of place.
Most of the countries used these funds to finance their activities and deficit their budgets, the part was stolen and the majority did not reach the poor.
The pandemic has also allowed many countries to print millions of money without having sufficient cover in assets and others.
Blockchain will make these processes easier to discover, but will not stop them.
I wasn't aware of these things to be honest and it sounds disastrous and how can such rampant misuse of funds even happen. How is there no governing body that can track the relief funds and how they are used.Most of the countries used these funds to finance their activities and deficit their budgets, the part was stolen and the majority did not reach the poor.
The pandemic has also allowed many countries to print millions of money without having sufficient cover in assets and others.
Blockchain will make these processes easier to discover, but will not stop them.
Money not reaching the poor is actually something that happens more than we expect and is the reason I stopped making any donations years back, instead I prefer to visit some poor and help them whom I know are actually in need.
People donating millions should always remember that the money they are donating, will be passing through a lot of riches and what eventually ends up being to the poor people is actually dust.
The excess printing of money you mentioned is actually going to hurt a lot later because its easy to print money but the inflation that follows will kil everything and things will get out of control.
February 19, 2021, 04:40:27 PM
I wonder if state finances utilizing a blockchain based, public ledger, could cut down on rampant fraud and abuse of state revenues.
From how I see things this isn't a problem regarding the government's system but a problem with the identity theft happening from the US so I don't think having a blockchain solution can fix all of this when they have created a fraud that can cover something else aside from benefits that they can get from the government. Identity theft can be used in several ways from stolen credit cards to sim swapping and other ways which you can fool any business with a stolen identity. Yeah they can add a blockchain technology in their system but if they want to solve the whole problem then they must focus on identity theft as well.
February 19, 2021, 03:53:48 PM
The fraud might be "legitimate" in some cases, though. People who were working, paying taxes etc., when the pandemic hit, but don't qualify to the help because they had just changed jobs for example. I understand why someone like that would try to get help anyway, it's the fault of politicians for not including everyone needing help in the bill.
On the other hand, criminals, mafias, already rich people that didn't need help, that's another story. I hope they will concentrate on such people when investigating, not the little people.
On the other hand, criminals, mafias, already rich people that didn't need help, that's another story. I hope they will concentrate on such people when investigating, not the little people.
February 19, 2021, 10:39:51 AM
Now look at all the money politicians and bankers steal, $100 billion looks like nothing to that.
February 19, 2021, 10:20:35 AM
Those who have taken the rights of people affected by Covid 19 based on amendments to state regulations are entitled to assistance incentives during the pandemic. As for scavengers (government corruption), how can they not be tempted by a fairly large fee not to take a certain percentage of the population, for example 10%, imagine if 1-2 million people affected will be cut. 10% / person. ah, financial management for the government is no wonder, cutting funds will always be a tradition in any country.
February 19, 2021, 09:28:49 AM
What say you, forum?
If it is done by the government it is perfect access to record data for anyone, the Blockchain as a whole functions in detectable identities digitally in any form, what else is tax and financial assistance from the government for its citizens, managers and recipients.Blockchain technology is likely to avoid people who want to commit corruption, fraud, etc. to easily track access to the identity of the perpetrators and the identity of the public.
I admit that most countries have implemented blockchain technology systems, however, they implement blockchain systems in certain sectors, not all government sectors place a blockchain system, that's the problem, because the blockchain system works transparently.
However, overall I support if every state asset goes in and out, the blockchain system applies.
February 19, 2021, 08:32:24 AM
How? How did it go that far?
$100 billion is just too much.
$1 billion is already questionable and should have reached the finance department of any country.
Bitcoin ain't that private to reach the culprit.
Somehow, I think of it as an inside job. Why?
Because it can't happen that wild without connections.
$100 billion is just too much.
$1 billion is already questionable and should have reached the finance department of any country.
Bitcoin ain't that private to reach the culprit.
Somehow, I think of it as an inside job. Why?
Because it can't happen that wild without connections.
February 19, 2021, 07:06:59 AM
Quote
The program was quickly flagged as high-risk by the Labor Department’s inspector general. There was no former employer to verify this category of claims, so states had to build the program around self-reported work history. On top of that, many states also relaxed internal controls amid pressure to quickly approve a crushing influx of claims, according to state and federal officials.
This is the main reason why these types of fraud are flourishing.The states are under the pressure of way too many claims,so they are lowering the control to approve more people for unemployment aid.
I don't really think that the blockchain can provide any solution of this problem.It's all about verifying the legitimacy of multiple claims,that were made by multiple people.This type of work can be done only by a bunch of clerks,not by the blockchain.
February 19, 2021, 06:43:04 AM
Nearly all of these frauds could have been prevented if the verification process would have been a little more complex than what is now and changing the way the payments as made if the money would have been sent to a bank account that the claimant had on file for his last wage payment all the scams involving a fake identity would have been made useless as even if you assume the identity you are just demanding money to be sent to an account you don't control.
I've never understood why Americans stick to those damn checks, at least it seems they've got the message and the next round will be done mainly via direct deposits.
I've never understood why Americans stick to those damn checks, at least it seems they've got the message and the next round will be done mainly via direct deposits.
I agree with that, as I said, it is not a problem to create a transparent system in which such things can be completely disabled or reduced to a minimum. This is not impossible if we look at the example of Scandinavian countries such as Denmark, Finland or Sweden, where corruption has been reduced to a minimum because politicians have decided that it will be like that - so the question arises why other countries do not copy their system?
For example, in Sweden there is a system that allows every citizen to check anyone's finances and compare them with the property that person owns - try to evade taxes there or have more than what your income can afford.
Every honest man is against crime and theft of any form, but when someone takes money intended for people in need of life, then it is even more inhumane and should be severely punished. In my country, during 2017/18, there was an investigation focused on the local branch of the Red Cross - and what they found was scandalous, the amount they paid themselves as salaries and various other donations was only slightly less than the amount they donated to humanitarian needs.
February 18, 2021, 10:21:13 PM
I read in some articles that 90% of the funds allocated to confront COIVD-19 pandemic in African countries have been used out of place.
Most of the countries used these funds to finance their activities and deficit their budgets, the part was stolen and the majority did not reach the poor.
The pandemic has also allowed many countries to print millions of money without having sufficient cover in assets and others.
Blockchain will make these processes easier to discover, but will not stop them.
Most of the countries used these funds to finance their activities and deficit their budgets, the part was stolen and the majority did not reach the poor.
The pandemic has also allowed many countries to print millions of money without having sufficient cover in assets and others.
Blockchain will make these processes easier to discover, but will not stop them.
This happens every time, everywhere (although in varying proportions). And this is exactly why I am not a fan of big spending measures by the government. It increases the federal debt and inflation rates by a lot, and in the end the overall benefit for the citizens is limited. A large part of the stimulus money will be used for purposes other than COVID 19 relief and a part will be stolen by people who are not qualified to receive it.
February 18, 2021, 05:12:02 PM
At first, I thought it was a mistake, because $100 billion is really huge money - and besides, it all happened in a country that should have mechanisms to prevent such huge misuse of money. I don't think this is something that can be done without the cooperation of both sides - I mean criminals and those who lead the whole operation by the government.
Nearly all of these frauds could have been prevented if the verification process would have been a little more complex than what is now and changing the way the payments as made if the money would have been sent to a bank account that the claimant had on file for his last wage payment all the scams involving a fake identity would have been made useless as even if you assume the identity you are just demanding money to be sent to an account you don't control.
I've never understood why Americans stick to those damn checks, at least it seems they've got the message and the next round will be done mainly via direct deposits.
It was clear from day one that once you've thought the best way is to send a check by mail to whoever makes a claim based just on his identity the problems will occur and every scammer out there that has got his hands on a few of those will try his luck. Every week I read in the news how scammers are getting caught with hundreds of credit cards not in their name, with fake IDs, with full information on some people, and this is just the tip that gets caught.
February 18, 2021, 07:35:36 AM
That's the sad reality of today's political scenario and that's everywhere. I can share an Indian example of misusing the fund. As soon as we went into lockdown, our Supreme Leader had announced a fund called "PM cares fund". Millions of dollars poured into this fund from common people, celebrities and corporates. Now when people started asking on where the government has used this funds for, our leader twisted the law and put this "PM Cares Fund" out of the reach of auditors and out of RTI act.
That means, no auditor will audit the spendings and no information will be provided to the common people regarding the spending of this fund. The current government has literally legalized the financial corruption this way! Sad but true!
That means, no auditor will audit the spendings and no information will be provided to the common people regarding the spending of this fund. The current government has literally legalized the financial corruption this way! Sad but true!
February 18, 2021, 07:07:36 AM
At first, I thought it was a mistake, because $100 billion is really huge money - and besides, it all happened in a country that should have mechanisms to prevent such huge misuse of money. I don't think this is something that can be done without the cooperation of both sides - I mean criminals and those who lead the whole operation by the government. Politicians often use the services of the criminal underworld to obtain financial benefits, and given the level of this crime, there is no doubt that all of them include some large fish from the political spectrum.
I think that it is not in their interest at all to make a transparent system, which is more than obvious from every financial scandal that arises from time to time. Corruption, bribery and all other forms of crime exist only because no government wants to take them seriously, or rather because they are part of that system. Crime has simply become an ingrained part of the system and that’s a fact - like it or not.
I wonder if state finances utilizing a blockchain based, public ledger, could cut down on rampant fraud and abuse of state revenues.
Perhaps it would be worthwhile to found a blockchain financial movement towards greater transparency and accountability of how public funds are allocated and distributed?
Would blockchain's unique features be well suited towards fulfilling such a role? Is there a better format or structure for curbing fraud and abuse on this scale.
What say you, forum?
Perhaps it would be worthwhile to found a blockchain financial movement towards greater transparency and accountability of how public funds are allocated and distributed?
Would blockchain's unique features be well suited towards fulfilling such a role? Is there a better format or structure for curbing fraud and abuse on this scale.
What say you, forum?
I think that it is not in their interest at all to make a transparent system, which is more than obvious from every financial scandal that arises from time to time. Corruption, bribery and all other forms of crime exist only because no government wants to take them seriously, or rather because they are part of that system. Crime has simply become an ingrained part of the system and that’s a fact - like it or not.
February 18, 2021, 06:32:36 AM
I read in some articles that 90% of the funds allocated to confront COIVD-19 pandemic in African countries have been used out of place.
Most of the countries used these funds to finance their activities and deficit their budgets, the part was stolen and the majority did not reach the poor.
The pandemic has also allowed many countries to print millions of money without having sufficient cover in assets and others.
Blockchain will make these processes easier to discover, but will not stop them.
Most of the countries used these funds to finance their activities and deficit their budgets, the part was stolen and the majority did not reach the poor.
The pandemic has also allowed many countries to print millions of money without having sufficient cover in assets and others.
Blockchain will make these processes easier to discover, but will not stop them.
February 17, 2021, 06:03:31 PM
Huge amounts of people getting scammed out of their aids goes to show that scammers don't pick no good day to scam people, so let's take the initiative and secure ourselves to ensure that we don't become victims to these people. Here in my country alone, millions were scammed out of their government aids as well, mostly senior citizens and people who are gullible enough are the ones that got heavily affected sadly.
February 17, 2021, 03:37:54 PM
In some other countries, including here in the UK, the blow of the pandemic to employment has been reduced, or at least delayed, by government support for those who are unable to work. In the UK the government pays 80% of wages for anyone who is unable to work due to the pandemic through the Job Retention Scheme (the furlough scheme). Similar systems have been set up in Germany and France.
The biggest cause of fraud is the fact that the US government has a difficult decision to make. As unemployment rose to around 15% in the US in April compared to less than 5% in the UK, there became a very difficult balance, as underfunded services for dishing out unemployment benefits were overwhelmed, between having appropriate security measures in place and being able to give the people who need it most their money. There's also the problem that the poorest people in society may find it the most difficult to prove that they deserve unemployment benefit. Because there's no support for people in work to prevent them losing their jobs apart from the small 'stimulus cheques', the US system is a kind of 'whack-a-mole' approach that leaves it open to all kinds of fraud.
There is some fraud in the furlough schemes, but as far as I know it's not on this kind of grand scale and people have generally kept their jobs so far. The decision to use population-wide support for the economy like stimulus cheques (which have also been given to US citizens that I know here in the UK despite them being permanent UK residents) is not an efficient way of dealing with the pandemic and is causing a lot of trouble for ordinary workers who are worried about losing their jobs.
The biggest cause of fraud is the fact that the US government has a difficult decision to make. As unemployment rose to around 15% in the US in April compared to less than 5% in the UK, there became a very difficult balance, as underfunded services for dishing out unemployment benefits were overwhelmed, between having appropriate security measures in place and being able to give the people who need it most their money. There's also the problem that the poorest people in society may find it the most difficult to prove that they deserve unemployment benefit. Because there's no support for people in work to prevent them losing their jobs apart from the small 'stimulus cheques', the US system is a kind of 'whack-a-mole' approach that leaves it open to all kinds of fraud.
There is some fraud in the furlough schemes, but as far as I know it's not on this kind of grand scale and people have generally kept their jobs so far. The decision to use population-wide support for the economy like stimulus cheques (which have also been given to US citizens that I know here in the UK despite them being permanent UK residents) is not an efficient way of dealing with the pandemic and is causing a lot of trouble for ordinary workers who are worried about losing their jobs.
Would blockchain's unique features be well suited towards fulfilling such a role? Is there a better format or structure for curbing fraud and abuse on this scale.
I think the best thing governments can do is prosecute people who are believed to be engaging in this kind of fraud. That means opening up courts properly - I think that restrictions on courts opening fully and trials with juries do more harm than good. Blockchain may not have much of a role to play because the problem is not verifying where the funds go, it is determining whether they were obtained fraudulently. 
February 16, 2021, 06:58:32 PM
Quote
A senior federal law enforcement source said the fraud is so complex and multilayered that it will take months to develop a full accounting.
When investigators raided a strip mall store in Garden Grove, California, in December, they found a line of customers snaking around the parking lot and huge stacks of cash inside the store.
Orange County prosecutors say Nguyen Social Services was charging up to $700 a pop to file false unemployment claims for people who did not qualify to receive Covid-19 relief money.
The brazen fraud was part of an overall scheme that cost taxpayers an estimated $11 million, prosecutors say.
“This isn’t just an Orange County problem. It isn’t just a California problem,” said Orange County District Attorney Todd Spitzer. “This is a breakdown of catastrophic proportions that has failed the American taxpayer.”
Government aid programs have long been fertile ground for scammers. But the scale of the fraud in the unemployment program created by the CARES Act has reached a staggering level, state and federal officials say.
The Labor Department inspector general has yet to complete a full investigation but, based on previous programs, estimates at least $63 billion of the $630 billion in disbursements has been misspent. The full scope of the loss in taxpayer funds is likely many times higher, experts and officials say, soaring well beyond $100 billion.
A rush to release the funds put enormous strain on state workforce agencies, creating a bonanza for individual scam artists and international cybercrime rings. And the federal government was slow to act despite early red flags, according to interviews with more than two dozen fraud experts, senior law enforcement officials and state and federal officials.
The Justice Department has assembled a task force to root out fraud across all 50 states and U.S. territories. Only now is the extent of the theft of taxpayer funds starting to come into focus.
A senior federal law enforcement source familiar with the investigation said the fraud is so complex and multilayered that it will take months to develop a full accounting.
Full coverage of the coronavirus outbreak
“It just continues to kind of spiral out and connect to other types of fraudulent acts,” the source said.
Officials in California, one of the only states to launch a review of the Covid-19 relief program, said they have tallied $11 billion stolen from taxpayers so far, but the total figure could be as high as $30 billion, or 27 percent. An early review in Nebraska, which looked at all statewide payments through June, found roughly 66 percent of unemployment money was misspent.
"In California, this is unquestionably the largest fraud against public agencies in our history," said Vern Pierson, president of the California District Attorneys Association. "Increasingly we are learning there could be fraud of historic proportions nationwide. While we don’t know the exact price tag, we know the amount of the loss of taxpayers is staggering."
A tsunami of attacks
The CARES Act was supposed to be a lifeline for a U.S. economy in free fall. Seeking the most efficient way to get cash into the hands of millions of jobless Americans, Congress turned to state workforce agencies, which administer unemployment insurance programs.
One of the act’s mandates was a new initiative called the Pandemic Unemployment Assistance program, aimed at helping gig workers, caregivers and people who are self-employed, all of whom are not typically eligible for unemployment insurance.
The program was quickly flagged as high-risk by the Labor Department’s inspector general. There was no former employer to verify this category of claims, so states had to build the program around self-reported work history. On top of that, many states also relaxed internal controls amid pressure to quickly approve a crushing influx of claims, according to state and federal officials.
“Water is going to find the leak. The criminals are going to find the weakest link,” said Alyssa Levitz, who leads the unemployment team at U.S. Digital Response, a nonprofit that provides tech assistance to local governments responding to crises. “And as the Pandemic Unemployment Assistance was being stood up, it was the weakest link.”
NBC News asked all 50 state workforce agencies how much money they have lost to fraud, but the vast majority that responded said they did not yet know the full extent of the loss.
Early indications in some states point to massive problems.
In routine reviews of payments through last June, Nebraska’s auditor found two-thirds of unemployment funds were misspent, and Kentucky’s auditor found that the program’s internal controls were so weak that they violated federal law.
The former executive director of Kentucky’s state workforce agency wrote in an email to staff: “Keep in mind, the goal is to put money in people’s hands ASAP to help them survive,” according to the audit.
The nationwide theft of taxpayer dollars continued quietly until December when Congress mandated that states verify the identity of claimants.
ID.me, an identity verification company that has now been contracted by 21 states, told NBC News that it is holding the line against a “veritable tsunami” of fraudulent claims flooding into state systems, raising questions about what passed through unseen before they got there.
“It’s like looking at fire burning inside of a house, but no fire alarm is going off,” said Blake Hall, the chief executive officer of ID.me. “It really is a national crisis.”
A wide array of fraudsters
More than 100 defendants have been charged across 71 cases in connection with CARES Act unemployment fraud, according to the Department of Justice. Federal authorities have seized or frozen $65 million, which is close to half of the actual losses associated with the crimes.
Many more people have been charged in state courts in connection with defrauding the program.
Huy Duc Nguyen and Mai Dacsom Nguyen, the pair accused of forming Nguyen Social Services to steal taxpayer funds, have each been charged with multiple counts including perjury and conspiracy to defraud another of property. They were released from custody but have not yet entered a plea.
Attempts to reach them were not successful. A spokesman for Orange County Superior Court said the court has not been notified that they have hired an attorney. The Nguyens are due back in court next month.
But for the overwhelming majority of phony unemployment claims, the culprits have not been caught.
The most common tactic used to fraudulently obtain cash meant for newly unemployed people is not especially sophisticated, experts say.
Identity thieves, who use Social Security numbers and other personal information stolen in data breaches and available on the dark web, account for 20 percent of the phony claims identified by ID.me, according to a company report.
“It’s so widespread and indiscriminate that they even target people who are heads of law enforcement agencies,” said Illinois Attorney General Kwame Raoul, who told NBC News that a scammer used his personal information to illegally obtain funds.
High-profile politicians such as Sen. Dianne Feinstein, D-Calif., and Ohio Gov. Mike DeWine were also victimized in this way.
Many identity theft victims may have no idea that benefits were filed in their name. But in recent weeks, millions of Americans began receiving 1099 tax forms from the IRS for benefits they never got.
Michael Webb, a 41-year-old former business owner from Lexington, Kentucky, was dumbfounded when he received a 1099 that showed $13,000 in benefits was filed in his name.
Webb had filed for unemployment benefits in March — and followed up repeatedly since then — but never got his claim approved. He now suspects it may have been because someone had already made a claim using his personal information.
“We're this close to losing everything,” said Webb, a father of three.
Another 10 percent of fraud comes from more elaborate “social engineering” attacks where an attacker tricks a victim into sharing personal data or otherwise cooperating in the fraud.
These attacks have played out in the form of multistage romance schemes, in which scammers try to woo victims and then convince them to hand over personal information, and even mass scam texts purporting to be from government agencies. To pass facial recognition checks, some criminals have even used 3-D printers to create masks of identity theft victims’ faces, according to ID.me.
In one chat transcript shared with NBC News, a victim thought he was getting hired by a German packaging company. Whoever was behind “Mr. Chapin Floyd, Materials and Quality” succeeded in convincing the victim to send his government ID, credit score and wireless carrier, among other details.
The opportunities have attracted garden-variety criminals, jail and prison inmates and at least a few desperate first-time offenders. But the most prolific offenders appear to be transnational organized crime groups out of West Africa, Asia and Eastern Europe, law enforcement officials say.
Cybersecurity firm Agari issued a report last May detailing how Scattered Canary, a Nigerian cybercrime ring that specializes in online scams, was targeting CARES Act unemployment insurance.
Researchers say it didn’t take long for playbooks on how to target unemployment agencies to pass through the dark web to like-minded scammers in places like Dubai, Hong Kong and Moscow.
“They are seeing essentially trillions of dollars that is up for grabs,” said Crane Hasshold, Agari’s senior director of threat research. “This is their World Series. This is their Super Bowl.”
A slow government response
There were early red flags that unemployment insurance was being targeted heavily by criminals.
Over the first few months of the program, Washington state announced hundreds of millions lost to fraud, and law enforcement agencies including the FBI and the Secret Service issued warnings. Meanwhile, some economists puzzled over why data showed there were more people collecting benefits than were actually unemployed.
The Labor Department’s inspector general has issued several public reports, including a June report to Congress that warned “the volume of UI investigative matters currently under review is unprecedented in the DOL-OIG’s history” and warned of losses higher than $36 billion.
The previous administration issued guidance to states and provided funding to combat fraud but took little public action other than that. In a November report, the Labor Department inspector general noted the department has “made efforts to focus on program integrity” but needed to develop better oversight of state unemployment claims.
A senior Labor Department official under the Biden administration told NBC News, “There was not enough focus from this agency and others, that was swift enough and focused specifically on the evolving type of fraud that it was seeing.”
A Labor Department spokesperson said in a statement to NBC News: “We are working on a comprehensive approach to partnering with states to minimize fraud, waste and abuse, while making sure Americans who have lost their jobs through no fault of their own are able to receive the benefits they deserve and desperately need.”
The embattled state agencies are likely to face further strain — at even higher stakes for taxpayers — with the next round of federal stimulus. The situation is “extremely serious,” in the words of the senior official at the Labor Department.
Criminals continue to flood the system, bouncing between states. ID.me recently caught 2.2 billion server requests out of Hong Kong in a single day and four major distributed denial-of-service attacks — attempts to overwhelm the server — originating from Nigeria in a single morning.
“It’s going to take a while to figure out the scope of this thing,” said Mason Wilder, a senior research specialist at the Association of Certified Fraud Examiners. “But the scale of it just dwarfs anything else.”
https://www.nbcnews.com/news/us-news/how-billions-pandemic-aid-was-swindled-con-artists-crime-syndicates-n1257766
When investigators raided a strip mall store in Garden Grove, California, in December, they found a line of customers snaking around the parking lot and huge stacks of cash inside the store.
Orange County prosecutors say Nguyen Social Services was charging up to $700 a pop to file false unemployment claims for people who did not qualify to receive Covid-19 relief money.
The brazen fraud was part of an overall scheme that cost taxpayers an estimated $11 million, prosecutors say.
“This isn’t just an Orange County problem. It isn’t just a California problem,” said Orange County District Attorney Todd Spitzer. “This is a breakdown of catastrophic proportions that has failed the American taxpayer.”
Government aid programs have long been fertile ground for scammers. But the scale of the fraud in the unemployment program created by the CARES Act has reached a staggering level, state and federal officials say.
The Labor Department inspector general has yet to complete a full investigation but, based on previous programs, estimates at least $63 billion of the $630 billion in disbursements has been misspent. The full scope of the loss in taxpayer funds is likely many times higher, experts and officials say, soaring well beyond $100 billion.
A rush to release the funds put enormous strain on state workforce agencies, creating a bonanza for individual scam artists and international cybercrime rings. And the federal government was slow to act despite early red flags, according to interviews with more than two dozen fraud experts, senior law enforcement officials and state and federal officials.
The Justice Department has assembled a task force to root out fraud across all 50 states and U.S. territories. Only now is the extent of the theft of taxpayer funds starting to come into focus.
A senior federal law enforcement source familiar with the investigation said the fraud is so complex and multilayered that it will take months to develop a full accounting.
Full coverage of the coronavirus outbreak
“It just continues to kind of spiral out and connect to other types of fraudulent acts,” the source said.
Officials in California, one of the only states to launch a review of the Covid-19 relief program, said they have tallied $11 billion stolen from taxpayers so far, but the total figure could be as high as $30 billion, or 27 percent. An early review in Nebraska, which looked at all statewide payments through June, found roughly 66 percent of unemployment money was misspent.
"In California, this is unquestionably the largest fraud against public agencies in our history," said Vern Pierson, president of the California District Attorneys Association. "Increasingly we are learning there could be fraud of historic proportions nationwide. While we don’t know the exact price tag, we know the amount of the loss of taxpayers is staggering."
A tsunami of attacks
The CARES Act was supposed to be a lifeline for a U.S. economy in free fall. Seeking the most efficient way to get cash into the hands of millions of jobless Americans, Congress turned to state workforce agencies, which administer unemployment insurance programs.
One of the act’s mandates was a new initiative called the Pandemic Unemployment Assistance program, aimed at helping gig workers, caregivers and people who are self-employed, all of whom are not typically eligible for unemployment insurance.
The program was quickly flagged as high-risk by the Labor Department’s inspector general. There was no former employer to verify this category of claims, so states had to build the program around self-reported work history. On top of that, many states also relaxed internal controls amid pressure to quickly approve a crushing influx of claims, according to state and federal officials.
“Water is going to find the leak. The criminals are going to find the weakest link,” said Alyssa Levitz, who leads the unemployment team at U.S. Digital Response, a nonprofit that provides tech assistance to local governments responding to crises. “And as the Pandemic Unemployment Assistance was being stood up, it was the weakest link.”
NBC News asked all 50 state workforce agencies how much money they have lost to fraud, but the vast majority that responded said they did not yet know the full extent of the loss.
Early indications in some states point to massive problems.
In routine reviews of payments through last June, Nebraska’s auditor found two-thirds of unemployment funds were misspent, and Kentucky’s auditor found that the program’s internal controls were so weak that they violated federal law.
The former executive director of Kentucky’s state workforce agency wrote in an email to staff: “Keep in mind, the goal is to put money in people’s hands ASAP to help them survive,” according to the audit.
The nationwide theft of taxpayer dollars continued quietly until December when Congress mandated that states verify the identity of claimants.
ID.me, an identity verification company that has now been contracted by 21 states, told NBC News that it is holding the line against a “veritable tsunami” of fraudulent claims flooding into state systems, raising questions about what passed through unseen before they got there.
“It’s like looking at fire burning inside of a house, but no fire alarm is going off,” said Blake Hall, the chief executive officer of ID.me. “It really is a national crisis.”
A wide array of fraudsters
More than 100 defendants have been charged across 71 cases in connection with CARES Act unemployment fraud, according to the Department of Justice. Federal authorities have seized or frozen $65 million, which is close to half of the actual losses associated with the crimes.
Many more people have been charged in state courts in connection with defrauding the program.
Huy Duc Nguyen and Mai Dacsom Nguyen, the pair accused of forming Nguyen Social Services to steal taxpayer funds, have each been charged with multiple counts including perjury and conspiracy to defraud another of property. They were released from custody but have not yet entered a plea.
Attempts to reach them were not successful. A spokesman for Orange County Superior Court said the court has not been notified that they have hired an attorney. The Nguyens are due back in court next month.
But for the overwhelming majority of phony unemployment claims, the culprits have not been caught.
The most common tactic used to fraudulently obtain cash meant for newly unemployed people is not especially sophisticated, experts say.
Identity thieves, who use Social Security numbers and other personal information stolen in data breaches and available on the dark web, account for 20 percent of the phony claims identified by ID.me, according to a company report.
“It’s so widespread and indiscriminate that they even target people who are heads of law enforcement agencies,” said Illinois Attorney General Kwame Raoul, who told NBC News that a scammer used his personal information to illegally obtain funds.
High-profile politicians such as Sen. Dianne Feinstein, D-Calif., and Ohio Gov. Mike DeWine were also victimized in this way.
Many identity theft victims may have no idea that benefits were filed in their name. But in recent weeks, millions of Americans began receiving 1099 tax forms from the IRS for benefits they never got.
Michael Webb, a 41-year-old former business owner from Lexington, Kentucky, was dumbfounded when he received a 1099 that showed $13,000 in benefits was filed in his name.
Webb had filed for unemployment benefits in March — and followed up repeatedly since then — but never got his claim approved. He now suspects it may have been because someone had already made a claim using his personal information.
“We're this close to losing everything,” said Webb, a father of three.
Another 10 percent of fraud comes from more elaborate “social engineering” attacks where an attacker tricks a victim into sharing personal data or otherwise cooperating in the fraud.
These attacks have played out in the form of multistage romance schemes, in which scammers try to woo victims and then convince them to hand over personal information, and even mass scam texts purporting to be from government agencies. To pass facial recognition checks, some criminals have even used 3-D printers to create masks of identity theft victims’ faces, according to ID.me.
In one chat transcript shared with NBC News, a victim thought he was getting hired by a German packaging company. Whoever was behind “Mr. Chapin Floyd, Materials and Quality” succeeded in convincing the victim to send his government ID, credit score and wireless carrier, among other details.
The opportunities have attracted garden-variety criminals, jail and prison inmates and at least a few desperate first-time offenders. But the most prolific offenders appear to be transnational organized crime groups out of West Africa, Asia and Eastern Europe, law enforcement officials say.
Cybersecurity firm Agari issued a report last May detailing how Scattered Canary, a Nigerian cybercrime ring that specializes in online scams, was targeting CARES Act unemployment insurance.
Researchers say it didn’t take long for playbooks on how to target unemployment agencies to pass through the dark web to like-minded scammers in places like Dubai, Hong Kong and Moscow.
“They are seeing essentially trillions of dollars that is up for grabs,” said Crane Hasshold, Agari’s senior director of threat research. “This is their World Series. This is their Super Bowl.”
A slow government response
There were early red flags that unemployment insurance was being targeted heavily by criminals.
Over the first few months of the program, Washington state announced hundreds of millions lost to fraud, and law enforcement agencies including the FBI and the Secret Service issued warnings. Meanwhile, some economists puzzled over why data showed there were more people collecting benefits than were actually unemployed.
The Labor Department’s inspector general has issued several public reports, including a June report to Congress that warned “the volume of UI investigative matters currently under review is unprecedented in the DOL-OIG’s history” and warned of losses higher than $36 billion.
The previous administration issued guidance to states and provided funding to combat fraud but took little public action other than that. In a November report, the Labor Department inspector general noted the department has “made efforts to focus on program integrity” but needed to develop better oversight of state unemployment claims.
A senior Labor Department official under the Biden administration told NBC News, “There was not enough focus from this agency and others, that was swift enough and focused specifically on the evolving type of fraud that it was seeing.”
A Labor Department spokesperson said in a statement to NBC News: “We are working on a comprehensive approach to partnering with states to minimize fraud, waste and abuse, while making sure Americans who have lost their jobs through no fault of their own are able to receive the benefits they deserve and desperately need.”
The embattled state agencies are likely to face further strain — at even higher stakes for taxpayers — with the next round of federal stimulus. The situation is “extremely serious,” in the words of the senior official at the Labor Department.
Criminals continue to flood the system, bouncing between states. ID.me recently caught 2.2 billion server requests out of Hong Kong in a single day and four major distributed denial-of-service attacks — attempts to overwhelm the server — originating from Nigeria in a single morning.
“It’s going to take a while to figure out the scope of this thing,” said Mason Wilder, a senior research specialist at the Association of Certified Fraud Examiners. “But the scale of it just dwarfs anything else.”
https://www.nbcnews.com/news/us-news/how-billions-pandemic-aid-was-swindled-con-artists-crime-syndicates-n1257766
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Criminals here apparently stole $100 billion dollars in state distributed relief funds.
$100 billion! That's a decent chunk of change!
I wonder if state finances utilizing a blockchain based, public ledger, could cut down on rampant fraud and abuse of state revenues.
Perhaps it would be worthwhile to found a blockchain financial movement towards greater transparency and accountability of how public funds are allocated and distributed?
Would blockchain's unique features be well suited towards fulfilling such a role? Is there a better format or structure for curbing fraud and abuse on this scale.
What say you, forum?
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