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Scammers launder thousands and thousands of Covid aid funds by on-line funding platforms

Tech-savvy scammers stolen from the government’s Covid pandemic relief programs to help businesses launder the money conveniently: They’re opening accounts with at least four online investment platforms, police officers said.

The digital platforms, according to investigators, are easy to throw at the money by setting up accounts with stolen identities. Authorities say more than $ 100 million in fraudulent funds have been transferred through investment accounts since Congress passed the CARES bill last March.

A non-partisan group of Democratic and Republican Congressmen announce a proposal for a Covid-19 relief bill on Capitol Hill on December 1, 2020 in Washington, DC.

Tasos Katopodis | Getty Images

Thieves have used Robinhood, TD Ameritrade, E-Trade and Fidelity to launder the money, law enforcement officials said.

The government quickly rolled out the Paycheck Protection Program and the Economic Injury Disaster Loan (EIDL) program last year to help small businesses. Both programs were fraught with problems. In an inspector general’s report published last October, inadequate controls were blamed for potential billions in fraud.

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“The thieves love this stuff. This was the Bonanza Act on Financial Crime of 2021,” said Charles Intriago, a money laundering expert and former federal prosecutor.

Because of the size of the potential fraud, he said, law enforcement is “facing a huge situation where the money is so massive, and the criminals see it as a great opportunity. They are taking the chance to tear it down.” . “

Roy Dotson, assistant to the special agent in charge of the secret service.

CNBC

A large number of money laundering investigations are ongoing, according to Roy Dotson, the secret service’s assistant special envoy who specializes in financial crimes.

“It’s definitely something that is visible to us. It uses all kinds of investment platforms,” ​​said Dotson.

Criminals take advantage of the ability to sign up for accounts as well as the relative anonymity compared to opening a bank account, he said.

“It’s just another layer that makes it harder for law enforcement to understand where the funds are coming from,” he said.

Dotson would not discuss the names or the number of target companies. He would just say that it is “multiple investment platforms”.

He estimated that “more than $ 100 million went through these platforms”.

How the scam works

The scam usually works like this: the criminal steals a business owner’s identity and applies for a loan. Once they get the money, the money has to be deposited somewhere, making it difficult for investigators to track down. As a result, fraudsters routinely use the stolen identity, which is usually an individual’s date of birth, social security number and other personal information, to open an investment account such as Robinhood.

In other cases, police officers say, the criminals use something called a “synthetic identity”, a fictitious social security number tied to a real person, or “mules” involved in the system.

Robinhood, which was recently on the news due to a wave of retail investor interest sparked by so-called meme stocks like GameStop, has been targeted in several fraud cases investigated.

Det. Ricardo Peña of the Coral Springs, Florida Police Department.

CNBC

Ricardo Pena, a fraud investigator with the Coral Springs Police Department in Florida who is part of a federal anti-fraud task force, said he is investigating several cases where robinhood has been used by criminals to launder PPP funds and EIDL funds.

A scammer stole Marc Heiberg’s identity and was able to obtain $ 28,000 in EIDL funds to transfer to a Robinhood account.

CNBC

In one case, Pena said the scammer stole the identity of a local named Marc Heiberg and was able to obtain $ 28,000 in EIDL funds raised using fraudulent information for a nonexistent company with 60 employees. The scammer then opened a Robinhood account and attempted to transfer most of the money from a bank account using the victim’s identity.

Records show an “ACH reversal” three days after the account was opened, Pena said. That is, the transfer was reversed.

Heiberg, a corporate merchandising manager, said Robinhood told him that the fraudulent account was being investigated. The criminals also opened an account with Chase, he said.

“It just gets totally outrageous that they can just take anyone like me out there, take your social security number and open accounts with a bank, open accounts with the government and have the money deposited and then start laundering and laundering others.” Company, “said Heiberg.

He said he was concerned that other accounts might have been opened on his behalf.

“My name means everything to me. You know, I have, I have boys, I have a family. And I want their names to be intact too,” said Heiberg.

The Small Business Administration, which oversees the loan programs, told CNBC that “new, improved measures” have been in place to detect fraud since the first round of loans was launched last year.

In a statement, Amy Bonitatibus, Chase’s chief communications officer, said, “We are actively monitoring for signs of fraud and taking quick action to protect our customers. If so, we immediately identified suspicious activity on the account that helped prevent a Money was withdrawn or transferred. “

The security video shows a suspected fraudster attempting to withdraw money from an ATM in a Chase bank in Boca Raton, Florida.

Coral Springs Police Department.

Coral Springs’ detective Pena said he had not identified who set up the fraudulent accounts, but screenshots of security videos show a suspect trying to withdraw money from an ATM in the bank.

Suspicious scammer at a chase bank in Boca Raton, Florida.

Coral Springs Police Department.

He said Robinhood is often targeted for its attraction to younger people – and many of the criminals are in their twenties.

“You hear about it; everyone goes there. Even the criminals know about it,” said Pena. “A lot of the people who commit these scams are younger. They understand e-banking. Platforms like Robinhood are just easier to get these accounts to move money in and out of. And they know there isn’t that much control. “

Rick McDonell, executive director of the Association of Certified Anti-Money Laundering Specialists, said he was not surprised by this form of fraud.

“If I were a good criminal, I would avoid banks like the plague,” said McDonell, one of the world’s leading experts on money laundering.

Scammers are also drawn to the ease of use of Robinhood and other such platforms, said Etay Maor, senior director of security strategy at Cato Networks.

“It’s not like you have to go to a bank and show yourself,” Maor said. “The criminals do their homework and find the best way to deal with such high reward, low risk situations. By the time you find out the information, the money will be gone.”

The platforms react

Three of the investment platforms that responded to requests for comment told CNBC that they have strict anti-fraud protocols in place to verify account information and have worked with law enforcement agencies on the matter.

A Robinhood spokesperson said, “We are focused on preventing fraud before it occurs and our fraud and security teams have worked with law enforcement to mitigate and address this industry-wide problem. Like other brokers and financial institutions, Robinhood is reviewing new customer information across different data sources and may require government-issued IDs. “

A spokesman for TD Ameritrade said the company has “made efforts since the inception of the CARES Act to identify and mitigate on the front lines of this type of fraudulent activity, including working with law enforcement, peer firms and government agencies.”

It added that “there will always be bad actors trying to take advantage of vulnerable investors / people at every opportunity – that is precisely why we have processes and controls in place to identify and escalate this behavior.”

Fidelity said in a statement that it “has discovered accounts with suspicious deposits related to this industry-wide problem related to COVID-19 relief funds. We are in constant coordination with law enforcement agencies and their efforts in this regard.”

In addition, the company has a number of safeguards and multiple levels of security in place to detect fraudulent accounts and subsequent transactions. Some of our protections are inherently visible and some are not. To ensure the integrity of our security practices, it is inappropriate for us to comment on these specific safeguards. “

E-Trade did not respond to multiple emails and calls.

Other fraud

Some scammers using online investment platforms don’t even bother to steal an identity.

In a recent Seattle case, prosecutors accused technical director Mukund Mohan of obtaining $ 5.5 million in total PPP funding by filing fraudulent loan applications. Court records show that $ 231,471 was deposited into Mohan’s Robinhood account, the remainder at various banks.

Mohan, whose LinkedIn account lists him as a former Director of Engineering at Microsoft and Product Management Director at Amazon, has apologized for the fraud.

In a blog post last August after he was charged on the case, Mohan wrote, “I screwed it up. I can’t say no. I hurt people who trusted me, believed in me, and are now beside themselves . Unfortunately I am. I can’t talk about the details given the legal circumstances, but I really apologize. “

Mohan pleaded guilty to wired fraud and money laundering. The sentencing is scheduled for July. He declined CNBC’s request for comment.

Secret Service’s Dotson said the size of the entire fraud was staggering, a claim that has been confirmed by other federal agencies and departments.

The Department of Justice has seized or forfeited $ 626 million in criminal and civil investigations related to the PPP and EIDL programs, less than 1% of the nearly $ 84 billion fraud found in the programs said the House Select subcommittee on the coronavirus crisis.

“Because of the huge volume of the stimulus package, the amount of money and the opportunities, individuals have only used the different platforms,” ​​said Dotson.

For more information on this story, check out CNBC’s “The News With Shepard Smith” on Monday at 7:00 pm (CET).

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