A Consumer Action News Alert • October 2021
  Common ties that badly bind  

You might be someone who is most comfortable with people "like you." If this is the case, make sure to be extra careful to avoid recommendations and come-ons from strangers who appear to have something in common with you. Known as "affinity fraud," these schemes target members of identifiable groups, such as the elderly, LGBTQ, people of the same religion, non-English speakers and ethnic communities. The term describes attempts to take advantage of the trust created by having something in common. There have been many investment frauds carried out under this guise, although it's used in other frauds as well. The SEC's Office of Investor Education and Advocacy issued an investor alert with tips on how you can avoid making investment decisions based solely on common ties with someone recommending or selling the investment. Affinity fraud often comes in the form of Ponzi or pyramid investment schemes, similar investment frauds that pay existing investors with funds collected from new investors, leading to the eventual collapse of the "pyramid" and huge losses for investors. Red flags to look for include promises of high returns with little risk, unlicensed sellers, and instructions to keep the investment secret. (Learn more about these schemes.) Recently the SEC charged a man with affinity fraud targeting the Venezuelan American community in Miami--misappropriating millions in investors' money for personal use, including a lavish wedding at a French chateau, a luxury Miami condominium, and servicing of his personal airplane. In another recent FBI case, members of the Pennsylvania Amish and Mennonite communities were swindled out of $59 million in an affinity fraud scheme.

  Only the lonely  

Romance scams involving seniors surged during the COVID-19 pandemic. According to the Federal Trade Commission (FTC), in 2020 losses from romance scams reached a record $304 million, up about 50% from 2019. For individuals, that means a median dollar loss of $2,500. The FTC says that scammers create attractive online profiles to draw people in, often copying photos of good-looking people and using made-up names. Some even assume the identities of real people. Once they make online contact, they often devise reasons why they can't meet in person. The pandemic inspired new twists to the liars' stories, with many people reporting that their so-called suitor couldn't travel because of the pandemic. Some scammers repeatedly canceled plans to meet due to positive COVID-19 tests. More and more people are looking to find love and companionship on the internet, according to the Pew Research Center. Last year it found that 3 in 10 U.S. adults said they had used an online dating site or app. The U.S. Senate Special Committee on Aging just released its 2021 Fraud Book, which has some tips on avoiding romance scams. You don't have to use an online dating site to get targeted by a "romance scam"--fraudsters can get to you through social media (like they did with this Philadelphia woman), so make sure to use social media wisely.

  Misguided trust  

What to leave behind. There comes a day in most of our lives when we start thinking about our mortality and what we have to leave behind. Wills and living trusts give us an opportunity to direct how our assets will be distributed after our death. "Avoiding Living Trust Scams," by the National Consumer Law Center (NCLC), is billed for advocates, but we think it's useful for everyone contemplating estate planning. The NCLC, a group we consider a staunch ally, notes that many living trust mills advertise through the mail, door-to-door, or by sponsoring seminars offering food or drinks. (Yes, wise SCAM GRAM readers, you know there is no such thing as a "free lunch"!) Many offers are designed around highly dubious tax avoidance schemes that could get you in hot water with the Internal Revenue Service. Before you work with anyone on wills, trusts or tax planning, check them out. Here are some tips to avoid living trust scams.

Feel the 'Bern.' We wrote recently in SCAM GRAM about a New York Times investigation that revealed how fundraising operatives for both major political parties used dubious online tactics to trick people into agreeing to make recurring monthly donations to their party of choice. Many of the victims were seniors, but, honestly, this can happen to anyone because of tricky online sign-up forms. In the spring, a Brennan Center article warned us to "Beware of 'Scam PACs' and PACs that Scam." Sometimes, when you are passionate about something--like a certain candidate--you can fall into the hands of not just digital manipulators (bad enough!), but outright scammers whose efforts can be "bipartisan." Kyle Prall, of Austin, Texas, was sentenced to three years in prison for raising over half a million dollars through scam PACs called "Feel Bern" and "Trump Victory."


About that 'fraud alert.' A San Diego woman who described herself as a senior contacted Consumer Action's hotline to report that she had been scammed out of more than $50,000 after a caller who said he was from Chase Bank (where the woman banks) told her that her account had been hacked. What followed was days of calls during which the "Chase Fraud Department" representative purportedly helped her lock scammers out of her account. The scammer brought another person from "Microsoft Fraud" into the mix. At some point during her interactions with the imposters, the woman was instructed to go to her bank and wire all of the money in her account to another account so that "they could set up new accounts for me." Apparently, to avoid raising any red flags with bank tellers, the scammer told the woman (in her words, "programmed me") to say it was for an investment. Next thing she knew, the woman had lost the $54,000 she wired. What do you need to know to avoid this scam? Do not ever trust that a call, email or text message about your accounts is legitimate. Instead, hang up or disregard the message (and any included links) and then reach out to your bank directly, using the phone number on your debit or credit card or your account statement. David Lazarus of the Los Angeles Times recounted a similar story last May.

Framed for fraud. Seeking insights into what might influence some targets and not others to fall for scams, the FINRA Investor Education Foundation and its partners conducted a two-year study. The findings came from in-depth in-person interviews with 17 people, 10 of whom lost money to scams and seven who did not, according to individual "mental frames"--perceptions about money, people, power, authority and other aspects of life. Researchers identified four frames: compliance, opportunity, intelligence and order. The study identified people who are more likely to fall for scams and lose money as those who easily submit to authority or power (compliance); believe wealth is built on random opportunities with clear winners or losers (opportunity); see themselves as less smart than others and feel shame about not knowing things (intelligence); and believe that rewards and justice will be fairly meted out (order). Basically, those who hold the opposite to these beliefs are not as likely to fall victim to scams. The researchers conclude that "if we can better understand how assumptions and beliefs color an individual's reaction to financial scams, we can promote counternarratives that may strengthen defenses to financial fraud attempts." Read more about the study, including profiles and videos of study participants, here. View an infographic about the findings.

A scammer's marketplace? Facebook says its platform helps people "find each other." A new report from nonprofit news service ProPublica finds that the platform also helps scammers find victims. Of course, fraudsters lurk on a lot of digital platforms and retailer sites, including eBay and Amazon, not just Facebook. But the sheer scope of the reports about Facebook Marketplace scams is eye-opening: ProPublica found internal documents, law enforcement bulletins from multiple countries and media reports describing frauds involving lottery numbers, puppies, apartment rentals, gaming consoles, work visas, sports betting, loans, outdoor pools, Bitcoin, auto insurance, event tickets, vaccine cards, sexual enhancement products, miracle beauty creams, vehicle sales, furniture, tools, shipping containers, Brazilian rainforest land and even egg farms, among other enterprises. Scammers target both buyers and sellers, resulting in financial losses, hacked Facebook accounts and stolen personal information. ProPublica has advice for Marketplace users on how to avoid scams.

Flooded with fraud? With massive flooding in many parts of the country, and a tightened market for used cars along with higher pandemic pricing, it's a perfect opportunity for salvaged vehicle scams. Owners of vehicles ruined in floods that have been declared total losses by insurance companies might be allowed to keep the damaged vehicles--although flood-damaged, total loss and lemon vehicles will eventually be noted as such on vehicle titles. Still, dishonest sellers may try to move the vehicle quickly without any disclosure of the vehicle's true history. If a vehicle has had a salvage title, a disclosure to buyers is mandated by law in most states. To help consumers avoid scammers, the National Insurance Crime Bureau (NICB) offers a free lookup service, VINCheck, so consumers can check for "red flags," such as theft, accident damage or insurance losses, using vehicle identification numbers (VINs). Consider buying a used car only through licensed dealers. No matter where you decide to purchase a used vehicle, get a vehicle history report (such as CARFAX), and arrange to have the vehicle fully inspected by a trusted mechanic. If the seller balks at this, walk away from the deal.

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