FTC Cracks Down on Pandemic Scammers

Man frustrated upset hacked using online computer for work or banking personal finances and identity theft - stock photo
•••


5m3photos/Getty Images

When more than 20 million people lost their jobs in the pandemic’s first months, scammers sprang into action to offer newly unemployed workers and other vulnerable people fake money-making opportunities. Now, the government is taking some of the accused scammers to court. 

The Federal Trade Commission (FTC) said Monday that it’s working with federal, state, and local partners to launch a crackdown against the alleged scammers, filing law enforcement actions against perpetrators of work-from-home schemes, employment scams, pyramid schemes, investment scams, bogus coaching courses, and other so-called “income scams” that altogether reaped more than $1 billion in ill-gotten gains.

There was a 70% spike in income scam complaints in the second quarter of the year compared to the same period in 2019, FTC data shows. The COVID-19 pandemic and the ensuing tough job market created “ideal conditions” for scammers who specialize in reeling victims in with false promises of making money.

“These scammers are taking advantage of a desperate situation to rip money from those of us least able to afford it,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said in a conference call with reporters Monday.

Scammers target those in a vulnerable position, such as having lost a job or income, said Anthony Pratkanis, an emeritus professor of psychology at the University of California, Santa Cruz who specializes in the study of persuasion. 

“Given the spread of the COVID virus, many Americans unfortunately find themselves in this situation,” Pratkanis said. “The con then dangles a phantom solution—sham work-from-home jobs, phony investment scams, fraudulent educational programs, and destructive pyramid schemes. With bills mounting and other life pressures, it can be hard to resist the false promise.”

Many of the 50 actions that the FTC is counting as part of “Operation Income Illusion” have already been filed, but the crackdown includes four new cases against companies the FTC says ripped consumers off.

In one case, a business called Moda Latina, based in La Puente, California, is being accused of targeting Latina consumers with a work-from-home opportunity selling perfume. One pitch, translated, said: “Crisis? What crisis? I forgot about that ever since I started selling with Perfume Box. It completely changed my life and my finances.” But the FTC said victims’ finances actually changed for the worse, with the company raking in $7 million from those who purchased the work-from-home business, but didn’t make the promised earnings. Attempts to contact Moda Latina Monday night were unsuccessful.

In another lawsuit, RagingBull.com is being accused of bilking $137 million over the course of three years, mostly from retirees, older adults, and immigrants, by offering fraudulent investment services. The company told victims the coronavirus pandemic presented an opportunity to “double or triple” their money in just “one week.” The company did not immediately return an email asking for comment Monday night, and the company’s automated answering system did not permit leaving a message.

Consumers reported losing about $150 million to income scams in the first three quarters of 2020. The most popular types of scams, according to the FTC, are phony job offers involving fake checks, schemes that promise to teach insider secrets, and investment scams promising high returns.

Law enforcement crackdowns are an effective tool in the fight against fraud, Pratkanis said. In the past, they have taken scammers out of action and made it harder to carry out their schemes. However, he cautioned that crackdowns have limitations: Fraud crimes are difficult to prosecute, the penalties are typically less than for other crimes, and scammers, after being punished, are likely to change their schemes, methods, and location rather than reform. 

“That is why it is important to have a comprehensive approach to fraud prevention including public awareness campaigns, education, technological solutions, and private sector involvement,” Pratkanis said.