The Federal Trade Commission is cracking down on scammers who’ve seen the coronavirus pandemic as a business opportunity.
“Operation Income Illusion” is specifically designed to take action against would-be scammers who pitch get-rich-quick investment schemes, sometimes using fake job offers and even sending out checks that turn out to be phony.
Andrew Smith, director of the FTC’s Bureau for Consumer Protection, told reporters in a teleconference Monday, “The financial fallout of the pandemic has increased both financial distress and opportunities for scammers.”
Smith said data from the FTC shows people lost nearly $150 million to income scams in the first months of the year. In the second quarter of 2020, the commission received reports of 11,879 income scams, a 70% increase compared to the same period in 2019.
Scammers use multiple tools, including social media, in their pitches to consumers, Smith said.
One example is National Web Design, which currently faces legal problems with the FTC. The entity is accused of sending out “millions of illegal robocalls, claiming that people can make hundreds of dollars a day,” Smith said.
“When the COVID-19 outbreak began, the defendants targeted people who recently lost their jobs,” Smith said. The pitch included an offer telling recipients that they could work from home as “associate members” and make up to $400 a day.
Smith said, “We allege that while the defendants charged people hundreds or even thousands of dollars, all they gave them was a worthless and defective website.”
The FTC has launched a public education effort as part of “Operation Income Illusion.” Among the steps consumers should take, is to hold off on acting on any job or business opportunity offered to them online or through robocalls, Smith said.
“If you find a business opportunity, take your time, especially if they’re trying to rush you. High pressure sales pitches are always a big red flag.”
Second, said Smith, “Be skeptical about success stories and testimonials. Our experience shows that glowing stories can be faked and online reviews can be made up.”
The FTC suggests researching any company or entity pressuring you to jump on to an opportunity before it is no longer available. “This can be as simple as searching online for the company’s name, plus words like review or scam or complaint.”
Maryland Attorney General Brian Frosh, who joined FTC officials on the call Monday, said even if you know and trust the person suggesting you take part in a financial scheme, be cautious. They may be making an earnest offer while “hawking schemes or products that can cost you big time. Sometimes they’re not even aware that they’re in the middle of a pyramid scheme.”
Frosh described cases where immigrants who were approached through people they knew and trusted were left with empty bank accounts, and no way to track down the people on the other end of the scheme.
Frosh described the case of one man who spotted an ad on Craigslist that promised readers an opportunity to open their own bagel restaurant. “The promoters promised to help the victim find the location and set up his business. He paid an initial franchise fee of $27,500 by cashier’s check.” The man was told if he couldn’t obtain financing, they would refund 100% of the “franchise fee.”
When the man failed to get the needed financing and tried to get his money back, the “promoters” could no longer be reached.
Frosh said, “Remember the old adage If it sounds too good to be true, it probably is.”
Another tactic includes issuing fake checks. The intended target of a scam gets a check that appears real. The victim is told to send along a payment, but by the time the victim’s bank determines the check is a fake, the victim’s already send cash to the scammers—and often is left with an empty bank account.
Frosh said before he became attorney general, his law practice was targeted. He explained he had a client who had retained him in a financial dispute with her husband. Frosh had put in extensive time on the case. And the woman sent along a case, saying her husband had finally given her the money at the heart of the dispute.
Frosh said the check appeared legitimate, it had watermarks and official looking seals, but the circumstances made him suspicious. Something about it seemed “fishy,” he said. Frosh’s staff contacted the bank that had issued the cashier’s check and was told the bank didn’t recognize the check. “They didn’t say it was a bad check,” said Frosh, they just said they didn’t “recognize it.” Had he deposited that check and assumed it was legitimate, Frosh said “we’d be out hundreds of thousands of dollars.”