Greetings from FrankonFraud,

What a week in fraud-fighting. Lots of reports and insights were released last week, giving us a treasure trove of fraud insights.

Last week we saw:

• Another massive founder fraud case emerged

• Fraud Expert warns Credit Union’s fraud risk is rising

• FinCEN released major guidance on Pig Butchering

• Visa blocks $30 billion in fraud

• Sentilink is cracking the code on phone numbers

• Gangs are using Spotify to launder money

• Aria hotel experienced a crazy internal fraud

• BioCatch announces big growth in ARR

• A woman netted $7 million in job fraud scheme

• The Fed released a universal definition of scams

Let’s get to those top stories right here! 👇

Vesttoo - Founder Fraud Alleged In Massive Billion Dollar Scheme

A few weeks ago I reported a developing fraud story on Vesttoo, the startup focused on insurance risk.

The company eventually declared bankruptcy and new management has alleged that the two co-founders were directly linked to forging documents that led to its downfall.

If true, this could be another devastating blow to startup’s. This has become the year of founder fraud.

The Amazingly Simple Fraud Rule We Used To Crush Fraud Losses

In the late 90’s I was hired to manage the credit and debit fraud strategies for a major bank. The bank was getting hit with every counterfeiting fraud ring imaginable and fraud losses were hitting 7 times the industry average.

My boss at the time said to me, “Find a Way To Help Us Reduce Fraud By 75%”

Then someone handed me a 30 pound box containing printouts of the 40,000 authorization rules they wanted me to “fix”.

I needed to do something fast.

Little did I know at the time, that within 30 days I would stumble upon an amazingly simple fraud rule that would help us crush fraud.

Click on This Link Or Image Below To See What That Rule Was

Fraud Report - As Banks Tighten, Credit Union’s Auto Fraud Risk Is Growing

Justin Davis says Credit Union’s risk of auto loan fraud is growing as other traditional banks and finance companies pull back.

According to Justin, Credit Unions have become a major force in auto lending as they offer subprime lending and open the doors to more indirect through dealership channels.

What worries him is the recent spike in charge-offs on their auto portfolios in the last three months. He believes that at least some of that spike could be tied to synthetic identity fraud and other first-party fraud types that some credit unions have never had to experience before.

You can check out his whole analysis here on the rapid growth of credit unions and their changing risk profiles.

FinCEN Releases Major Guidance on Pig Butchering

FinCEN released a major report and guidance last week on growing Pig Butchering Scams.

The alert tells banks the types of red flags they should monitor to detect and prevent the scam.

The alert also directs banks on how to fill out SARs and advises them to use the term “FIN-2023-PIGBUTCHERING” so that the trend can be correctly reported and tracked.

Thanks to Barry Koch for the heads up on this report.

Fraud Streams - Criminal Gangs Are Using Spotify To Launder Money

Violent criminal gangs in Sweden have developed a clever scheme to launder money on Spotify.

Musical artist with ties to the criminal gangs publish their music on Spotify. Then the gangs pay people who sold fake streams to boost the listen counts.

The revenue from those fake streams then funnels back to the artist who helps the gangs launder the money.

It’s a win for both the gangs that get their money laundered and for the musical artist who becomes Spotify famous.

Insane $770,000 Debit Card Refund Fraud At Aria Hotel in Vegas

A hotel manager at the Aria was arrested after he was caught living well beyond his means.

After investigators caught up with him, they determined that he used his authority to approve refunds to customers “real stays” but instead of refunding the money to their cards, he routed it to his own debit card.

All told he managed to route 209 fake refunds for over $770,000 to his own Chase Debit Card.

Click here on image below to read the article

Woman Held 16 Jobs At The Same Time In Mind Boggling Job Fraud Scam

A woman in China pulled off the biggest job fraud in history- holding 16 different jobs and collecting $7 million in salary.

She did this by applying for new jobs even while already working at one or more companies. When interviewing for a new position, she would take photographs and send them to her existing employers, saying the pictures were from client meetings.

And when she couldn’t keep up with all the job offers she was getting, she outsourced the jobs to her friends creating a job fraud network so they could help her rake in money.

Before long she amassed a team believed to be made up of 53 people, whose earnings she was funneling through multiple bank accounts.

It’s Happening. Just Like Crypto, AI Is Having It’s Hype Bubble Fraud Moment

Just like Crypto in 2022, AI is in a massive hype bubble. And just like Crypto, there is probably going to be a lot of fraud because of it.

Two big AI related investment fraud cases surfaced this week.

The first involves this AI Driven Hedge Fund started by a guy named Mina Tadrus who promised investors unbelievable 30% annual returns. How could he promise such lofty returns? Why he had a great AI Machine that could pick the best stocks. In reality he just pocked all the money for himself.

The second case involved this AI Automators, a West Hollywood Company that promised enormous profits to merchants by using AI machine learning to maximize their profits. The FTC alleges that they garnered about $22 million from their “factually inaccurate fraud claims.”

Fed Working Group Steps Up To Provide A Universal Scam Definition

The Fed just released the first ever Universal definition of scams and they kept it simple - “the use of deception or manipulation intended to achieve financial gain.”

The definition was created by an industry working group, including Mary Ann Miller.

Cool Blog - Sentilink Cracking The Code On Phone Numbers And Fraud Ring Risk

Sentilink published a cool blog this week unveiling the risk of “non-issued phone numbers” on identity theft risk.

Apparently, there is some widespread abuse of those phone numbers by fraudsters and most of the abuse is targeted at a single major phone carrier.

The data scientists found that fraud ring activity could be detected based on the sequential use of unassigned phone numbers.

Click on this link or image below to read the study

Biometrics For Fraud Is Hitting It’s Stride. BioCatch Announces Big Growth

The use of Biometrics in fraud detection and money laundering are really catching on.

BioCatch announced it now processes over 7 billion user sessions each month, counts over 100 of the largest 500 banks in the world as customers and grew to over 275 employees worldwide.

They didn’t release their actual revenues but based on estimates from last year one has to imagine it could be closing in on $100 million in recurring revenues annually.

Could an IPO or acquisition be in the cards for BioCatch? The firm has raised $251 million from investors, so the expectations for the companies tech is high!

Frustrated Bank Teller Say’s The Fraud Department Doesn’t Care

A bank teller complained on Reddit that they keep catching identity theft fraudsters in the branch but the fraud department keeps telling him to “let them go”.

The post titled “Does your branch contact law enforcement when fraudsters in a ring of organized crime with stolen IDs attempt to transact?” makes it clear that not every bank is very aggressive at contacting law enforcement when fraud is happening.

Visa - Fraud Is Down. They blocked $30 Billion in Fraud This Year

Visa published their half yearly fraud report. The good news is that fraud has decreased and that they’ve already blocked over $30 billion in fraud attempts.

The bad news is there are some new concerning trends showing up in their data that you should be aware of.

“I Got Scammed” and PayPal’s Disastrous Virtual AI Response Has Me Rolling

We humans love to laugh at machines. They think they are so perfect. I lol’d at this screenshot a co-worker shared with us last week.

Thanks for taking the time to read my weekly newsletter to the end. Is anyone else going to be at MBA’s Fraud and Compliance Conference in DC?

I will be there talking about my favorite subject - Credit Repair Fraud, sharing insights and trends from my research.

Have a great week from FrankonFraud!