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Bombshell Report 💣 And A New Wave Of Identity Fraud Attacks
Frank McKenna
March 27, 2023
Welcome, Fraud Fighters and Scam Stoppers
Every week there is something interesting happening in fraud, and this week really kept us on our toes.
And most of the activity seemed to focus on fake accounts and new waves of identity fraud attacks from China.
There was a new explosive report on Cash App. Socure reported a new organized wave of identity fraud hitting the industry, and a fraud prediction model called the M-score is flashing an alert that we are at the highest rate of corporate fraud risk in over 40 years.
Let’s check out some of my favorite stories and fraud fighters of the week.
New Bombshell Report Accuses Cash App Of Widescale Fraud And Fake Accounts
For years fraud fighters have always believed Cash App was the poster child for fraud and scam activity.
This week, the famous short sellers - Hindenberg Hindenburg Research released a searing report today where former employees of Block claim that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
It’s a fascinating expose, including quotes from former employees and their experience with the payment app company
Banks Come To Cash App Defense, Say “Systematic Fraud Highly Unlikely”
Surprisingly, some banks are coming to the defense of Cash App. In particular, Truist and Keybanc analysts spoke up about the Hindenburg report.
Truist analyst Andrew Jeffrey has indicated that systematic fraud is very unlikely at Block. He says that to establish an account with Cash App, you must tie it to a bank account first, so creating fake accounts would be hard.
While anyone can order a card, it still needs to be authenticated like any bank card — including verification of an SSN and/or drivers license.. To our knowledge, it is not possible to gain access to the full functionality of Cash App by using a fake SSN. To the extent Cash App fraud exists, we think authentication requirements are enough to assure that core profitability is not materially impacted.
If only 100% of bank accounts were free from synthetic identities and fake driver’s licenses were not invented yet, right?
Organized Burst Of Identity Attacks Emerged As Bank Meltdowns Happened
Speaking of synthetic identities and being unable to use a fake SSN to get a Cash App account, synthetic identity is still raging.
This week’s Linkedin post of the week goes to Johnny Ayers, CEO of Socure. What I found super interesting was one of the points that was reported at last week’s Fintech Meetup.
And it was this👇
“Many are currently under organized waves of attack; most are seeing 3-4x increased synthetic attacks in just the last 2 weeks”
According to Ayers, it started after the Silicon Valley Bank implosion. They saw a clear spike in third-party and fraud attempts at small business banks.
A subsequent blog post by the amazing Mike Cook this morning provided more details on the spike.
Apparently, bad actors had been testing the banking system for weeks and then scaled up their attacks with bots on March 10th after the bank collapses began.
Most disturbing of all? A flood of those attacks appeared to originate from China!
Fraud Prediction Model Is Flashing Highest Corporate Fraud Risk In 40 Years
A corporate fraud prediction model called the M-score is flashing its highest risk in over 40 years.
The M-score analyzes corporations’ quarterly reports and predicts the likelihood that they are manipulating earnings.
An aggregate M-score was recently released, which tracks 2,000 companies in the US and is tracking at its highest point since 1980. This could either mean we are headed for a likely recession, or some massive fraud is going on. Or perhaps is could mean both.
This Woman Just Can’t Get Enough ID Theft!
Just how many counts of identity theft can one woman get?
In the case of 60-year-old Kathy Lachat, way more than you can count. Police said Lachat has been charged with 1,166 counts of identity theft, and that’s just in the last 3 years!
Apparently, she’s been doing the identity theft game since 2016, and they haven’t even finished investigating her crimes yet.
Apparently, the judge didn’t seem to think it was a big deal and set her bail at only $5,000.
She’ll be out in no time doing it all again soon.
Fraud Fighter David Maimon Knew Check Fraud Was Going To Erupt A Long Time Ago
You've likely encountered David Maimon, either during his insightful media interviews on check fraud or through his revealing LinkedIn posts that shed light on the inner workings of underground fraud markets.
I first ran across him when I started investigating the rumors of increased check fraud that banks were reporting about 18 months ago.
At the time, the only person raising the red flag was David. He was seeing something emerge on Telegram that was concerning.
He was witnessing a booming secondary market for stolen checks, as well as money mules and walkers that would help pass bad those bad checks for criminals.
I asked David why he loves fighting fraud. His response? “ My passion for the study of online fraud is embedded in the thrill I get from discovering new things. Fraudsters evolve constantly and change their modus operandi rapidly, so this dynamic environment produces innovation and discovery at a fairly high rate”
David is the director of the Evidenced-Based Cybersecurity Group and a professor at Georgia State University. The group monitors hackers, scammers, and fraudsters’ activity on Telegram and the Dark Web, and their work is outstanding.
If you want to hear a great podcast with David, check out Karisse Hendrick's Latest Fraudology Episode, where David goes in-depth on threats you probably don’t know about yet.
Thanks for reading this week’s edition of FrankonFraud. Please let me know if you have any tips or want me to recognize someone extraordinary in fraud.
Have a fantastic and very positive fraud-fighting week.
Keep your eyes out for fraud! 👀
Frank McKenna