WELCOME TO PLANET CYBERFRAUD, U.S. REGION: IC3 Report Shows Tremendous Surge In Dollars Lost To Online Scams; Nevada, Utah, Florida, D.C. Among Cyberscam Capitals

Dollar value (in millions) of fraud referred for investigation by IC3 between 2007 and 2009. Source: IC3 2009 Internet Crime Report.

Welcome to the rapidly evolving world of Planet Fraud, U.S. Region — or, more precisely, the U.S. Region of Planet Cyberfraud, the electronic web of deceit that often exists out of view and is sucking wealth at an alarming pace.

Its capitals last year, according to a new report from The Internet Crime Complaint Center (IC3), included California, Florida, New York, Texas, Washington and the District of Columbia, with cyberfraud — viewed on a per-capita basis — particularly concentrated in D.C., Nevada, Washington, Montana, Utah and Florida.

People who complained about fraud — and the fraudsters they complained about — most often did not live in the same state. Complainants often weren’t able to identify the state in which a fraudster resided, according to the report.

Countries mentioned in the IC3 report include the United States, United Kingdom, Nigeria, Canada, Malaysia and Ghana. The report focuses on reports to IC3’s website, which operates in the United States.

Highest, per-capita concentration of cyerfraud in the United States in 2009. Source: IC3 2009 Internet Crime Report.

Not even law enforcement was immune from attacks by cybercriminals. The most common complaint that IC3 received last year was about an email scam in which the perpetrators used the name of the FBI — one of the world’s premier police agencies — “in an effort to gain information from the target,” IC3 said.

IC3 is a partnership between the FBI and the National White Collar Crime Center (NW3C).

“The figures contained in this report indicate that criminals are continuing to take full advantage of the anonymity afforded them by the Internet,” said NW3C Director Donald Brackman. “They are also developing increasingly sophisticated means of defrauding unsuspecting consumers. Internet crime is evolving in ways we couldn’t have imagined just five years ago.”

IC3 placed the dollar losses in cases it referred for investigation last year at $559.7 million, up more than double from 2008’s figure of $264.6 million. The number of complaints in 2009 surged to 336,655, up 22.3 percent from 2008’s total of 275,284.

Peter Trahon, section chief of the FBI’s Cyber Division, reissued the age-old warning:

“[I]f something seems too good to be true, it likely is,” Trahon said. He added that computer users should ensure they have “up-to-date security protection on their devices and evaluate e-mail solicitations they receive with a healthy skepticism.”

Why? Various appeals for money and various rogue attempts to corrupt computers by installing unwanted software and malicious code, including misery delivered by fake pop-up ads that “directed [victims] to purchase anti-virus software to repair their computers.”

In some instances this resulted in viruses, Trojans, or key loggers being downloaded onto victims’ computers, IC3 said.

Some highlights of the report:

  • In 2009, IC3 received several complaints presenting a new spin on the media coined “Hitman Scam,” a type of email extortion scheme. Victims are reportedly being threatened in an attempt to extort money. The victim receives an email from a member of an organization such as the “Ishmael Ghost Islamic Group.”
  • One of the components of crime committed via the Internet that makes investigation and prosecution difficult is that the offender and victim may be located anywhere in the world. This is a unique characteristic not found with “traditional” crime.
  • Another popular scam of 2009 involved unsolicited calls regarding fraudulent “government stimulus money.” IC3 received numerous complaints from victims receiving unsolicited telephone calls with a recorded message. The recorded voice message reportedly sounds very much like President Barrack Obama discussing alleged government funds available for those who apply.
  • IC3 received numerous complaints about work-at-home scams and survey scams related to online job sites.
  • Of the complaints involving financial harm that were referred to law enforcement, the highest median dollar losses were found among investment fraud ($3,200), overpayment fraud ($2,500), and advance fee fraud ($1,500).

Read the IC3 Internet Crime Report for 2009.

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9 Responses to “WELCOME TO PLANET CYBERFRAUD, U.S. REGION: IC3 Report Shows Tremendous Surge In Dollars Lost To Online Scams; Nevada, Utah, Florida, D.C. Among Cyberscam Capitals”

  1. “[I]f something seems too good to be true, it likely is,”

    Just to show that the Septic Tanks are not the only ones to fall for and operate ponzi schemes:

    Kevin Foster Found Guilty
    http://www.fool.co.uk/news/investing/2010/03/11/kevin-foster-found-guilty.aspx?source=isesitlnk0000001&mrr=0.25

    Harrow Crown Court heard how Foster, through his ‘KF Concept’ roadshow, promised investors that he had a foolproof gambling and multi-level marketing system, claiming that for every £1 invested he made £28.50, and that his scheme was sitting on a fortune of over £203m.

    It’s the same story as all the others – paying older “investors” with new money, spending on fancy cars & toys etc.

    Learn the lessons

    Despite my having read many tales of investment fraud over the years, two things never fail to surprise me. One is that people continue to believe such promises of fabulous riches. And in the main they’re just ordinary folk like you and me — as the investor who got stung for £180,000 said, “I never thought that I was stupid, but I was convinced by him, and thousands of others were too.”

    The other is that the perpetrators actually think they can get away with it — FSA and SFO investigations are necessarily complex and can take quite some time, but as we have seen this week, they eventually get their man.

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  2. Patrick, I notice you mentioned Texas as one of the larger Cyberfraud states, but it was not listed in the “Top Ten” chart. Can you imagine the chagrin of one Robert L and his Jaffa Partners? Either your ‘Crap” filter is well trained or else his Bobby-ness is being preoccupied with yet more legal problems and the scrutiny of many LEO’s and their agencies. After all, he (like Andy Bowdoin) have not had a job in years, yet, here they both lead such “money magnet” lives.

    If only i had a dollar for every Nigerian person wanting to give me a few million, or my fellow countrymen who want to show me how to get rich quickly and illegally. When will people learn there’s no such thing as a free lunch? Perhaps, never…

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  3. Don: Patrick, I notice you mentioned Texas as one of the larger Cyberfraud states, but it was not listed in the “Top Ten” chart.

    Hi Don,

    See “Map 1 – Top 10 States by Count: Individual Perpetrators (Numbered by Rank)” on Page 8 of the IC3 report.

    Texas is ranked No. 5 in individual perpetrators:

    http://www.ic3.gov/media/annualreport/2009_IC3Report.pdf

    Patrick

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  4. Methinks cyberfraud is under reported by several orders of magnitude.

    Besides issuing an annual report, what does IC3 actually do? How do they help people? I am seeing very little benefit from this organization but that could change if someone could tell me how the public benefits from their existence.

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  5. dirty_bird: Methinks cyberfraud is under reported by several orders of magnitude.

    Hi d_b,

    Me, too. It’s increasingly being reported to IC3, which has been around for about 10 years, though. My thought is that victims who do report cybercrime don’t think about reporting it to IC3 in the first instance. Rather, they report it through the channel with which they are most familiar: Federal agencies, state agencies, local agencies.

    I’m thinking that IC3 has high potential to receive more reports as people become more familiar with it. That seems to be happening more and more with each passing year — but it also seems that the first thought people who report cybercrime is about the police/regulatory agency with which they are most familiar.

    The IC3 numbers do not reflect the total volume of cybercrime. Rather, the numbers reflect the crimes reported to IC3.

    dirty_bird: Besides issuing an annual report, what does IC3 actually do? How do they help people? I am seeing very little benefit from this organization but that could change if someone could tell me how the public benefits from their existence.

    There are some success stories in the 2009 IC3 report about cases reported to IC3 and passed to police agencies. It would be nice to see more of these, and to see the FBI and the National White Collar Crime Center perhaps push more to build awareness of IC3.

    Among the IC3 success stories in 2009 (this list is not all-inclusive, and represents a sample the Blog is reproducing):

    ___________________________________________________________________________

    * The Alamance County Sheriff’s Office of North Carolina received a referral from IC3 in April 2009 regarding a series of alleged fraud cases with an international nexus. At least one of the alleged suspects was residing in their jurisdiction.

    According to complaints related to this case, the alleged victims posted advertisements on Craigslist and were subsequently contacted by a potential buyer. In all cases, the buyer would pose as a wealthy individual (usually a doctor or CEO) claiming to be out of the country at the time (either in Ireland or Nigeria).

    * In July 2009, NW3C was contacted by Detective Rick Arias of the Miami Beach Police Department, Miami Beach, Florida, requesting an investigative search on the name Michael Reece.

    This search initially turned up two complaints. Detective Arias responded by providing additional information that may be linked to Reece’s activities, including email addresses, aliases, and alleged victims.

    The case was referred to IC3. After expanding the search criteria, IC3 analysts were able to build a case against Reece that spanned 16 cases with $31,167.50 in reported losses.

    According to the filed complaints, Reece, using the aliases John Essels, John Mills, and Michael Seren, listed ads on Craigslist for vacation rental properties. After the victims signed and mailed the contracts for the properties, Reece would then coerce victims to send him deposits that ranged from $1,000 to $4,000. The victims would not receive any further contact from him. Using this information, Detective Arias was able to arrest Michael Reece on July 31, 2009, marking the third arrest of Reece by Detective Arias.

    * IC3 sent a case to the Broward County Sheriff’s Office, Fort Lauderdale, Florida in May 2009 regarding the suspected business owner of Godfather Motors. Victims purchased motorcycles but did not receive them after payment was made.

    The Sheriff’s Office sent an update in November 2009 indicating that the owner, Samuel Paniaqua, was arrested in June 2009 for 3rd Degree Grand Theft and is in federal custody in Miami, Florida. After additional research, it was determined that the perpetrator, in fact, owned another company in which complaints had been lodged.

    ___________________________________________________________________________

    In general, it seems as though IC3 is well known among people who visit Scam.com and other sites that publish info on scams and allegations of scams. I’m not so certain that the average person on the street who happens to encounter an instance of cybercrime directed at them or a loved one or friend reflexively thinks about reporting it through IC3.

    If I’m right about that, then perhaps it follows that a concerted awareness campaign for IC3 would put it more on the tips of victims’ tongues.

    That’s one of the reasons I carried this story.

    Regards,

    Patrick

    P.S. It’s been good to see you around these parts for the past couple of weeks, d_b. I was worried that you got swept away while keeping track of a Ponzi riot somewhere or in a riot associated with one of those countries newly declared on paper. :-)

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  6. admin: I’m thinking that IC3 has high potential to receive more reports as people become more familiar with it

    Then I think they should run an awareness campaign. Smokey the Bear was a great public service campaign which ran when I was a kid. Everybody knew “Only you can prevent forest fires”. A few banner ads would do wonders. Also flipping a website would be very effective. By flipping, I mean when a scam is taken down, leave the website as is and when people try to sign up, flash a page stating that this particular program has been raided and indicted as a suspected Ponzi. Place links to the IC3, FBI, Secret Service reporting forms and red flag sites. The Secret Service (IIRC) did this once when they raided a credit card fraud group of hackers a few years back. It sends a message to people.

    I have various projects so sometimes things heat up in those areas and my time is limited. Too many projects, not enough time. Just think of it as an ad rotator. Some things get attention, others don’t but I retain my interest.

    Keep up the good work. Your site is the best in this area. I should probably nominate you for a Webbie. Pamela Jones has won numerous awards with Groklaw. She started out following an obscure law suit, SCO sued IBM claiming they owned the rights to Linux, and now works for the EFF IIRC. It’s a full time gig.

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  7. dirty_bird:
    Then I think they should run an awareness campaign.Smokey the Bear was a great public service campaign which ran when I was a kid.Everybody knew “Only you can prevent forest fires”.

    I think Gregg has Chili Dog running around in a doggie snuggie with printing that tells people to report their cybercrime to IC3 but that has a few limitations. :)

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  8. So you think the increase in reporting is the result of everyone in the well armed bunker becoming aware and reporting cyberfraud? If so, I really, really think that fraud is under reported and Chili Dog needs to get out more.

    Whip: I think Gregg has Chili Dog running around in a doggie snuggie with printing that tells people to report their cybercrime to IC3 but that has a few limitations.

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  9. Chili Dog just needs to sink a few teeth in to a couple Achilles tendons to wake some people up.

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