Scammers Launder Millions Through Online Investment Platforms Like Robinhood

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Tech-savvy scammers who steal the government’s Covid pandemic relief programs to help businesses have found a convenient way to launder money: They open accounts on at least four online investment platforms, have said law enforcement officials.

Digital platforms, investigators said, are easy to drain money by creating accounts with stolen identities. More than $ 100 million in fraudulent funds have passed through investment accounts since Congress passed the CARES law last March, officials say.

Thieves have used Robinhood, TD Ameritrade, E-Trade and Fidelity to launder money, a police source said.

The government quickly rolled out the Paycheck Protection Program and the Economic Disaster Loan Program, or EIDL, to help small businesses last year. Both programs have been plagued by problems. An inspector general’s report released last October attributed billions of dollars in potential fraud to inadequate controls.

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“Thieves love this stuff. It was the financial crime windfall of 2021,” said Charles Intriago, a money laundering expert and former federal prosecutor.

Because of the scale of the potential fraud, he said, law enforcement is faced with “a colossal situation where the money is so massive and criminals see it as a great opportunity. They drool over it. opportunity to rip him off. “

Roy Dotson, assistant to the special agent in charge of the secret services.

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Many investigations into money laundering are underway, according to Roy Dotson, deputy special agent of the secret services in charge, specializing in financial crimes.

“It’s definitely something that is visible to us. There are all types of investment platforms used for this,” Dotson said.

Criminals take advantage of the ease with which it is possible to create accounts, as well as the relative anonymity of opening a bank account, he said.

“It’s just another step that makes it harder for law enforcement to understand where the funds are coming from,” he said.

Dotson would not discuss the names or number of companies targeted. He would only say that these are “multiple investment platforms”.

He estimated that “over $ 100 million has passed through these platforms” in this manner.

How does fraud work

Fraud generally works like this: The criminal steals the identity of a business owner and applies for a loan. Once they get the funds, the money has to be deposited somewhere, making it difficult for investigators to trace. So scammers regularly use the stolen identity, which is usually a person’s date of birth, social security number, and other personal information, to open an investment account like with Robinhood.

In other cases, law enforcement officials have said, criminals use what’s called a “synthetic identity,” which is a fictitious social security number linked to a real person, or “mules”. Which participate in the scheme.

Robinhood, which recently made headlines due to a surge of retail investor interest generated by so-called memes such as GameStop, has been targeted in several investigated fraud cases.

Det. Ricardo Peña of the Coral Springs, Florida Police Department.

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Ricardo Pena, a fraud detective with the Coral Springs Police Department in Florida who is part of a federal anti-fraud task force, said he was investigating several cases where Robinhood was used by criminals to launder money. PPP funds and EIDL funds.

A fraudster stole Marc Heiberg’s identity and was able to receive $ 28,000 in EIDL funds to transfer to a Robinhood account.

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In one case, Pena said the scammer stole the identity of a local resident named Marc Heiberg and was able to receive $ 28,000 in EIDL funds, which were obtained using fraudulent information for a non-existent cash company. 60 employees. The scammer then opened a Robinhood account and attempted to transfer most of the money from a bank account using the victim’s identity.

Records show an “ACH reversal” three days after the account was opened, Pena said. This means that the transfer has been canceled.

Heiberg, a corporate merchandising manager, said Robinhood told him he was investigating the fraudulent account. The criminals also opened an account with Chase, he said.

“It just becomes outrageous that they can just take out anybody like me, take your social security number and open accounts in a bank, open accounts with the government and have that money deposited, and then start laundering money. money, launder it. in other businesses, ”Heiberg said.

He said he was concerned that other accounts may have been opened in his name.

“My name means everything to me. You know, I have, I have boys, I have a family. And, you know, I want their names to be too intact,” Heiberg said.

The Small Business Administration, which oversees loan programs, told CNBC that “new and improved measures” to detect fraud have been put in place since the launch of the first round of loans last year.

In a statement, Chase Director of Communications Amy Bonitatibus said, “We are actively monitoring for signs of fraud and taking prompt action to protect our customers. In this case, we immediately identified suspicious activity on the account, which helped prevent the withdrawal of money or transferred. “

Security video shows an alleged fraudster trying to withdraw money from an ATM at a Chase bank in Boca Raton, Florida.

Coral Springs Police Department.

Coral Springs Detective Pena said he did not identify who created the fraudulent accounts, but screenshots from the security video show a suspect trying to withdraw money from an ATM automatic at the bank.

A suspected fraudster at a Chase bank in Boca Raton, Florida.

Coral Springs Police Department.

He said Robinhood is often targeted because of its appeal to young people – and many criminals are in their 20s.

“You hear about it; everyone’s going there. Even criminals know it,” Pena said. “A lot of the people who commit these frauds are younger. They understand electronic banking. Platforms like Robinhood are just easier to get these accounts in order to get money in and out of. And they know it. there isn’t a lot of surveillance. “

Rick McDonell, executive director of the Association of Certified Anti-Money Laundering Specialists, said he was not surprised by this form of fraud.

“If I were a good criminal I would avoid banks like the plague,” said McDonell, one of the world’s foremost money laundering experts.

Fraudsters are also drawn to the ease of use of Robinhood and other similar platforms, according to Etay Maor, senior director of security strategy at Cato Networks.

“It’s not like you have to walk into a bank and show yourself off,” Maor said. “Criminals are doing their homework and finding the best way to deal with high return, low risk situations like this. By the time you find out the information, the money is gone.

Platforms respond

Three of the investment platforms that responded to a request for comment told CNBC that they have strong anti-fraud protocols in place to verify account information and are working with the forces of the order on this issue.

A Robinhood spokesperson said: “We are focused on preventing fraud before it happens and our fraud and security teams have worked with law enforcement to mitigate and resolve This industry-wide problem Like other brokers and financial institutions, Robinhood verifies new client information through various data sources and requires government-issued identification where applicable.

A spokesperson for TD Ameritrade said the company “had made efforts from the outset of the CARES Act to be at the forefront of identifying and mitigating this type of fraudulent activity, including by engaging with law enforcement, peer firms and government agencies ”.

He added that “there will always be bad actors who try to take advantage of investors / vulnerable people at every opportunity they can – this is exactly why we have processes and controls in place to try to identify and to intensify this behavior. “

Fidelity said in a statement that it had “detected accounts with suspicious deposits associated with this industry-wide issue of COVID-19 relief funds. We are engaged in continued coordination with law enforcement and their efforts in this regard. “

Additionally, the company said it has a “range of safeguards and multiple layers of security to detect fraudulent accounts and subsequent transactions. By design, some of our protections are visible and secure. others no. To help ensure the integrity of our practical security, it is not appropriate for us to comment further on these specific safeguards. “

E-Trade did not respond to several emails and calls.

Other fraud

Some scammers who use online investing platforms don’t even bother to steal an identity.

In a recent Seattle case, prosecutors accused tech executive Mukund Mohan of receiving a total of $ 5.5 million in P3 funds by submitting fraudulent loan applications. Court documents show that $ 231,471 was deposited into Mohan’s Robinhood account, the remainder in various banks.

Mohan, whose LinkedIn account lists him as a former director of engineering at Microsoft and director of product management at Amazon, apologized for the fraud.

In a blog post last August after being indicted in this case, Mohan wrote: “I fucked up. I can’t say no. I hurt people who trusted me, who believed in me and who are now in addition to themselves. Unfortunately, I can’t speak to the details given the legal circumstances, but I really apologize. “

Mohan has pleaded guilty to wire fraud and money laundering, with sentencing slated for July. He declined CNBC’s request for comment.

Secret Service Dotson said the scale of the global fraud is staggering, a claim supported by other federal departments and agencies.

The Department of Justice seized or confiscated $ 626 million in funds following criminal and civil investigations related to the PPP and EIDL programs, or less than 1% of the nearly $ 84 billion in fraud identified in the programs, according to the House selection subcommittee. on the coronavirus crisis.

“Due to the sheer volume of the stimulus package and the amount of money and the opportunities, it has led people to use all of the different platforms,” Dotson said.



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