Recent Fraud Cases

Blog / Recent Fraud Cases

Recent fraud cases in 2023 have shown a disturbing reality of deception and illicit activities that continue to plague individuals and organizations across various industries. Unveiling an intricate web of fraud, these cases serve as a sudden reminder of the ever-present threat and evolving tactics employed by fraudsters. By delving into the methods employed and the devastating consequences faced by victims, a clearer understanding can emerge of the pressing need for proactive measures to combat fraud in today's world.

Health Care Fraud Scheme

The Justice Department cracked down on healthcare fraud, telemedicine scams, and illegal prescription schemes. The total amount is reported as an alleged $2.5 billion in fraud. In a two-week operation, 78 defendants, including 24 medical professionals, faced federal and state charges across 16 states. The initiative led to 90 Medicare and Medicaid revocations, asset seizures, and millions of dollars in cash, vehicles, and real estate.

Attorney General Merrick Garland vowed to prosecute those who defraud Americans and steal from taxpayer-funded programs. The elderly, people with mental health issues, pregnant individuals, opioid addiction patients, and those at risk of contracting HIV, were included as vulnerable to fraud.

One case involved a software company facilitating kickbacks for doctors and telemarketers selling unnecessary medical equipment. Telemarketing efforts resulted in fraudulent Medicare orders and $1.9 billion in reimbursement claims. Another case revealed a licensed physician issuing fraudulent orders for orthotic braces, even for amputees. Prosecutors also uncovered individuals repackaging HIV medications, occasionally with incorrect labels or broken pills, for sale to pharmacies. In Wisconsin, a woman coerced pregnant individuals into signing up for prenatal services through community baby showers, leading to millions of dollars in fraudulent claims.

These enforcement actions reflect ongoing efforts to combat healthcare fraud, protect vulnerable populations, and preserve taxpayer-funded programs. The Department of Justice remains committed to prosecuting criminals and safeguarding public healthcare systems.

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Fraudster Entrepreneur Turned Herself In

Elizabeth Holmes, the disgraced founder of the now-defunct blood testing startup Theranos, has reported to prison, marking the culmination of her stunning downfall. Holmes was sentenced to over 11 years in prison after being convicted on multiple charges of defrauding investors. Her request to remain free on bail while appealing her conviction was denied, leading Judge Edward Davila to order her to surrender to the Bureau of Prisons by May 30.

Holmes arrived at the Federal Prison Camp Bryan in southern Texas, a minimum-security facility located approximately 100 miles from Houston, her hometown before moving to California. Meanwhile, her former boyfriend and ex-Theranos COO, Ramesh "Sunny" Balwani, also began serving his sentence in a California prison last month.

Once hailed as a tech icon and symbol of Silicon Valley's limitless potential, Holmes dropped out of Stanford at 19 to focus on Theranos, which claimed to have revolutionized blood testing with its proprietary technology. However, a 2015 Wall Street Journal investigation revealed discrepancies and doubts about Theranos' capabilities, including relying on third-party devices instead of its own technology. The company ultimately dissolved in September 2018.

Holmes and Balwani were indicted together nearly five years ago, but their trials were separated after Holmes indicated her intent to accuse Balwani of abuse during their relationship. In addition to her prison sentence, Holmes and Balwani were ordered by Judge Davila to pay restitution of around $452 million to the victims of their crimes.

During her sentencing, Holmes expressed remorse and acknowledged her failures, expressing love and respect for the people involved with Theranos. She expressed sincere guilt for her conduct and apologized to her coworkers, investors, and patients.

Holmes' imprisonment marks a striking fall from grace for a former tech luminary and highlights the rare instance of tech executives facing and being convicted on fraud charges.

Cryptocurrency Platform CEO Charged with Fraud

Former Celsius Networks CEO, Alexander Mashinsky, has been charged by US prosecutors with defrauding customers and misleading them about the company's operations. The indictment included charges of various types of fraud.

Mashinsky, along with Roni Cohen-Pavon, Celsius' chief revenue officer, also faces multiple counts of manipulating the price of the platform's crypto token, CEL, while selling their own tokens at inflated prices.

Celsius presented itself as a secure bank-like platform where customers could deposit crypto assets and earn interest. However, the indictment maintains that Mashinsky ran Celsius as a risky investment fund, misleading clients and making them unwitting investors in a venture that was much riskier and less profitable than represented.

Mashinsky has pleaded not guilty and was released on a $40 million bond. His attorney, Jonathan Ohring, vehemently denies the allegations and plans to mount a vigorous defense.

Celsius was among several crypto companies that collapsed last year during a market downturn, revealing signs of widespread fraud. Authorities have been aggressively pursuing charges against these companies and their founders. The founder of FTX, Sam Bankman-Fried, was detained in December and accused of planning one of the biggest financial frauds in US history. He has pled not guilty and is scheduled to stand trial in October.

In addition to the criminal charges, Celsius and Mashinsky face civil lawsuits. The Commodity Futures Trading Commission and the New York Attorney General's office have both sued Mashinsky for fraud. The Securities and Exchange Commission has also filed civil fraud charges and seeks to permanently ban Mashinsky from running an exchange or trading cryptocurrencies.

Regulators caution potential customers and investors in the crypto space to exercise caution. Authorities are intensifying efforts to combat corruption in the crypto economy. Major cryptocurrency platforms such as Binance and Coinbase have faced increased scrutiny, with allegations of operating illegal exchanges. The Federal Trade Commission has reached a civil settlement with Celsius and its affiliates for $4.7 billion, suspending payment to allow Celsius to return funds to customers.

The indictment against Mashinsky represents a significant step in combating corruption in the crypto industry, as regulators continue to monitor and address fraudulent activities in the market.

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Father and Son Charged with Lottery Fraud

A father and son from Massachusetts have been sentenced for a scheme involving over $20 million in illegally claimed lottery winnings and evading $6 million in federal taxes. Ali Jaafar received five years in prison, while his son Yousef Jaafar received 50 months. They must also pay $6 million in restitution and forfeit their profits.

The Jaafars were convicted of conspiracy to defraud the IRS, money laundering, and filing false tax returns. Prosecutors called it an elaborate tax fraud scheme spanning a decade, where they defrauded the Massachusetts State Lottery Commission and the IRS. They recruited co-conspirators and deceived officials to avoid detection.

Their attorney plans to appeal the verdict. Another son, Mohamed Jaafar, pleaded guilty and awaits sentencing.

The Jaafars ranked among the top four lottery ticket cashers in Massachusetts in 2019. They bought winning tickets from people at a discount, allowing the real winners to remain anonymous and avoid taxes. Convenience store owners facilitated the transactions. The defendants claimed the prize money as their own.

Dozens of retailers involved in the scheme will have their lottery agent licenses revoked. The Jaafars illegally cashed over 14,000 lottery tickets worth more than $20 million. They also reported the winnings on their tax returns while fraudulently claiming losses to avoid paying federal income taxes.

IRS Criminal Investigations condemned the Jaafars' actions, stating that they chose illegal activities over building a legitimate business. The case demonstrates efforts by the Massachusetts State Lottery Commission and law enforcement to prevent illegal activities and protect the system's integrity.

The Undermining of the COVID Relief Program

Hundreds of billions of dollars in taxpayer money intended for COVID-19 relief programs have been stolen in what experts call the largest fraud in US history. Approximately $80 billion was distributed through the Paycheck Protection Program (PPP). Moreover, $90 billion to $400 billion from the COVID unemployment relief program and an extra $80 billion from a separate COVID disaster relief program were falsely claimed as well.

While the prevalence of COVID relief fraud has been known, the recent revelations shed light on the massive scale and implications of the issue. Even with potential inflation of the highest estimates, the total fraud in all COVID relief funds is a significant amount that rivals the federal funds allocated to President Biden's infrastructure spending plan.

Prosecutors, government watchdogs, and private experts are working to address the leaks and minimize further losses. Although most of the losses are deemed unrecoverable, there is still an opportunity to mitigate the damage as around $600 billion remains unallocated. The Biden administration implemented stricter verification rules in 2020, which have helped reduce fraud. However, they admit that the programs prioritized speed over security.

The methods employed by criminals varied depending on the program. COVID unemployment relief fraud involved individuals or organized crime groups using stolen identities to claim jobless benefits, with each identity potentially worth up to $30,000 in benefits. The Paycheck Protection Program fraud differed, as borrowers inflated employee numbers or created fictitious companies. Lenders often neglected to verify applications due to the Small Business Administration's guidance that they would not be held accountable for borrowers' non-compliance.

The exact amount stolen remains uncertain, but estimates range from $76 billion to $100 billion. To identify fraud patterns, the Pandemic Response Accountability Committee is using data scientists and artificial intelligence to analyze records. Their efforts have revealed cases where a single phone number was linked to 150 loan applications.

The magnitude of the fraud highlights the need for enhanced security measures and stricter verification protocols to ensure that relief funds reach those who genuinely require assistance. Preventing further fraud is crucial, and continued efforts are underway to safeguard taxpayer money and hold those responsible accountable.

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