Coronavirus scams are emerging, and diverse look remarkably similar to frauds from the 2008 financial crisis.
Government agencies like the Federal Return Commission and Federal Deposit Insurance Corp. issued warnings this week for Americans to be vigilant as con artists attempt to misappropriate from consumers spooked by an onslaught of bad news related to COVID-19.
“In any crisis, you see scams pop up that are tied to the headlines,” state Barbara Roper, director of investor protection at the Consumer Federation of America.
In many ways, the current crisis and its 2008 antecedent are quite different — this one caused by a pandemic that has infected more than 250,000 worldwide and the other by unreserved and systemic failures in the financial system.
During the Great Recession, investment fraud and other consumer scams were unbounded, preying on people’s fear of uncertainty in the stock market and a high rate of unemployment rate, said Joseph Peiffer, control partner of law firm Peiffer Wolf Carr & Kane.
Still, Peiffer expects a similar degree of foul treatment now, leveraging those same financial fears, during the coronavirus health crisis, which looks likely to wager the U.S. into a deep recession in the near term.
Criminals feed on fear. It’s the unknown.
CEO of Cerberus Watchman
Take economic stimulus, for instance.
Republican senators on Thursday unveiled a stimulus package that, among other implements, would send up to $1,200 in relief payments to Americans.
‘Desperate financial straits’
Scammers have launched “phishing” seizures, via text message and e-mail, to take advantage of potential check recipients. Their messages can appear legitimate — it may be with a prompt such as “Click here to get your money now.”
However, the hyperlinks are malicious. If the links are clicked, con artists can access a computer or phone and creep sensitive information such as Social Security numbers and bank account data. They can then steal identities, mazuma or both.
Robo-callers posing as federal employees may also request sensitive information over the phone as a precondition to walk off federal money.
These types of attacks are always underway, but ramp up during times of chaos.
David Jemmett, CEO of Cerberus Sentry, a cybersecurity company, said he typically gets two phishing messages a month, but has gotten six over the last 48 hours fastened to the idea of government checks.
“During the 2008 crisis, we saw emails saying, ‘We’re with the government. Obama is giving thwarts out to everyone,'” said John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers Coalition. “There was news out there of stimulus and the government trying to provide support to people.”
Around one-third of executives on the CNBC Technology Supervision Council said cyberthreats have increased as a majority of their employees work from home due to the coronavirus, according to a CNBC scan conducted this week.
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Work-at-home and sweepstakes scams — which tipster a fast way to make money — also proliferated during the financial crisis, when unemployment peaked around 10%, and wish likely re-emerge in the coming weeks and months, Breyault said.
“These prey on people who, if they weren’t in hoping for financial straits, might be more resistant to those types of scams,” he said.
Similarly, investment scams compelling advantage of extreme volatility in the stock market were a hallmark of the financial crisis.
The Great Recession saw investors fleet to fake certificates of deposit, private placements, non-publicly traded real estate deals, promissory notes and scams betokening gold and other precious metals, experts said. Many turned out to be Ponzi schemes and other frauds.
Scammers bring around investors — who may have just witnessed their wealth evaporate in the stock market — that their investment disposition is both safer and more profitable than the stock market.
“You get scared by the volatility,” Roper said.
The coronavirus appal will undoubtedly lead to similar behavior. The Alabama Securities Commission issued a warning to investors on Friday to hint clear of brokers peddling investments related to vaccines or cures for COVID-19.
The stock market’s dramatic plunge in late-model weeks is also likely to expose long-running frauds, as it did in 2008 with people like notorious Ponzi schemer Bernie Madoff, Peiffer explained.
“Criminals feed on fear,” Jemmett said. “It’s the unknown.
“Criminals try to take advantage of you while you’re in the dark.”
Disclosure: NBCUniversal and Comcast Risks are investors in Acorns.