Alpha Team Analysis: FTC Report on Scams in 2020

FTC Report on Scams in 2020

On October 21, 2020, the Federal Trade Commission (FTC) posted a data spotlight blog about scams on social media. In the post, the FTC discusses a trend in submissions to their Consumer Sentinel Network, where victims of scams have increased since the onset of the pandemic. When comparing the FTC report to ZeroFOX data, we’ve seen a positive correlation between the increase in reported scams to the FTC and an increase to scams found across all of our data sources. ZeroFOX Alpha Team has found a 519% year over year increase in scam-related activity targeting our customers' brands, with Financial Services and Retail customers being affected the most. Alpha Team assesses with HIGH confidence that to increase their efficacy, scams will continue their cadence throughout the pandemic and will take advantage of the fog of war associated with the pandemic and the social network’s slowing response times.

Recommendations

• Be mindful of any opportunity for financial gain proposed on social media
• If you are skeptical of a business, research it on Google and the FTC website for scam complaints
• To protect your brand and customers, enable the Fraud, Scams & Piracy rules for your ZeroFOX platform. Reach out to [email protected] for assistance

Details

On October 21, 2020, the Federal Trade Commission (FTC) posted a data spotlight blog about scams on social media. In the post, the FTC discusses a trend in submissions to their Consumer Sentinel Network, where victims of scams have increased since the onset of the pandemic. The Consumer Sentinel Network is a cyber investigative tool made available to US government agencies to gain access to reports made by consumers to the FTC regarding a plethora of reports related to scams, fraud, identity theft, and any type of crime related to improper business practices and schemes. Within this tool, investigators can measure losses based on the reports, which is an important investigative measurement to quantify the impact on American citizens.

In 2019, reports of losses from fraud originating on social media reached $134 million. Within the first 6 months of 2020, this reported number rocketed to $117 million.

Figure 1: FTC Scam Report Detailing Loss for Consumers

FTCs Top Scams

According to the FTC, the 4 most reported types of scams are online shopping, romance, income opportunity, and social relief scams. Online shopping scams usually refer to an illegitimate shop that is being operated on social media, such as one that sells desirable brand products, and the fraudster tricks the victim into sending money without the product being delivered, or the product delivered is fake and low quality. For example, a naive consumer can order a designer purse at a low price and then receive a cheap knock-off.

Figure 2: Online Shopping Scam Example

Another type of online shopping scam is called dropshipping scams. Dropshipping is a legitimate business model, where online retailers can be a middle man and sell items that they don’t have in store. Dropship scam stores can sell a product to the victim at low prices without ever fulfilling their obligation to ship the victim their inventory. In one FTC complaint, a charge was brought to a Dropship coaching company for faulty business practices.

The next scam, Romance scams, have been plaguing the US for years. Romance scams have caused a loss of $475 million to consumers in 2019 alone. They are so effective that the FBI has a page dedicated to educating people about them, and it also serves as a portal to report potential romance scams. According to the FTC report, most romance scams reported to their agency started with a Friend Request or a message on social media. Romance scams typically target people who are on dating sites, and they have been effective against seniors (55+).

Income opportunity and relief scams have been around for a number of years on social media and have been widely reported by ZeroFOX . In these scams, posts on social media are made to hashtags and profiles that promise a “quick turnaround” of money for an initial deposit. For example, Money Flipping scams promise victims quick returns on their deposits to the scammer, but once the deposit is made the scammer disappears or blocks the victim.

Figure 3: MoneyFlipping Scam on Instagram

Income opportunity and relief scams can also result in a victim falling prey to a 419 or Advanced Fee scam. In this example, fraudsters send a wire transfer or an invalid check to a victim and ask the victim to route a portion of the money to an attacker-controlled account. Within days, the wire transfer bounces, and the victim loses the money they routed afterward. Sugar baby scams, for example, are a combined income opportunity and advanced fee scam.

Figure 4: Sugar Baby Scam

ZeroFOX Data

When comparing the FTC report to ZeroFOX data, we’ve seen a positive correlation between the increase in reported scams to the FTC and an increase in scams found across all of our data sources.

Across industries in the ZeroFOX ecosystem, we’ve seen a 519% year over year increase in security incidents specifically related to scams. Some individual breakdowns of customer cohort scams include:

• 423% increase in Financial Services alone (scammers/money mulers targeting banking customers)
• 1579% increase in Retail scams
• 226% increase in Consumer Goods scams

Specific scams:

• 295% increase in HR scams, which could align with scammers looking to capitalize on work from home opportunities and lay-off/furloughs due to the pandemic
• 164% increase in Crypto Giveaway scams, where an account is taken over or an impersonator profile is created to look like an influencer to peddle the scam
• 609% increase in Money Flipping Scams
• 100% increase in Impersonating profiles that have someone who claims to work for a company in HR, but does not

Across all industries, Alpha Team has seen a 94% YoY increase in scam takedowns submitted and then subsequently removed.

ZeroFOX Alpha Team assesses that scammers will likely continue to use the pandemic as an opportunity to take advantage of desperate consumers. Emotional and economic distress can leave victims vulnerable to these scams, especially ones designed to alleviate stress and reduce the impact of the pandemic. Alpha Team also assesses that the scam types will remain constant and we will not see many new scams, mostly due to the years of experience and resources available for tried and tested scams.