How an 83-year-old fell right into a scammer's fear bubble – and what role gift cards played

On Wednesday morning, the day before Thanksgiving, Mae woke up, put her hair in curlers, and turned on her laptop. A message appeared, saying that her Safari web browser had encountered an issue and offering the 83-year-old a link that might connect her to the Apple Computer Company. Mae clicked on it.

She didn’t understand it yet, but Mae, like Millions of Americans yearly, had fallen into the clutches of fraudsters. Over the subsequent 10 hours, the criminals tried various ways to steal their money.

The best approach to get them to purchase gift cards was to get them to purchase them. The cards from retailers like Target, Apple and Amazon are sold in drugstores and supermarkets.

They are higher for fraudsters than money, easier to move and just as anonymous. Criminals can obtain gift card numbers online, in stores all over the world or Sell ​​or trade them on illegal markets on the Darknet, telegram or discord.

An estimated $8 billion is stolen annually from seniors age 60 and older through scams perpetrated by strangers. in response to AARP. The cards are some of the common fraud methods reported by older adults,According to the Federal Trade Commission.

Mae’s story is one in every of many cases which have prompted us to – a Professor of Fraud Prevention and Forensic Accounting the previous top financial regulator and Pulitzer Prize winner investigative reporter – to analyze how fraudsters and corporations exploited cracks within the Civil War-era system of economic regulation.

The investigation shows that federal regulators have did not protect the general public from gift card fraud and Congress has largely bowed to regulators. Efforts by states and the federal government to rein within the industry have been fought by lobbyists and gift card trade groups. And gift card retailers are sometimes not much help to law enforcement.

One of us learned about Mae's case through his work as a fraud investigator and has seen dozens of comparable cases. Mae, who lives in Maryland, doesn't want to offer her last name, but she wants people to know her story in order that they don't make the identical mistakes.

In gift card fraud, everyone advantages except the victim: fraudsters, gift card firms, and retailers. Criminals benefit from a rapidly evolving payments industry that’s shrouded in secrecy and designed to make sure easy transactions.

Call this number

When Mae called the number that appeared on her screen, a person who introduced himself as Mac Morgan, an “Apple high security engineer,” answered. The problem appeared to be coming from her bank, he told her. She explained that she lived at M&T, a bank in northeast Buffalo, New York. Call them, he said, and gave her a phone number.

The woman who answered said her name was Alivia and that she worked from M&T Bank's anti-fraud unit. Alivia told Mae that a European pornographer and scammer had tried to realize access to her account and withdraw $20,000 through the night. The withdrawal had been blocked, but Mae needed to get to the bank and collect the cash before the scammers did.

Alivia promised to remain on the phone with Mae throughout the method.

Gift cards are the most recent tool utilized by scammers to defraud people of their money through schemes resembling romance scams, fake tax returns, and false investment schemes.

The The average reported loss amount is $1,000.but between 2021 and 2022, greater than 100 consumers reported losses from gift card fraud exceeding $400,000, in response to an FTC public records request. According to Jordan Hirschfield, a present card analyst at Javelin Strategy & ResearchHe estimates that between 1% and 5% of gift card sales could possibly be fraud, but since nobody keeps records, it's difficult to get a precise number. If the 1% to five% figure is correct, that's between $5.5 billion and $27.5 billion per yr.

A victim’s fear bubble

Mae had a Fear bubblean artificially induced state of panic that makes rational considering difficult.

Anyone can turn into a victim. Mae had graduated with honors from an elite private university. She is a sober retired nurse who lives independently. Now, on the instructions of a scammer, she rushed to her bank in a panic.

At the bank, the teller and manager tried to dissuade Mae from withdrawing $20,000 in money. After about quarter-hour, they managed to get her to calm down.

In Maryland, the bank had no alternative but to offer Mae her money. This isn’t the case in other states. In Florida, a state that’s battling increased fraud cases against seniors, The legislature passed a law In May, financial institutions were allowed to postpone transactions with people over 65 if there is affordable suspicion of exploitation.

Reports from law enforcement agencies indicate that even a couple of hours' delay can burst the fear bubble created by fraudsters.

Several states have passed or are considering laws requiring warning labels on gift cards. Delaware, Iowa, Nebraska, Pennsylvania, Rhode Island And West Virginia.

Next, Alivia led Mae to a Cash2Bitcoin He went to an ATM at a gas station and explained the registration process, including uploading her driver's license, a know-your-customer requirement that doesn't apply to gift cards. Mae put 1000’s of dollars into the machine. At $15,000, she reached the limit for deposits.

Alivia then passed the phone to a co-worker named Ross, who instructed Mae to purchase gift cards. At Rite Aid, Mae bought 4 $2,000 cards, scratched off the backs of the cards, and skim the numbers to Ross.

But on the Food Lion supermarket, a manager who knew her refused to sell her gift cards. Ross gave up and told her to go home but not to inform anyone what had happened.

Gift card firms claim to be “heavily regulated” because Congress has passed the bank card law in 2009. It eliminated many gift card fees, prohibited them from being valid for no less than five years, and allowed state laws to override federal laws. However, it didn’t expand existing protections against consumer fraud on credit and debit cards.

In 2010 Congress created a unified regulatory authority for financial consumer protection: the Consumer Protection Office for FinanceBut the agency has not kept pace with the Increase in consumer financial products outside banksThe regulations it passed in 2016 and 2018 exempted most gift cards from regulation. The FTC and Treasury Department have also proven ineffective in combating the issue.

The fear bubble bursts

By the time Mae finally pulled into her driveway, the ether had already died down. “There was a big lightbulb: 'You've been screwed,'” she said.

Mae called M&T: There was no open fraud case. She called Target: The gift cards had already been spent. Mae got most of her Bitcoin a reimbursement, because of compliance efforts and the fraud freeze on her account the day of the fraud. But the cash from the gift cards was gone.

Fraud against the elderly, including through gift cards, is predicted to proceed to extend.

Mae reported her story to the local police, AARP and the FTC database“It can happen to anyone,” she said.

For the total investigation, see: Gift card fraud is making scammers and the industry billions as regulators fail to guard consumers – and the way an 83-year-old fell into the ‘fear bubble’