Billions in Unemployment Benefits Were Stolen By Scammers Last Year

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by The Smart Wallet Updated on January 27, 2021

A person with a mask sitting in dim light behind a computer

After the initial outbreak of the coronavirus in the U.S., Congress passed the CARES Act to provide struggling Americans with economic relief. The bill provided crucial items like stimulus payments and unemployment benefits that have helped keep some families afloat amid the crisis. But these relief programs have also spawned massive scams, and we’re just now beginning to tally some of the damage done by fraudsters.

USA Today reported in December that international scammers have skimmed at least $36 million from U.S. unemployment relief. The problem was apparent as early as May when Washington state reported being defrauded out of hundreds of millions of dollars in unemployment. Since then, the issue has ballooned into a crisis, and at least 11 states have seen an uptick in unemployment fraud since the pandemic began, according to Bloomberg Law.

“Scattered Canary” and International Scammers

Foreign scams are nothing new, but many of these fraudulent unemployment claims are reportedly coming from well-organized crime rings. One Nigerian ring called “Scattered Canary” has become particularly notorious for scamming $600 million in two weeks. One thing that Scattered Canary and other groups have made clear are just how vulnerable the system can be.

According to The Hustle, Scattered Canary can steal an identity with nothing but a name, $2 in cryptocurrency, and a little bit of internet research. Scammers often purchase people’s information off of the dark web or use family/personal search apps to dig up info.

With a stolen identity, scammers file for unemployment and wire the money through avenues like Venmo or PayPal before pocketing it themselves. The scams can be a bit more intricate, as well. Some scammers create fake businesses and lay off fake employees to get mass unemployment benefits.

While states are scrambling to weed out fraud and strengthen their systems, there are ways you can protect your identity and information too. For example, Experian offers a free dark web scan so you can see if any of your private information is vulnerable. Otherwise, follow general tips for avoiding scams online – don’t give out personal info, stick to websites you know, etc.

By The Numbers

Here’s how a few different states have reported being impacted by unemployment scams, according to USA Today and Bloomberg Law:

  • Arizona flagged 1 million unemployment claims as potentially fraudulent and has lost at least $8 million dollars
  • California potentially lost $2 billion on unemployment fraud, according to a letter from Bank of America officials to state legislators
  • New York state reportedly filed more fraud claims with law enforcement from March to August than it did in the past decade combined, and has experienced roughly $1 billion in fraudulent activity
  • Massachusetts has been defrauded out of at least $242 million
  • Washington paid out more than 86,000 fraudulent claims worth $576 million, $300 million of which has been recovered

The Bottom Line

It’s likely that some fraud has occurred in all 50 states, but only a handful have released concrete data thus far. Although the end may be in sight for the pandemic with vaccines rolling out, we’re just starting to grapple with the fallout in other aspects. Tens of billions of dollars have been taken from Americans on unemployment, and this is just the beginning of reporting these scams.

As mentioned above, you can help protect yourself by keeping your personal information close and using Experian’s dark web scan to check if any of your info is already out there as well as regularly check your credit reports.