Fraud Magazine’s Top Frauds of 2023

Fraud Magazine’s Top Frauds of 2023

Fraud Magazine has again spotlighted last year's most scandalous fraud cases in their annual roundup here. Here are the top cases that shaped the year:

1. The Fall of FTX: Sam Bankman-Fried's FTX crumbled, revealing a billion-dollar fraud involving misappropriation of customer funds. 

This fraud featured crypto but it was a traditional bread and butter fraud. Crypto wasn’t the problem, someone stealing customer’s crypto at a custodial central exchange was the problem. 

The case featured massive red flags: a related party conflict that was generally known (market rumors were common about potential frontrunning by Alameda, we didn’t know about the related party transfers of customer funds though), a lack of an audit committee or even a board, a lack of a CFO. VCs didn’t do the necessary diligence because of Fear of Missing Out.

2. Arizona Sober Home Scams: Fraudulent sober-living homes in Arizona exploited Medicaid loopholes to siphon off millions by billing for non-existent treatment services to Native Americans, massive exploitation and system manipulation. What was meant to be exemptions in spending authorization processes to help facilitate housing to those suffering from addiction became a massive fraud engine.

The money quote from the WSJ is that “the state first noticed something was improper when totals for substance-abuse treatments jumped from $53 million in 2019 to $668 million in 2022.” Wow!

3. Southeast Asian Cyberfraud Hubs: In Southeast Asia, empty buildings were transformed into centers of cyberfraud, where trafficked individuals were forced into committing online scams. 

Individuals were trafficked by the thousands into these fraud mills to use as themselves perpetrators of online romance scams. This one makes you lose faith in humanity.

4. Casino Vishing Attacks: Major casinos like MGM and Caesars faced cyberattacks through vishing, where hackers used social engineering to infiltrate networks and access sensitive customer data.

Massive casinos are thought of as impregnable for their imposing physical security, the basis for safecracker fantasy movies like Ocean’s 11. And yet MGM was temporarily shut down by a single employee responding to a phishing attack. The chain is only as secure as the weakest link.

5. Guo Wengui's Billion-Dollar Scam: Exiled Chinese billionaire Guo Wengui allegedly defrauded thousands through fake investment opportunities in media and technology, using his platform and hundreds of millions in investor flows to fund personal spending, using his personal spending to prop up investor pitches, and so on. It’s an old fraud pattern but a common one.

These cases not only underline the diversity and complexity of modern fraud but also the critical need for expert intervention in litigation and fraud examination. For legal professionals grappling with such deceit, forensic accountants at Veritas Financial Analytics offer invaluable expertise. Through the combination of deep legal and financial knowledge ensures rigorous examination and reliable litigation support in complex fraud cases.

For detailed insights into these cases and to explore how our forensic accounting services can support your legal strategies, visit us at Veritas Financial Analytics.