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COVID Frauds of the Week: Consumer and Investor Fraud

Posted  June 18, 2020

Scammers continue to prey on the vulnerable during the COVID-19 crisis, and thankfully, they continue to get busted for it.  This week, the enforcement highlights centered on consumer and investor fraud, although there are surely numerous other kinds of fraud that have not yet been stopped.

The Federal Trade Commission this week announced that it had taken legal action to try to shut down a remarkably (and allegedly) brazen scheme.  Traffic Jam Events, LLC, allegedly sent mailers to consumers that were ginned up to look official and emblazoned with “IMPORTANT COVID-19 STIMULUS DOCUMENTS.”  Inside, they allegedly included a faux stimulus check that made references to a program similar to the CARES Act.  Curiously, the documents allegedly instructed consumers to appear in person to claim their supposed benefits.  Anyone who did so allegedly found only a used car sale put on by the defendants.

Meanwhile, the U.S. Attorney for the Northern District of Georgia announced charges against Stephen Matthew Shumaker.  According to the charges, Shumaker allegedly attempted to defraud consumers by claiming the air purifier he was marketing could kill every major kind of infection, including COVID-19.  Of course, it cannot.  What’s worse, what he was allegedly marketing was a misbranded pesticidal device, the alleged selling of which is also against federal law.

Finally this week, a California man was charged by the U.S. Attorney for the Central District of California with wire fraud based on an alleged phony investment scheme.  According to the USAO, Keith Lawrence Middlebrook allegedly solicited investors in several states with promises that he had developed a cure for COVID-19.  As part of his sales pitch, he allegedly represented that none other than Earvin “Magic” Johnson was a director in his company and that unnamed investors in Dubai had already committed to purchasing his companies for $10 billion.

Thankfully, each of these alleged schemes was stopped before the scammers did too much damage.  But there are assuredly more out there.  As we have argued, whistleblowers will play a key role in helping reveal and stop these frauds.  Frauds involving government funds can be outed through the efforts of whistleblowers using the False Claims Act, but these repeated examples of consumer fraud underscore the need for a consumer fraud whistleblower program, such as that recently introduced into the Senate.

If you have information about frauds related to COVID-19, or any other fraud on government programs, contact us.

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Tagged in: Catch of the Week, COVID-19, Financial and Investment Fraud, Importance of Whistleblowers,