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As the pandemic shuttered businesses and forced people out of work, the federal government sent a flood of relief money into programs aimed at helping the newly unemployed and boosting the economy. That included $3.1 trillion that former President Donald J. Trump approved in 2020, followed by a $1.9 trillion package signed into law in 2021 by President Biden. But those dollars came with few strings and minimal oversight, the New York Times reported. The result: one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube. Now, prosecutors are trying to catch up. There are currently 500 people working on pandemic-fraud cases across the offices of 21 inspectors general, plus investigators from the F.B.I., the Secret Service, the Postal Inspection Service and the Internal Revenue Service. The federal government has already charged 1,500 people with defrauding pandemic-aid programs, and more than 450 people have been convicted so far. But those figures are dwarfed by the mountain of tips and leads that investigators still have to chase. Agents in the Labor Department’s inspector general’s office have 39,000 investigations going. About 50 agents in a Small Business Administration office are sorting through two million potentially fraudulent loan applications.

The Securities and Exchange Commission yesterday charged 18 individuals and entities for their roles in a fraudulent scheme in which dozens of online retail brokerage accounts were hacked and improperly used to purchase microcap stocks to manipulate the price and trading volume of those stocks, according to a SEC press release. Those charged include Rahim Mohamed of Alberta, Canada, who is alleged to have coordinated the hacking attacks, and several others in and outside the U.S. who allegedly benefited from or participated in the scheme. According to the SEC’s complaint, in late 2017 and early 2018, hackers accessed at least 31 U.S. retail brokerage accounts and used them to purchase the securities of Lotus Bio-Technology Development Corp. and Good Gaming, Inc. The unauthorized purchases allegedly enabled fraudsters, who already controlled large blocks of Lotus Bio-Tech and Good Gaming stock, to sell their holdings at artificially high prices and reap more than $1 million in illicit proceeds. According to the complaint, Davies Wong of British Columbia, Canada, and Glenn B. Laken of Illinois, respectively, controlled the majority of the Lotus Bio-Tech and Good Gaming stock that was sold while the hacking attacks were being carried out, and Mohamed coordinated with Wong, Laken, and others to orchestrate the attacks. The complaint also alleges that Richard Tang of British Columbia, Canada, was involved with both the Lotus Bio-Tech and Good Gaming schemes.

A Willmar attorney has pleaded guilty to fraudulent concealment of bankruptcy assets, announced U.S. Attorney Andrew M. Luger, according to a DOJ press release. According to court documents, on November 3, 2015, Gregory Ronald Anderson, a licensed attorney, prepared and filed a voluntary bankruptcy petition on behalf of his client, James Alan Rothers. Upon the filing of the petition, Anderson knew that Rothers’ assets, wherever located, became property of a “bankruptcy estate” to be used to pay Rothers’ creditors. Anderson also filed a set of Rothers’ bankruptcy schedules in which Rothers was required to disclose, under penalty of perjury, the full extent and value of all Rothers’ assets as of November 3, 2015. According to court documents, prior to the filing of the petition, Anderson created fake liabilities to create the appearance that Rothers was insolvent when, in fact, Rothers could easily have paid all of his creditors. Specifically, Anderson arranged to have a fictitious lawsuit filed against Rothers, and then instructed Rothers to default in that lawsuit. This created a judgment of approximately $608,000 against Rothers to further the appearance that he was insolvent. Anderson also created documents that made it appear that an Iowa company had loaned $240,000 to Rothers and that Rothers had an obligation to repay this loan. The loan was entirely bogus and created to bolster the appearance of Rothers’ insolvency.

An attacker targeting the solana cryptocurrency ecosystem drained funds from thousands of wallets in an incident that could draw increased regulatory scrutiny to digital assets, the Wall Street Journal reported. By 1 a.m. ET Wednesday, an unknown actor exploited a flaw to drain cryptocurrencies from 7,767 wallets where crypto holders store their funds, according to the Solana Foundation, a nonprofit that supports the network. The attack affected several wallet providers, including Slope and Phantom. While the total value of the assets stolen was unclear, blockchain security firm PeckShield estimated the loss to be $8 million. The details of the attack were unknown. Both wallet providers said on Twitter that they were working to fix the issue. “At this time, the team does not believe this is a Phantom-specific issue,” the company said. On both platforms, users reported losing their solana tokens and that of stablecoin USDC, whose value is pegged to the U.S. dollar. (Subscription required.)

Millions of customers of crypto platforms Voyager Digital Holdings Inc. and Celsius Network LLC have been thrust into a potentially long and painful battle in bankruptcy trying to retrieve their money, WSJ Pro Bankruptcy reported. The chapter 11 filings of crypto brokerage Voyager and nonbank lender Celsius have tied up the holdings of their customers, who are realizing how little control they have over their funds and that they aren’t likely to recover in full through bankruptcy court. Jess Archer, a 45-year-old single mom to two children, deposited $70,000, a sizable portion of her savings, with Voyager in May and June. She was drawn by the firm’s offer of a 9% interest rate, hoping the profit could help her make a down payment on a new house. When Voyager filed for bankruptcy, “I spent two days crying and blaming myself,” said Archer. Voyager has said that recoveries for customers can include a combination of crypto, shares in the reorganized company and maybe some tokens. It has also made it clear that the account holders will be “impaired,” an outcome that could include not getting all of their money back. Archer said that she believes it is unlikely that she will get anything back even though Voyager has received court approval to pay employees and professionals. While she still thinks crypto is a viable alternative to fiat currency like the U.S. dollar, her experience has led her to believe that more government oversight is needed so history doesn’t repeat itself. Joshua Sussberg, a lawyer who represents both Voyager and Celsius, said while the decision to halt trading services and freeze withdrawals was difficult for the companies, “it was necessary to preserve investments and ensure equal treatment of all customers.” But now the focus is to work with customers, through officially appointed committees of customers, to maximize value for them, he said. “All is not lost. On the contrary, it is our job to get customers as much value back as quickly as we can,” Sussberg said. In recent weeks, Voyager has asked for a bankruptcy court’s permission to honor customer withdrawal requests for some $350 million in cash funds held in custody at the Metropolitan Commercial Bank, but it said the roughly $1.3 billion in digital assets on Voyager’s platform belongs to the bankruptcy estate that will be shared by all creditors, with the distribution to be decided through the bankruptcy proceeding.

U.S. crypto firm Nomad has been hit by a $190 million theft, blockchain researchers said today, the latest such heist to hit the digital asset sector this year, Reuters reported. Nomad said in a tweet that it was "aware of the incident" and was currently investigating, without giving further details or the value of the theft. Crypto analytics firm PeckShield told Reuters $190 million worth of users' cryptocurrencies were stolen, including ether and the stablecoin USDC. Other blockchain researchers put the figure at over $150 million. The company has notified law enforcement and is working with blockchain forensics firms to try to identify the accounts involved and get back the funds, it said in a statement to crypto news outlet CoinDesk. Nomad, which last week raised $22 million from investors including major U.S. exchange Coinbase Global, makes software that connects different blockchains — the digital ledgers that underpin most cryptocurrencies. The heist targeted Nomad's "bridge" — a tool which allows users to transfer tokens between blockchains. Blockchain bridges have increasingly become the target of thefts, which have long plagued the crypto sector. Over $1 billion has been stolen from bridges so far in 2022, according to London-based blockchain analytics firm Elliptic. In June, U.S. crypto firm Harmony said that thieves stole around $100 million worth of tokens from its Horizon bridge product.

U.S. banking regulators have ordered cryptofirm Voyager Digital to cease and desist from making "false and misleading" claims regarding deposit insurance protection for customers, Reuters reported. The Federal Reserve and the Federal Deposit Insurance Corp. sent a letter to the firm on Thursday, stating they believed that Voyager had misled customers by claiming their funds with the company would be covered by the FDIC. In reality, the company simply had a deposit account with Metropolitan Commercial Bank, but customers' deposits with Voyager, which declared bankruptcy earlier this month, were not FDIC-insured.

The CEO of two Hollywood production companies that specialize in reality-television programming was sentenced to 12 months and one day in federal prison for fraudulently obtaining a $2 million business loan using fabricated documents and by misrepresenting his companies’ financial circumstances, according to a DOJ press release. Jonathan Lee Smith was sentenced by U.S. District Judge John F. Walter, who also ordered Smith to pay $2 million in restitution. Smith managed and owned two Hollywood-based production companies, Hoplite Entertainment Inc., and Hoplite Inc. To convince a private lender to fund a $2 million loan in 2020, Smith falsely represented that his two companies had accounts receivable of $3,348,000, and he submitted falsified license agreements and other forgeries to back up the claim. Based on these and other misrepresentations, the victim lender agreed to the loan and, on Sept. 30, 2020, transferred $1,951,416 to a Hoplite Entertainment bank account. To convince the private lender to give him additional time to repay the loan, court documents state, Smith falsely represented that payment was imminent. He also emailed a fake record showing a $100,000 wire payment from Hoplite, Inc. to the lender. In fact, the loan was never repaid. Smith filed for chapter 7 bankruptcy relief on March 30, 2021, in the Central District of California.