Lottery and Sweepstakes Scams

Like the swallows returning to Capistrano, it was easy to predict that scammers would try to cash in on the awareness and hype surrounding the record Powerball jackpot. Officials confirmed Thursday that three winning tickets had been sold.

Cue the scammers. It wasn't long before this message was making the rounds on Facebook:

“I WASNT GOING TO PUT THIS ON FB BUT I COULDNT HOLD IT AND I STILL CANT BELIEVE THIS!!! I WON $1.5 BILLION. MY FAMILY HAS BEEN CRYING FOR HOURS.”

First of all, there were three winning tickets for a $1.6 billion jackpot, so no one individual won $1.5 billion. Any crying was purely crocodile tears.

The post continues:

“I am picking 10 random people who share this photo and giving them $10,000 each. CALL ME CRAZY BUT GOD is GOOD! FOLLOW ME ON INSTRAGRAM.”

We've seen this one before

Okay, it's “instagram,” not “instragram.” But the bigger point is this is exactly the same scam that was hot a couple of weeks ago, when a similar poster claimed that Facebook founder Mark Zuckerberg, who made news when he said he and his wife were donating 99% of their stock to charity, was picking 10 Facebook users at random to share in the riches. To qualify, one supposedly had to “Like” or “Share” something.

While this might qualify more as a hoax than a scam, the potential for dangerous fraud exists if you get sucked into claims of free Powerball money. Ahead of the drawing, Ohio Attorney General Mike DeWine issued this warning to be on guard against creative schemers.

“If you receive a call saying you’ve won the lottery, it’s almost always a scam,” Attorney General DeWine said in the alert. “Con artists play on what’s in the news, so we’re warning people to be wary of scams as the Powerball jackpot grows.”

Average loss of $5,000

Over the last four weeks as the jackpot grew, DeWine said his office's Consumer Protection Section had received more than two dozen complaints involving sweepstakes or prize scams. The average reported loss, he said, was about $5,000.

DeWine says consumers should hang up on any callers who say they have won lottery money. That's not how it works.

In most cases, the scammers who say their victim has won the lottery require them to send several thousand dollars – always in a non-traceable manner – in order to receive their millions. Again, that's not how any lottery works.

If you happen to get one of these calls, hang up and report it to your local police department and state attorney general.

A federal court, acting on a request from the Federal Trade Commission (FTC), has temporarily shut down a sweepstakes operation based in Fort Lauderdale that took more than $28 million from consumers throughout the U.S and other countries, including Australia, Canada, France, Germany, Japan, and the United Kingdom.

The FTC wants a permanen end to the allegedly illegal practices and a return of money to victims.

“This outfit promised people huge prizes and collected millions in fees but never paid out a dime,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “If someone says you have to pay to claim a sweepstakes prize, assume it’s a scam.”

The charges

The FTC’s complaint and other court filings claim the defendants mailed personalized letters that falsely told consumers they had won large cash prizes -- typically more than $2 million. The prizes are “guaranteed,” the letters stated, but to collect the money, consumers had to mail the defendants a $20-$30 fee by cash, check or money order. To create a false sense of urgency, they set a deadline, typically 10 days, and warned consumers they would forfeit their winnings if they didn’t pay on time.

In reality, consumers had not won anything. The defendants have no connection to any sweepstakes and cannot award or pay anyone the promised prizes.

“Only in dense, confusing language, at the bottom or on the back of the letters,” the FTC explains, do they admit that the only service they provide is compiling “reports” about sweepstakes and contests offered by other parties that are open to the public.

By design, the defendants’ disclaimers are unclear and inconspicuous, and fail to alert consumers to the truth, and most consumers don’t even receive the “reports” and would never have agreed to pay $20-$30 for them.

The parade of defendants

The defendants are Mail Tree Inc.; Michael McKay Co.; Spin Mail Inc.; MCP Marketing Activities LLC, also doing business as Magellan Mail and Magellan Marketing; Trans National Concepts Inc.; Romeria Global LLC, also d/b/a Lowenstein Varick and Nagel; Supreme Media LLC; Vernier Holdings Inc.; Awards Research Consultant LLC; Mailpro Americas Corp.; Masterpiece Marketing LLC, also d/b/a Affiliated Opportunities Group (AOG), Corporate Accounting Authority (CAA), Dispatch Notification Services (DNS), Information Reporting Group (IRG), National Directory Center (NDC), and Priority Information Exchange (PIE); Matthew Pisoni; Marcus Pradel; John Leon; and Victor Ramirez. The court issued an order that temporarily stopped the illegal conduct, froze the defendants’ assets, and appointed a receiver to control the operation while the FTC pursues the case.

“No one is permitted to steal hard-earned money from members of our community,” U.S. Attorney Wifredo A. Ferrer said. “This office will work with international, national and local law enforcement agencies to prevent these types of sweepstake fraud schemes, and we will bring those who commit these crimes to justice.”

Here's the latest scam you need to watch out for: today the Federal Trade Commission issued a warning about fake letters, allegedly from the FTC's consumer protection director Jessica Rich, offering to help victims claim a cash prize they supposedly won.

But in order to get this big cash prize, the letter says, you'll first have to pay $5,000 to cover the costs of the “Legal Registration Bond” supposedly required.

It's a come-on for the classic “advance fee scam,” of course; if you pay the money the scammer will take it and run, leaving you $5,000 poorer and without any prize. There's nothing unusual nowadays about getting such a scammy come-on message from a con artist pretending to be some type of governmental authority figure or bureaucrat – anybody from a courtroom clerk to your state's attorney general, a fake IRS agent to a bogus deputy sheriff.

But getting such a letter through the U.S. Mail is relatively rare nowadays; most scammers prefer email because it's faster and cheaper, even free. On the other hand, that same fact might make people slightly more likely to fall for such a scam if the come-on is printed on actual paper and sent through old-fashioned snail mail, rather than done entirely by electronics.

“The language might sound legal, and the letter might look legit. You might look up Jessica Rich and see she's an actual FTC official. But the truth is, there's nothing legal or official about it. It's a fake letter designed to convince you to send money for a non-existent prize,” the FTC's warning said.

Furthermore, the FTC doesn't oversee contests, sweepstakes or any other “win valuable prizes”-type events. Even if it did, you should always remember that legitimate contests, sweepstakes or any other “win valuable prizes”-type events don't require you to first pay money in order to receive your prize.

A sweepstakes promoter has been permanently banned from direct mail marketing and is liable for a $9.5 million judgment under a settlement with the Federal Trade Commission, which charged her with violating a previous court order by running a sweepstakes scam.

“There’s a price to pay to violating a court order in an FTC case,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “In this case, that’s $9.5 million and a permanent ban on direct mail marketing.”

In April 2007, Crystal Ewing and other defendants were banned from prize promotions to settle FTC charges that they deceptively enticed consumers in the U.S., Canada and the United Kingdom to send money to collect large cash prizes that, in fact, did not exist.

Ewing now admits to violating the 2007 court order through her work with another FTC defendant, Glen Burke, and a prize promotions company, Puzzles Unlimited LLC, that duped consumers with the illusory promise of sweepstakes winnings in exchange for processing fees.

Payout notice

Using direct mail ads, Puzzles Unlimited enticed consumers to enter promotions by using terms like “Notice of Grand Prize Payout” and “Grand Prize Guaranteed,” which led consumers to believe they had already won thousands of dollars and just needed to fill out a form containing a simple puzzle and submit a “processing fee” of $10 to $15. 

But the vast majority of consumers received no “Grand Prize Payout” – or any other payout whatsoever. Instead, the consumers who submitted “processing fees” continued to receive additional rounds of puzzles that they were told they must complete correctly in order to claim the prize money.

With each round of mailers, consumers were misled with promises of bonus winnings in exchange for additional fees. At each step of the way, consumers were told they were tied for first place in the promotion regardless of whether or not this was true.