In honor of National Consumer Protection Week, we’re talking about investment fraud with Eric Shen, Inspector in Charge at the Postal Inspection Service’s Criminal Investigations Group. Discover the deceptive tactics used by fraudsters to lure in unsuspecting victims and learn how to safeguard your finances.
This week on Mailin' It!, we’re joined by Eric Shen, Inspector in Charge at the Postal Inspection Service’s Criminal Investigations Group, to shine a light on investment fraud. From cryptocurrency scams to smishing, we discuss the myriad of tactics fraudsters use to deceive people and share tips on how to identify them. Join us as we uncover the inner workings of these schemes and provide you with the knowledge to protect yourself and your loved ones from falling victim to deceptive practices.
Karla Kirby
Hi, everybody. Welcome to “Mailin’ It,” the official podcast of the United States Postal Service. I'm Karla Kirby.
Jonathan Castillo
And I'm Jonathan Castillo. It's becoming something of a tradition here on Mailin’ It to talk about National Consumer Protection Week every year around this time. There's a good reason for that. The Postal Inspection Service plays a very important role in fighting fraud and other crimes that can happen to any one of us. In the past, we've covered work from home schemes and romance scams as part of the National Consumer Protection Week.
This time we're going to focus on investment fraud.
Karla Kirby
Specifically, this episode, we're speaking with Eric Shen, inspector in charge at the Postal Inspection Service's Criminal Investigations Group, about some of the investment scams he's seeing out there and how people can protect themselves and their loved ones from becoming victims. Eric, welcome to Mailin’ It.
Eric Shen
Thank you for having me.
Karla Kirby
Eric, before we get into our conversation about National Consumer Protection Week and fraud prevention, it would be great if you could tell us a little bit about yourself. How long have you been with the Postal Inspection Service?
Eric Shen
I have been with the Postal Inspection Service for about 18 years. For the last two years, I have been in my current position as the inspector in charge of the Criminal Investigations Group. Before that, my 16 years of my career was always in Los Angeles, California, kind of where I grew up as well. So recently moved out here a couple of years ago.
Jonathan Castillo
Tell us a little about your background in law enforcement. Are financial crimes your specialty at the Inspection Service?
Eric Shen
Yes. Before coming to Washington, D.C. in my current position, I worked in Los Angeles. And during the six years there, when I was working on cases, I worked majority of cases of financial crimes involving mail theft, identity theft, bank fraud, mail fraud. When I became a team leader, I supervise a team of inspectors and task force members for financial crimes, identity Theft Task Force.
When I became an assistant inspector in charge, I oversaw the mail fraud programs, the security programs, and the mail theft programs that all involved those aspects of financial crimes.
Karla Kirby
So a lot of the scams these days are reaching people through email and text and other digital channels. What's the connection between this type of criminal behavior and the Postal Inspection Service?
Eric Shen
Well, Karla and Jonathan, as you know, the mail reaches everyone in this country and abroad as well. So, you know, a lot of these scams involve sending or receiving money via the mail. Then they're part of the inspection service jurisdiction. Once the mail is being utilized to facilitate these criminal activities. Also, sometimes people are asked to mail crypto wallet.
It's a trend over the past five years - Crypto wallets. If you don't know what they are, they're really a size of a maybe a USB thumb drive. Something to that aspect that has digital currency in it. It's very easy to mail small. It's hard to locate when you can hide other items in the mail. So it's definitely something that we're seeing that trend now.
It's harder to trace when you're using cryptocurrency. And there's always an element of mail in investment fraud as well when you're looking at these types of financial crimes.
Jonathan Castillo
And we mentioned a little bit earlier, you know, this year you're focused on investment fraud. For our listeners, maybe you're like me might not be familiar with the term. What exactly is investment fraud? What does that even mean?
Eric Shen
So investment frauds, it's been going on for a long time. I think it's just becoming unfortunately worse because of social media and the Internet. There's a lot more opportunities. There's a lot more reach with social media and the Internet. You know, a lot of these examples I can give you is get rich quick schemes or investment opportunities like bogus securities or commodities, oil wells, rare coins, crypto currency.
Usually a request of money typically follows, which is a big red flag that someone's being targeted for a scam.
Jonathan Castillo
Would you be able to give us some real world examples of what these investment scams might look like?
Eric Shen
Sure. Between 2009 and 2018, a businessman named Frederic Voit told investors he was looking to invest in companies with innovative products. He led people to believe he was going to invest their money in specific companies. Most of the money he received went to his own pockets, of course, and he also used the money from the new investors to pay the existing investors, which is the classic Ponzi scheme that we've seen, you know, throughout the history. When investors didn't receive the payments they thought they pretty much expected he was caught. So continued to go on until the investigation kind of come to fruition. He was sentenced in 2022 to over five years in federal prison, and he was ordered to pay almost $41 million in restitution. In another Ponzi example, I can give you that we've investigated as a as an agency is a con artist pretending to be the CEO of a New York investment firm.
He, again, very similar to these schemes, defrauded the investors out of more than $4 million through a financial service firm that he controlled. He lied to the investors about how much money had been raised, who had invested, how close the firm was to an IPO, and how he would use investors money. He took most of the money for his own use or to pay off investors in a Ponzi like fashion. And he was, of course, once investigated, sentenced to prison.
Karla Kirby
So based on some information, I looked at Ponzi schemes and the U.S. mail have a long history. More than 100 years, they're named for Charles Ponzi. He used coupons issued by the Postal Service to defraud investors shortly after World War One ended. There's a longer story here, of course, but the short of it is that postal inspectors ending up nailing him in 1920.
And he was sentenced to five years in jail. Eric, you mentioned cryptocurrency earlier. I thought that that type of financial transaction was done digitally. Do you have any examples of cryptocurrency investigation that involve Postal Service inspections or risk?
Eric Shen
Absolutely. And just like any type of scam, it could be a romance scam or a financial type of scam. As long as there's money involved, we are starting to see that trend where they're asking for digital currency instead. But it's not just those type of things. So something specific that that, you know, is almost like in your backyard, Right.
A Colorado pastor was recently charged with convincing followers to buy millions of dollars worth of cryptocurrency called INDX Coin. He and his wife allegedly offered INDX coin through an online cryptocurrency currency exchange they created, controlled and operated. They raised more than $3 million from more than 300 people that really trusted them. You know, he's a pastor. You expect going to church, you would trust this person, right?
But the couple, they spend at least 1.3 million of the money they received on jewelry, vacations, airline tickets, clothing and remodeling their homes. So, once again, identified, investigated, going through the judicial process. The other assets were frozen and all the people behind INDX coin are being prosecuted currently.
Jonathan Castillo
Wow. What a terrible, you know, abuse of trust there. Tell me, what makes these investment scams so difficult for the victims to see through?
Eric Shen
Well, you know, they try to make these schemes very realistic. You know, we've seen ones where they actually rented a physical office space, hired a receptionist. You know, they position themselves as investment counselors and they distribute professionally designed mailers to describe their offering. And they use really well-rehearsed scripts to be convincing, utilizing social media, utilizing the mail, utilizing emails, creating those, the facade of the investments.
And they target older people because older people have the money saved up from their, you know, their retirement. And they may be less savvy about investment. So there may be more in line to falling for those things. And we're also seeing a trend with cryptocurrency. A lot of younger adults in their early ages of, you know, twenties, mid-thirties, they're falling for these scams.
Get rich quick scams involving cryptocurrency, trying to make money. And a lot of times it's like mentioning the pastor's trusted friends or family members that could be potentially behind the scam. Even experienced investors can be caught up in a clever investment scam. Example I can give you as a professional money managers who place their clients money with Bernie Madoff.
That's something that's very much in the news that everyone has seen, and it's definitely another reason why these investment scams seem so realistic when you have these names or well-known people involved.
Karla Kirby
So it's interesting that scammers will go to great lengths to appear legitimate, especially when they can reach so many people with just a social media account, a website and an email address. Can you give us an example of a case where it would have been really difficult for even an experienced investor to know that they were being caught up in a fraud?
Eric Shen
Absolutely. You know, example I can give you is the Nikola Motor Company. The CEO of the parent company, Trevor Milton, encouraged investment in companies plans to produce hydrogen, build hydrogen plants and manufacture hydrogen and battery powered trucks. But he was overstating the company's potential, ended up replying to investors via social media, TV, podcasts and in print. And instead of launching an initial public offering, he merged Nikola into what's called a special purpose acquisition company. This sidesteps certain regulations aimed at governing IPOs and in public statements the CEO makes. Milton was convicted of securities and wire fraud and was sentenced to four years in federal prison with three years of supervised release. He was ordered to forfeit his property. He received a $1 million fine and he has to pay the restitution back to the investors.
Jonathan Castillo
Erik, When we were preparing for this episode, I remember you mentioned that some people have a really hard time being convinced that they're actually a victim of investment fraud. Why is that?
Eric Shen
Well these con men are very slick, very good at what they do. Sometimes people are scammed by family, friends, other people they trust, like the pastor in Colorado that I mentioned earlier. Sometimes people are so convinced by a fraudster that those victims recruit other victims as really hard to understand the victim's mindset. Example I can give you as a personal example, when I went to talk to a victim of one of a financial scheme, she didn't believe me and she actually called the police on me. So I had to get her family involved, her daughter involved, to really convince them her that this, you know, investment that she was putting her life savings into was bogus.
Jonathan Castillo
And so, Erik, I can remember this one time a few years back. Right. My partner at the time got this phone call and they were asking, you know, basically saying, hey, you know, your taxes, you know, you owe this much in taxes and you know, you're going to get penalties. And if you don't pay now, you know, you know, you can serve jail time and things like that. So I remember getting that phone call, answering it, and I was going along with it at first. I mean, they were so convincing. And then, you know, they just kept asking for a little bit more information. And I thought, wait a second, these are red flags here. Like you talked about. This is a red flag. And finally, I got on before I gave them any of the good information. But I think the point is, it's not just, you know, the elderly they're being targeted here. They go after anybody. And it can really if you're not paying attention, if you're distracted, because I think at that time I was a little distracted. They can just it can affect young people, old people, anyone.
Eric Shen
Absolutely. You know, and I think that's the point. They target everybody, anybody and try to catch you off guard. I can tell you myself, like I mentioned earlier, 18 years in federal law enforcement with the Postal Inspection Service, a couple of days ago, I receive a solicitation in the mail about I notice you purchase this on Amazon, right of review, scan this QR code, provide your personal information, and we’ll send you a $30 gift card.
And I first read it on my oh, $3 gift card. I could use that. But then I did a double take and I even showed my wife like, this has got to be a scam, right? And she's like, Oh, yeah. And then we just ripped it up and threw in the trash. But, you know, it really is. They target anyone and anybody and they would they will go after whoever is going to kind of take it, take the bait a little bit.
So you have to be really diligent when you see things come through in the mail, phone calls, emails, texts, you know, they use everything and anything to reach out to the public.
Jonathan Castillo
They're using QR codes now.
Eric Shen
Yes. Yeah.
Jonathan Castillo
Wow. That's, you know, usually like when you see a QR code on a mail piece, you feel like it's pretty legit. Yeah. So that's kind of scary.
Eric Shen
Oh, yeah, absolutely. They really try to take advantage of any type of new technology to scam people.
Karla Kirby
I think, you know, people tend to, you know, look at things especially, I think, Eric, what you mentioned very interesting that they knew your Amazon purchase and so when you see that, you're like, oh, this must be legitimate. So is anybody really immune to being subjected to this type of scamming?
Eric Shen
And no, you know, if you're out there as far as making purchases online or you know what what's popular - purchases online. So that's a good example. You know even though you may not have ever used Amazon, they will utilize Amazon's logo they'll create that that fake letter solicitation to you and still mail it to you hoping one of you did purchase something and then think, okay, I can utilize this account knowing that Amazon is a popular website that everyone utilizes, You know, that's a good example.
But there's other many examples. If you purchase, you know, from other clothing companies or anything like that online, they just, will, you know, Photoshopped their logo into a letter that they create to make as real as they can. Like, you know, I've received solicitations before and not just in the you know, in an email as well from a bank, I received one saying, oh, you're, you know, your account might have be been hacked. Please click on this link. And, you know, just stuff like that you're going to see. And you have to really be careful and diligent when that happens. First thing I do, I take out my debit card, I call the back of the number and I ask them, Did you send me a information on that? And they said, No, we don't do it that way.
So that's another way of kind of preventing anything further. And to educate your family, your members, you know, whoever's listening to this podcast, that's something you got to do to be really diligent and double check. You know, when you do receive something that might seem a little off.
Karla Kirby
So that actually brings me to something that, you know, I recently received at my home. So it was a notice of breach and it said and there was a QR code and there was a phone number on it, but the actual vendor who said they had the breach, I didn't recognize it, but they said they worked as a sub for another vendor. And so I think that fear, yeah. Of okay, it's a breach and okay, they're going to give some consumer protection or some kind of credit monitoring, but it doesn't even click to most people that you're going to have to give them your personal information to verify. Yeah, who you are. Very disheartening. So what are some ways that people can protect themselves from this type of fraud?
Eric Shen
You know, you try to vet the person or company by searching for them online and on social media, search online for their email address or phone number to see if info about a scam pops up. Check if an investment professional or company is licensed or registered. You can go to investor.gov and a Commodity Futures Trading Commission websites are good resources.
You can also call the Better Business Bureau, State Attorney General or Consumer Protection Agency. Compare any information the person has giving you with what you find out about them online. Never move more quickly to commit to an investment that you feel comfortable with. These are not just things that I'm mentioning to you. I actually practice these things myself.
Jonathan Castillo
You know, one of the problems that you pointed out a little bit earlier is that some people just have a hard time knowing when they're being scammed. How can people help protect their family, their friends.
Eric Shen
Just being especially attentive towards younger family members who might not have a lot of experience investing and older family members who may not have a lot of experience online. The inspection service sometimes attends AARP meetings to educate older adults about different types of fraud because they are often targeted. If appropriate, answer to phone for older family members and relatives when you're visiting to get a sense of the types of calls come into their homes, and if appropriate, volunteer to review their finances with them and question suspicious payments or large withdrawals.
National Fraud Protection Week is a week that focuses on this, but we advocate for prevention all year long.
Karla Kirby
So definitely, let me tell you, being aware of those social media and how they really mine your information and, you know, target those ads is another key thing that I've noticed. So if someone thinks that they or someone they know has been a victim of this type of fraud, what can they do and how can they get help?
Eric Shen
Well, if you have been targeted or fallen victim to a scam, tell a friend or family member, file a report at USPIS.gov, or call 1-877-876-2455. Most of the tips and complaints come through the website and then an investigation really starts with you reporting it. People should never feel ashamed to come forward if they are victims. Their courage can help others also becoming victims. The inspection service is working to spot investment fraud, but relies heavily on the public acting as our eyes.
Jonathan Castillo
And years before we wrap this up, Eric, I did want to ask you about a different type of fraud that's really been on the increase lately, these unsolicited mobile text messages from the Postal Service, or at least they're purporting to be from the Postal Service. And so many people are getting them. I know I'm getting them. You probably receive them as well.
It's not investment fraud exactly, but I think it's worth mentioning. Right.
Eric Shen
You're absolutely right, Jonathan. You are correct. I do get those probably once every other week. You know, the type of text message you're talking about is called smishing. If you never signed up for a USPS tracking request for a specific package, then don't click the link. That's what they're there for. They really want to get you in to that to clicking on that link, because when they do that, they are hoping that you will then provide that information such as usernames and passwords, Social security numbers, date of birth, credit, debit card numbers, personal identifiers, or other sensitive information.
These victims will typically receive a deceptive text message to lure the recipient into providing their personal or financial information. So in general, people using Smishing scams attempt to disguise themselves as a government agency such as ourselves, the Postal Service banks, or other legitimate companies. This information is then used to carry out other crimes, such as financial fraud. The Postal Service offers free tools to track specific packages, but customers are required to either register online or initiate a text message and provide a tracking number.
USPS does not charge for these services. USPS will not send customers text messages or emails without a customer first requesting the service with a tracking number and it will not contain a link.
Jonathan Castillo
That's key. I think that's really key because, you know, I get those text messages right? I went through the Smishing. And it's like, Oh, your packages delayed or something. And then that's when they try to get all that information and that's where they, you know, use it for other types of fraud.
Eric Shen
So absolutely.
Jonathan Castillo
Crazy. Well, listen, Eric, thank you so much for joining us on the podcast. It was great speaking with you. Great learning about all the different types of investment fraud scams that are out there and how we can help protect, you know, our loved ones or friends.
Karla Kirby
So definitely thank you for joining us. Just want to clarify, so to file a report USPIS.gov or 1-877-876-2455 and that would be for any scams that involve the Postal Service. Well, definitely great information. Hopefully our listeners took note. Don't click on the link.
Eric Shen
That's right. Don't click on the link. Thank you for having me. I really appreciate your time.
Karla Kirby
Thank you so much.
Karla Kirby
And now it's time for another segment of Did You Know where Jonathan and I discuss surprising facts about the Postal Service that most people are not aware of. I'll get things started. Jonathan, did you know that before 1913, the Postal Service wasn't allowed to deliver packages that weighed more than 4 pounds?
Jonathan Castillo
Wow. It's hard to believe the weight limit was ever that low.
Karla Kirby
I know postal employees were prohibited from accepting anything weighing more than 4 pounds. Interestingly, 4 pounds was only the limit for domestic items, but international parcels could weigh up to 11 pounds. Former Postmaster General John Wanamaker called it a curious anomaly and pushed for changes in domestic package delivery. On July 1, 1913, the Post Office Department started a new service called Parcel Post.
Jonathan Castillo
That is curious. Who were the first people to use the new parcel post?
Karla Kirby
Well, there was a bit of a race to be first. At the stroke of midnight that first day. Postmaster Ed M. Morgan in New York City and Postmaster General Hitchcock each mailed the other a package. However, these weren't the first packages to be delivered. The distinction belongs to an 11 pound container of apples sent to New Jersey Governor and President elect Woodrow Wilson.
The Woodrow Wilson Club of Princeton deposited the apples at a local post office at precisely 12:01 a.m. By pre-arrangement, the carrier who received the package raced to the president elect's home, where at 12:04 a.m., Wilson met him at the door and signed for his apples. In the first six months of parcel post, the post office department delivered 300 million packages.
Jonathan Castillo
Amazing. That is a lot of packages in just six months. My Did You Know is also related to shipping packages. Did you know that the Postal Service played a special role in helping U.S. soldiers in Europe celebrate Christmas in 1918?
Karla Kirby
No, I didn't. What was the special role?
Jonathan Castillo
Well, more than 2 million American military servicemen and women were stationed in Europe when the Declaration of Armistice on November 11th, 1918, effectively ended World War One. Many could not return home by Christmas 1918. So with the help of the Red Cross, military and postal officials planned to deliver Christmas by mail.
Karla Kirby
Interesting. How did they do that?
Jonathan Castillo
During the fall of 1918. Service members could request coupons to send home, asking for a standardized 3 pound box of gifts. The U.S. military reported that more than 15 million parcels in packages with the special Christmas coupons arrived in Europe that December. Additionally, 46 million letters came from the U.S. while American Expeditionary Forces Service personnel sent home more than 40 million letters.
Karla Kirby
Wow. That's quite an impressive amount of mail. It's wonderful to know that the Postal Service has been supporting our servicemen and women for more than 100 years. And that wraps up this edition of Did You Know.
Jonathan Castillo
You know, Karla, I'm so glad we had a chance to dive into all the different types of investment fraud scams that are out there. What hit home for me was something that Eric said about the victims. Sometimes it's really hard for someone to admit, even to themselves maybe that they've been scammed, duped, hoodwinked. It's not easy. That's why it's so important as consumers, right, to educate ourselves and share this information with our friends and our loved ones.
And I think it's great that the inspection service is so proactive on cracking down on mail related crime, fraud and really ensuring the sanctity of mail. Karla, as you know, last year in May, they launched a joint effort with the Postal Service - Project Safe Delivery to enhance employee safety and strengthen consumer protections. And here they are again helping fight investment fraud by educating the American public during National Consumer Protection Week.
Karla Kirby
You know, Jonathan, great points. I think one of the major things I took away from speaking with Eric is that really nobody is immune to these type of scams, whether it be investment, whether it be romance, text, phone mail. There's just so many things out here that we need to be diligent about and definitely sharing our experiences with family and friends.
Another good thing he pointed out was Google it. If you get something, look and see, does it come up as a scam? I think that is also one of the ways that we can look to protect ourselves. So that's all for this episode of Mailin’ It.
Jonathan Castillo
Until next delivery.
Karla Kirby
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