Posts tagged with "Fraud"

New York AG Letitia James: We found ‘significant evidence’ of Trump Organization fraud

January 20, 2022

New York Attorney General Letitia James asked a court late Tuesday night, January 18, to compel Donald TrumpDonald Trump Jr., and Ivanka Trump to testify under oath—saying that her office’s investigation into the Trump Organization had uncovered “significant evidence” of fraud, reports The Daily Beast.

James said in a tweet, “We have uncovered significant evidence indicating that the Trump Organization used fraudulent and misleading asset valuations on multiple properties to obtain economic benefits, including loans, insurance coverage, and tax deductions for years.”

“Donald J. Trump, Ivanka Trump, and Donald Trump Jr… assert that they may have ignored lawfully issued subpoenas for sworn testimony because of what they contend is ‘an unprecedented and unconstitutional maneuver’ by the Office of the Attorney General (OAG)” the motion states. “But subpoenas to current and former top company officials—such as those at issue here—are routine in complex financial investigations and are amply warranted here.”

The court document notes that for over a year—and since Eric Trump testified in August 2020—the AG’s office has found significant evidence indicating that the Trump Organization used intentionally wrong property valuations “to obtain a host of economic benefits, including loans, insurance coverage, and tax deductions.”

Eric Trump invoked the Fifth Amendment “repeatedly” to avoid testifying as to the valuations of multiple Trump Organization properties, according to the memo.

Prosecutors note that, while their office has not reached a final decision as to whether this evidence warrants any legal action, their grounds “for conducting the investigation are beyond reproach.”

“This game must end,” the AG’s office says in its court filing, which asks that a judge force Trump and his two adult children to testify, as well as compel the company to turn over key missing documents.

In a Wednesday statement, the Trump Organization denied the allegations, accusing James of “misleading the public” with her probe into the former president’s businesses.

“She defrauded New Yorkers by basing her entire candidacy on a promise to get Trump at all costs without having seen a shred of evidence and in violation of every conceivable ethical rule. Three years later she is now faced with the stark reality that she has no case,” the statement said.

“So, in response to Trump suing her and filing multiple ethical complaints, and on the heels of her failed governor’s race, she has no choice but to mislead the public yet again by misrepresenting the facts and ignoring her own inflammatory comments. Her allegations are baseless and will be vigorously defended.”

The filing states that the investigation into the Trump Organization began in March 2019, when Trump’s former lawyer Michael Cohen testified before Congress. During his testimony, Cohen said Trump’s annual financial states inflated the values of the former president’s assets in order to obtain favorable loans and insurance coverage—while also deflating the value of some of his other assets to lower real estate taxes owed.

“OAG has methodically investigated those allegations; indeed, the Trump Organization has already provided substantial documentary and testimonial discovery in response to subpoenas issued by OAG in connection with its civil investigation, without ever challenging OAG’s good faith,” the motion states.

For more than two years, the Trump Organization was aware of the attorney general’s investigation into the alleged misconduct and insisted its executives were cooperating, according to the filing. In reality, the motion states, the organization dragged its heels and only recently began to hand over many of the documents that were ordered via subpoena in December 2019.

The memo details numerous schemes to allegedly inflate the value of Trump’s assets, including one in which the former president valued his own apartment in Trump Tower at $327 million, “based on the apartment having 30,000 square feet of space multiplied by a certain price per square foot.” But in 2017, the apartment shrank for the first time to its actual size of just over 10,000 square feet and its valuation shrank commensurately to $116.8 million.

Asked about this, Trump Organization CFO Allen Weisselberg conceded that this amounted to a $200 million overstatement, “give or take.”

The court filing offers details on the Trump Organization’s allegedly misleading and false statements about the value of at least six properties—including the Trump golf clubs in Scotland and Westchester; and several of the company’s iconic buildings, including Trump Park Avenue and 40 Wall Street.

The AG’s office argues that the Trump Organization misrepresented the value of all these properties to the IRS, lenders, and other insurers with financial statements that were “inflated as part of a pattern to suggest that Mr. Trump’s net worth was higher than it otherwise would have appeared.”

In addition to the former president’s alleged misdeeds, the filing also paints a better picture into the previously opaque roles his two adult children play in the company. For example, Ivanka Trump was renting an apartment at Trump Park Avenue as if it were valued at $8.5 million, the memo notes. In Trump’s financial statements, however, the apartment was worth $25 million.

Ivanka “was a key player” in many of the company’s transactions and “was able to ask for an access to financial summaries and projections covering properties or businesses in the Trump Organization portfolio,” according to the memo, and also was a point person in its relationship with Deutsche Bank.

Donald Trump Jr., who joined the family firm in 2001, was likewise crucial to the organization’s financial makeup.

“Moreover, evidence obtained by OAG confirms that Donald Trump, Jr. was involved with certain Trump Organization properties that are valued on Mr. Trump’s Statement of Financial Condition, including 40 Wall Street, and was consulted in connection with the matters on the Statements of Financial Condition,” the memo states.

The attorney general’s office claims it has received more than 5 million pages of evidence from the company that show Trump lied about the most banal things: the amount of cash available for a deal, the use of so-called “outside professionals” to evaluate the value of assets, and even the actual size of the Trump Tower penthouse. In some instances, investigators say, they found that the Trump Organization inflated the value of a property simply because it had his name on it—even though the financial documents explicitly indicated that wasn’t allowed.

But when investigators tried to get a hold of Trump’s handwritten documents—like Post-it Notes—that would show his involvement in the allegedly shady valuations, the AG’s office alleges that the company simply wouldn’t turn them over.

In the past, a source with direct knowledge of the company’s inner workings has told The Daily Beast that the Trump Organization had an annual ritual in which Trump and Weisselberg would review company finances in private and fill in the blanks as they saw fit. (Weisselberg and the company were indicted last summer on tax fraud charges in the parallel criminal investigation that’s being run by the Manhattan district attorney with the AG’s help.)

The filing asks a judge to compel Donald Trump and the Trump Organization to turn over all documents within 14 days, and to have Donald, Donald Jr., and Ivanka summoned to testify within 21 days.

Research contact: @thedailybeast

Theranos’ Elizabeth Holmes will be sentenced in September

January 17, 2022

Elizabeth Holmes, the disgraced founder of Theranos, will be sentenced on September 26 in San Jose, California, after a jury found her guilty on Monday, January 4, on four of 11 charges in a case of criminal fraud, reports Vanity Fair.

Holmes founded Theranos in 2003 after dropping out of Stanford University at the age of 19. She went on to become a billionaire on paper after raising more than $900 million from investors, based on the promise that the company’s innovative blood testing technology would be able to diagnose a wide variety of diseases with just a few drops of blood from a patient—rather than the traditional vials of blood drawn from a patient’s vein. 

However, Theranos ultimately ended up shutting down in 2018 after The Wall Street Journal published an exposé in 2015— divulging that the tests were not accurate and that Theranos was using traditional machines for its testing rather than its own technology.

That same year, the 37-year-old entrepreneur was charged by federal prosecutors with nine counts of wire fraud and two counts of conspiracy to commit wire fraud over allegations that she deceived investors and patients about the company’s technology.

The jury, which comprised eight men and four women, convicted Holmes on one charge of conspiracy and three charges of fraud. They determined she was not guilty of a second conspiracy charge and not guilty on three fraud charges. They were unable to reach a unanimous decision on another three fraud charges, which the U.S. government plans to dismiss, according to a court filing on Tuesday, Janury 11. Each count carries a maximum sentence of 20 years in prison.

Holmes pleaded not guilty to all charges and took to the stand to defend herself during the trial, during which she admitted to having regrets but denied defrauding anyone. She also placed blamed on her former boyfriend and ex-Theranos Chief Operating Officer Ramesh “Sunny” Balwani for allegedly misleading her about the effectiveness of Theranos’ technology, and she accused him of emotional and sexual abuse.

Balwani will face his own trial beginning in March over his alleged role in defrauding the company’s stakeholders, following delays due to the coronavirus pandemic.

Research contact: @VanityFair

Two Trump Organization employees are called to testify before Manhattan grand jury

September 3, 2021

Two Trump Organization employees—a senior finance official and a director of security—are expected to testify before a grand jury early this month, as Manhattan prosecutors seek to advance their criminal investigation into former President Donald Trump’s business affairs, according to people familiar with the matter, The Wall Street Journal reports.

Matthew Calamari Jr., the Trump Organization’s corporate director of security—and the son of the company’s COO—was served a subpoena for his testimony this week, the sources said. Prosecutors have examined an apartment Calamari received from the Trump Organization and how he reported that apartment on his taxes, according to those same sources.

Jeffrey McConney, a senior finance official at the Trump Organization, also is expected to go before the grand jury again very shortly.

Citing people with knowledge of the matter, The New York Times reported that the order for McConney—the long-standing Trump Organization controller and one of a small group of officials supervising the company’s fiscal matters—to testify before a state grand jury relating to the office’s ongoing probe into top Trump Organization CFO Allen Weisselberg.

McConney, who previously testified before the grand jury prior to the indictments of the Trump Organization and its chief financial officer earlier this summer, prepared the personal tax returns of Matthew Calamari Sr. , people familiar with the matter said.

Calamari Jr.’s testimony before the grand jury would grant him immunity on the subjects about which he testified—signaling that prosecutors don’t plan to indict him. Prosecutors continue to investigate whether the elder Calamari received tax-free fringe benefits and to determine whether his cooperation would be helpful to them, according to people familiar with the matter.

Nicholas Gravante Jr., the Calamaris’ lawyer, denied wrongdoing by his clients and said: “If either of my clients [is] subpoenaed to testify before the grand jury, they have no choice but to do so, and will appear and testify truthfully.”

A lawyer for McConney didn’t respond to a request for comment.

In July, the Manhattan district attorney’s office announced indictments—charging the Trump Organization and Chief Financial Officer Allen Weisselberg with tax fraud. Prosecutors accused Weisselberg and the company of a 15-year-long tax-fraud scheme involving off-the-books payments and perks like cars and apartments to employees at the company. Prosecutors from the New York attorney general’s office are working with the district attorney’s office on the case.

According to the Journal, Weisselberg and lawyers for the Trump Organization have pleaded not guilty. Alan Futerfas, a lawyer for the Trump Organization, said that the case was brought because of the Trump name and that compensation cases are resolved by civil tax authorities.

Since then, prosecutors have fought with the Trump Organization over documents the district attorney’s office subpoenaed.

A second sealed court appearance over that dispute took place last week, according to people familiar with the matter.

Research contact: @WSJ

Theranos whistleblowers launch advisory group on ethical practices for tech startups

April 4, 2019

March seemed to be “Theranos month” on U.S. television, as network, premium cable, and streaming channels ran stories on the stunning rise and fall of the Silicon Valley company helmed by Elizabeth Holmes—who claimed she had found a way to test for a full range of diseases with a small blood sample and a “magic box.”

Now, Erika Cheung and Tyler Shultz—two former employees who blew the whistle on Theranos—have launched a new organization called Ethics in Entrepreneurship, which seeks to help other entrepreneurs from suffering the same fate as Holmes, CNN reports.

Cheung, who lives in Hong Kong, is the former Theranos lab worker who tipped off the Centers for Medicare and Medicaid Services to look into the blood testing startup.

Shultz, who is the grandson of Theranos board member and former Secretary of State George Shultz, was an ex-research engineer instrumental in helping Wall Street Journal investigative reporter John Carreyrou expose the company, according to the news outlet..

Theranos had a reported $9 billion valuation and employed hundreds of workers who bought into its mission to create a cheaper and more efficient alternative to traditional blood testing methods. After Carreyrou’s initial investigation into the company in 2015, its technology and testing methods started to unravel.

In March 2018, the Securities and Exchange Commission settled charges against Theranos and Holmes, over “massive fraud “involving more than $700 million raised from investors. In September, Theranos announced plans to dissolve itself. The company remains the subject of an ongoing criminal investigation by the Department of Justice.

Ethics in Entrepreneurship, which is seeking non-profit status in the United States and Hong Kong, according to CNN, wants to make talking about ethical practices the norm in the startup world. The founders plan to help connect early stage entrepreneurs to ethicists, seasoned entrepreneurs, and other relevant industry experts who can guide them on how to make ethical decisions when building a company. It also plans to make available tools and frameworks for ethical decisions that benefit businesses, employees and consumers.

There were so many instances, even for someone like Elizabeth Holmes, to turn back and say, ‘I’m taking things a little too far here,'” Cheung told CNN Business. “She had many opportunities to — even at the very end, she could have said, ‘OK, I’m sorry. I messed up. I’ll stop processing patient samples and I’m going to get my team together, we’re going to work on this and we’re going to make a good product.’ I don’t think she’s ever said that, until she had to go to court and say those things.'”

The organization is accepting donations on its website to help support the development of resources guides and workshops.

“I do think entrepreneurship can empower people and empower society but we also have to not let things escalate to this degree,” Cheung said.

Research contact: @saraashleyo

Sanders pulls no punches as he enters 2020 race; says Trump is ‘pathological liar, fraud, and racist’

February 21, 2019

The Independent senator from Vermont has joined the race: Senator Bernie Sanders announced his 2020 presidential bid on February 19 in a no-nonsense campaign video designed to knock President Donald Trump back on his heels.

“You know as well as I do that we are living in a pivotal and dangerous moment in American history,” he said in his “I’m Running for President” video, adding, “We are running against a president who is a pathological liar, a fraud, a racist, a sexist, xenophobe, and someone who is undermining American democracy as he leads us in an authoritarian direction.”

Saying that he needed one million grassroots supporters to succeed in “bringing [Americans] together again” Sanders offered a message calculated to mobilize his audience of “…women and men, black, white, Latino, Native American, Asian American, gay and straight, young and old, native-born,  and immigrant. “

Indeed, his campaign reported raising $5.9 million during the first 24 hours after his presidential announcement.

The 77-year-old candidate—whom many, including President Donald Trump had openly believed “had missed his time” and had lost his luster since the 2016 race—received donations from more than 225,000 individuals in the first day of his campaign, a haul that far outpaced his Democratic rivals and some of his biggest fundraising days during his primary challenge to Hillary Clinton, The Wall Street Journal reported.

With Sanders’ entry, the field now includes a dozen major Democratic candidates and could grow larger with expected decisions soon by former Vice President Joe Biden and former Texas Representative Beto O’Rourke.

By comparison, Senator Kamala Harris (D-California) raised $1.5 million from 38,000 donors online in the 24 hours after she announced her campaign last month.

In his previous campaign, Sanders—an outlier to begin with because of his Independent politics—had labeled himself a Democratic socialist, a platform seen as too radical by the Democratic Party establishment. This time around, those same ideas—Medicare for all, a higher minimum wage, free college tuition— have gained widespread acceptance and are being embraced by mainstream candidates seeking the Democratic nomination.

“Our campaign is about transforming our country and creating a government based on the principles of economic, social, racial and environmental justice,” Sanders said. “Our campaign is about taking on the powerful special interests that dominate our economic and political life. I’m talking about Wall Street, the health insurance companies, the drug companies, the fossil fuel industry, the military-industrial complex, the private-prison industry and the large multi-national corporations that exert such an enormous influence over our lives.”

Sanders promised to “fight for working families and the shrinking middle class, not just the 1%.”

His campaign slogan represents a jab at the current administration: “Not me. Us.”

In response, President Trump tweeted, “Crazy Bernie has just entered the race. I wish him well!”

Research contact: @BernieSanders

Fishy business: Bogus seafood is everywhere, even in port cities

January 29, 2019

Is your seafood retailer telling—and selling you on—a “fish story”? In New York City according to State Attorney General Letitia James, if you are buying lemon sole, red snapper, or wild salmon, it is likely that’s not what you’re taking home.

Late last month the James’ office issued a report  asserting that 43%t of the time, when premium-priced fish (fetching between $19 and $29 per pound) — like grouper, cod, halibut, striped bass, and white tuna —is purchased, inferior varieties farmed in foreign countries with very little or no regulatory oversight are substituted without the buyer’s knowledge.

“I’m very happy to see law enforcement getting involved says,” Larry Olmsted, author of “Real Food/Fake Food: Why You Don’t Know What You’re Eating and What You Can Do about It,”  recently told Salon.

“Mislabeling is rampant in the seafood industry, and if you can’t reliably get the fish you want in a port city like New York, just imagine what levels of fraud are like further inland,” Olmstead said to Salon, adding, “This business has had a fraud problem for years and years—and the only people tracking it have been public interests groups,”

In the investigation leading up to the release of the new report . samples from 155 seafood retailers were purchased and tested. Farmed salmon samples were purposely mislabeled as “wild” 27% of the time. Sixty-seven percent of red snapper fillets were mislabeled; and virtually every piece of fish labeled as lemon sole (87%) was something entirely different and cheaper.

Across the board, substitutes were cheaper, less desirable, and less environmentally sustainable species. This, while the U.S. per capita consumption of seafood for 2017 has increased to 16 pounds from 14.9 pounds in 2016.

“For white-fleshed fish, supermarkets and grocery stores that are jerking their customers around usually sub-in Asian catfish varieties called swai, panga and basa,” Robert DeMasco, owner of Pierless Fish in Brooklyn, a seafood wholesaler with a client list including many of the country’s most celebrated restaurants, told Salon. .

These catfish varieties don’t even rate compared to the more well-known durable darling of American aquaculture, tilapia. “There’s no way of knowing how swai and the others are raised, what kind of antibiotics are used on them— though, you can bet whatever it is, there’s a ton of it being used. There’s no way of knowing what they get fed,” DeMasco told the news outlet.

“In Asia—Thailand, Cambodia and Vietnam mostly—there’s very little regulation and you know what’s crazy? Ninety percent of the fish Americans eat is coming from foreign countries,” DeMasco revealed.

Compare that to the 18% of the total supply of vegetables that are imported, and the less than 30% of total beef eaten each year that is imported, and the challenge ahead for well-regulated domestic fishermen begins to take shape.

“For the most part, the fish Americans eat is already filleted,” says author Olmsted. “The majority of it is already prepared and served in restaurants and we all know that means battered and fried, so there’s not a lot of opportunity for consumer education and that’s what it is going to take to cut down on fish fraud.

“This is the same thing that happened with the organic movement,” Olmstead told Salon. “It can be done, it will just take time and the kind of oversight that’s being signaled from New York.”

“In the fish business there are words that sell fish. ‘Snapper’ is one of those words. Another word is ‘grouper.’ It is really hard to sell a fish that is not called snapper or grouper, so of course they’re the most ripped-off fish in the store, but people just aren’t interested in lieu de mer, or even pollack, really. Turbot? That’s a nice fish,” says Demasco. “Very hard to sell.”

On menus people like descriptions. I think it’s the romance, the story in their head,” DeMasco continues. “‘Line-caught’ this, ‘day boat’ that.’ ‘Diver scallops’ is a big one. People love a diver in a wetsuit getting their scallop for them. There are some, sure. I know a lot of the guys. But how many menus in this city, this country have a ‘diver scallop’ on it? There aren’t that many divers. No. Scallops are dredged. ‘Dredged?’ Dredged is not a sexy word.”

One of the solutions is to know where your fish is coming from. “I’m a big fan of some of the branding efforts that are going on in aquaculture, it makes it easier to identify and patronize the good guys,” says Olmsted, adding, “There are good American outfits farming salmon, even shrimp. People want this stuff and companies know it.”

Research contact: @mannyhoward

Feds look at Trump inaugural fund and super PAC for illegal foreign donations

December 17, 2018

When President Donald Trump was sworn in on January 22, 2017, his first instinct was to place his right hand on his own book, The Art of the Deal, rather than the Bible. Looking back, some might say that the how-to book would have been the better choice, in light of the financial machinations that allegedly took place leading up to that day.

Federal prosecutors in New York now are investigating whether foreigners illegally funneled donations to Trump’s inaugural committee and to a pro-Trump super PAC in hopes of “buying influence” in the administration, The New York Times reports.

That would pose a big problem for the White House, because U.S. law prohibits foreign contributions to federal campaigns, political action committees, and inaugural funds.

The inquiry has focused in on money emanating from nations in the Middle East—including Qatar, Saudi Arabia, and the United Arab Emirates. Prosecutors are interested in finding out if entities from those nations used “straw donors” to disguise their donations to the two funds.

Thomas Barrack Jr., a billionaire financier and a longtime associate of Trump’s, raised money for both funds—but his spokesperson, Owen Blicksilver, told the news outlet, “Tom has never talked with any foreign individual or entity for the purposes of raising money for or obtaining donations related to … the campaign, the inauguration, or any such political activity.”

The super PAC, Rebuilding America Now, was formed in June 2016—during a period when the Trump presidential campaign reportedly was short of cash and out of favor with Republican donors. While Trump was adamant that he could finance his own campaign, he refused to dig too deeply into his own pockets.

According to several Times sources, Paul Manafort, the campaign manager at the time, suggested that Barrack step in to raise funds for the PAC, which could collect unlimited amounts of money as long as it avoided coordinating closely with the candidate.

However, in an interview with investigators a year ago, the Times said, Barrack commented that Manafort seemed to view the political committee as an arm of the campaign, despite laws meant to prevent such coordination, according to a person familiar with the interview.

In fact, Manafort asked two campaign aides, Laurance Gay and Ken McKay, to help run the operation. A press officer said at the time that the committee violated no rules because the campaign never paid the two men. Neither man returned repeated phone calls from the Times seeking comment.

According to filings with the Federal Election Commission, the committee raised $23 million and provided funds for Trump advertisements, polls, and other political expenditures. While most of the money came from U.S. donors, prosecutors have asked witnesses whether anyone from the Middle East also contributed to the kitty, perhaps using American intermediaries to cover the transactions.

After the election, the Trump campaign had money rolling in, raising an astounding $107 million for the inauguration—four times as much as the pro-Trump PAC and twice as much as the amount raised for President Barack Obama’s first inauguration.

Today, the question remains, how was that money used for Trump’s much smaller-scale inaugural event—and what happened to any unspent dollars?

Last week, for the first time, Ivanka Trump became publicly involved in the POTUS’s election probe.  According to reports by Newsweek and ProPublica, she hiked the rates for the meeting rooms and the ballrooms at the Trump International Hotel in Washington DC specifically during the days that visitors to the inauguration would be in the city. Any extra profits would have gone straight to the Trump Organization.

The inaugural committee complied with all laws and “has not been contacted by any prosecutors,” Blicksilver, who is also a spokesman for the fund, told The New York Times. Its finances “were fully audited internally and independently,” and donors were fully vetted and disclosed to the Federal Election Commission, as required, he said.

That remains to be seen. If there has been an audit, there is no external evidence of it. Although many news outlets, including the Times, have requested a copy of the financial analysis, none has been made available.

However, prosecutors certainly would be able to obtain those documents, if they exist.

Research contact: @nytimes

Payment card chips fail to halt fraud, study finds

November 9, 2018

Of the more than 60 million payment cards that have been compromised or stolen within the past 12 months, chip-enabled cards represented a staggering 93%, according to results of a study released  recently by Gemini Advisory.

In 2015, the global financial industry began a massive migration to the EMV (Europay, MasterCard, Visa) standard in response to overwhelming levels of payment card fraud. The chip-enabled cards were supposed to provide end-to-end encryption during card-present transactions; and to prevent payment card counterfeiting.

However, the New York-based cyber consulting firm says—although most card issuers have adopted the standard—retailers and other merchants have failed to comply with the EMV implementation. 

Indeed, key findings of the study are alarming—among them:

With most large U.S. merchants fully transitioned to EMV, Gemini say that gas pump terminals and small/medium size businesses have become the victims of opportunity. Smaller businesses are only now beginning to understand the importance of EMV programs, as well as to provide a sufficient budget allocation toward them.

Because Gemini Advisory believes that criminal groups will always sway to the path of least resistance, the firm predicts that financially motivated threat groups such as Fin6  and Fin7 are likely to turn their resources toward small- to medium-size businesses with  between 10 to 50 locations.

The bottom line: Until EMV implementation is more widespread among U.S. merchants, Gemini Advisory recommends the usage of mobile payment systems such as Android Pay, Google Pay, and Apple Pay. Such payment systems are not susceptible to shimming devices or POS malware—making them the most secure payment method currently available.

Research contact: @geminiadvisory

 

Don’t trust that online product review!

May 11, 2018

Do you habitually check Amazon’s product reviews before you place your orders? If so, BuzzFeed has a cautionary tale to tell—and although the names have been changed, the alleged “fraud” is all too real, the website claims.

It involves manufacturers/merchants that will pay for five-star ratings—and sellers such as Amazon that cannot root out or thwart fake product evaluations.

As BuzzFeed reports, one morning in late January, “Jake” picked up a shipping box, tore through the packaging, found the enclosed iPhone case, snapped a photo, and uploaded it to an Amazon review he was busy composing.

The review raved about the case’s sleek design and cool, clear volume buttons. He finished it off with a glowing title (“The perfect case!!”) and rated the product a perfect five stars. Click. Submitted.

There’s just one problem: Jake had never tried the case. He doesn’t even have an iPhone, BuzzFeed notes.

He then copied the link to his review and pasted it into an invite-only Slack channel for paid Amazon reviewers. A day later, he received a notification from PayPal, alerting him to a new credit in his account: A $10 refund for the phone case he will never use, along with $3 for his efforts.

“Jake” and four other reviewers who spoke to BuzzFeed for the story asked to remain anonymous for fear Amazon would ban their accounts.

They are part of an underground network—a complicated web of subreddits, invite-only Slack channels, private Discord servers, and closed Facebook groups—and, according to BuzzFeed, the incentives are simple: Being a five-star product is crucial to selling inventory at scale in the intensely competitive online marketplace — so important that manufacturers and merchants are willing to pay thousands of people to review their products positively.

And it works, time after time: In a 2011 Cone survey, 87% of consumers said that a positive review confirmed their decision to purchase a product; online customer reviews are the second most trusted source of product information, behind recommendations from family and friends. But only 3% to 10% of “real” customers leave reviews.

It’s not that Amazon and other marketplaces haven’t tried: In October 2016, Amazon banned free items or steep discounts in exchange for reviews facilitated by third parties.

But , already, they are back. Tommy Noonan, CEO of ReviewMeta, a site that analyzes Amazon product ratings, said what he calls “unnatural reviews —that is, reviews, that his algorithm indicates might be fake—have returned to the platform. In June 2017, Noonan noticed an uptick in unnatural reviews along with an increase in the average rating of products, and the rate of growth hasn’t slowed since.

Amazon won’t reveal how many reviews—fraudulent or tota—it has, BuzzFeed says. But based on his analysis of Amazon data, Noonan estimates that Amazon hosts around 250 million reviews. Noonan’s website has collected 58.5 million of those reviews, and the ReviewMeta algorithm labeled 9.1%, or 5.3 million of the dataset’s reviews, as “unnatural.”

A word to the wise: An unnatural review doesn’t necessarily mean a product is substandard. But the problem with paid-for reviews is that they make it difficult for consumers—even savvy ones (and we know you are)—to determine whether what they’re buying is actually good or bad.

Research contact: nicole.nguyen@buzzfeed.com