SSN, Tax Refund and Cyber Fraud:

Cost of the J-1 Summer Work Travel program to American taxpayers.

The following information has been taken from the recent study about the J-1 Summer Work and Travel USA program (swt). For endnotes and more information refer to the complete version of the research.

SSN fraud

Social Security Numbers issued to swt participants are sold by either overseas swt recruiting agencies or by program participants themselves. Third parties, who obtain SSN of swt participants along with J-1 visa scans and other students’ personal information, use it for all kinds of financial crimes in the US. Fundamental flaws in the scandal-plagued swt program created a perfect environment for this fraudulence to occur. Below is a combination of factors that facilitates this fraud:

  • Desperation of participants who are recruited into the program by agents with false promises of high earnings. Participants incur high debt believing they would recoup program costs “in one month” as promised by agents. As this does not happen desperate students are made to accept an “easy solution” – sell SSN to repay accumulated debts. Immaturity and naivety of swt participants are exploited both by SSN fraudsters and overseas agents vetted by US sponsors.
  • Agents’ lack of robust standards that would protect personal information of swt participants [in21]
  • Zero oversight of foreign agents who operate within the “swt hunting mode” mentality (see research). Agents with low ethical standards are not held accountable for negligence and misconduct. They may and reportedly do sell SSNs in batches with no repercussions.

Selling of participants’ SSN although is not publicized as much as sexual exploitation does cost American citizens millions of dollars annually. Remember, if it is not reported it does not mean it is not happening. As this study shows there is a huge grey swt SSN market. Third parties seeking participants’ SSN even directly call swt agents and offer lucrative deals. The fact that someone openly solicits SSN from large agents indicates existing precedents and agents’ cooperation. For example, one large swt agency noted that an unidentified person called the agency and asked to sell students’ information: “This person not only asked us to sell students’ personal data, he also had the audacity to inform that another agency in our city is already selling SSNs of its clients”. Requests like these, as the agent noted, happen frequently [194, ssn_1]. How many agents agreed to make easy cash from participants’s SSN remains unknown. In another outrageous example, an offer to buy SSN was posted on the wall of the US embassy-approved agent’s social media platform [in36]. It was posted in 2016 and is there in 2020, although other shady ads were filtered out and removed by the agent.

Alarmingly, that does not appear to be an isolated case but quite common as indicated by tons of related posts[in36]. Russian speaking internet is flooded with all kinds of SSN buy/sell offers. Simple online search reveals dozens of ads, discussion boards and social media groups entirely dedicated to selling/buying SSN of former swt participants – essentially a swt SSN black market. Typical ad may say something like this one: “I am selling SSN (scans, no physical cards) of J1 students who are currently not in the US. Kit: copy of the SSN and visa. SSN are clean, no fraud, one-handed sale. Who is interested – message me. I do not consult, only sale” [194, ssn_2]. Sounds crazy, does it not?

Social media groups and other forums serve essentially like a trading desk where swt students sell and anonymous profiles buy SSN. For example, one such group, called “Will buy SSN”, has been active since 2010. It has 64 members and dozens of buy/sell posts for J-1 SSN [194, ssn_3]. Most active advertisers in this group also sell swt job offers as can be seen from their personal profiles. Particularly, one SSN seller/buyer posted ads in 2019 at the largest swt agency presumably selling job offers but specifically noted “only for those who have already been in US”[in36]. Users in this group sell SSN in all kinds of different flavors: from female and male swt participants, different nationalities, scans, copies and originals, those who returned back home on time, in bulk and apiece, and with discount if buying only SS numbers, etc. Prices vary from $120 to $500. Several posts noted that they have more than 100 SSN up for sale – indicating a possible sale of swt databases from swt agents (see above call about selling SSN in batches). Otherwise where would they get so many SSN of swt participants from? Another VK group with 61 members has been active since 2013, it sells and buys SSN of J1 students and their US bank accounts. Prices for clean swt SSN go up to $1000[194, ssn_4]. In another group swt participants sell their SSN a littler cheaper[194, ssn_5]. Here are a few more discussion boards with selling and buying SSN[194, ssn_6, ssn_7].

Clearly, the business of selling and buying SSN of swt participants is big and quite active. It is like a flea market of the swt program participants’ SS numbers. Selling of SSN by foreign students is so widespread that it has been even acknowledged by the large swt sponsor. Interexchange in 2018 and 2019 swt brochure stated that “In the past some program participants were found to be involved in Social Security fraud (selling SS numbers), bank fraud and attempted money laundering“ [194, ssn_8]. But if you think swt SSN fraud is in the past (as sponsors want you to believe) then you are wrong as there are multiple related posts in 2019 and 2020 [in36]. Even worse, in 2020 former swt participants are offered to sell their SSN for “US presidential election falsification” [in36].

But sponsors and agents do not elaborate why such business is flourishing. They do not want to recognize the root of the problem. Instead they to increase revenues continue to mislead applicants promising them tons of money in the US and naive students get loans to participate in the program. Many swt participants at the end of the program realize that they will not have earned the promised by agents “pile of cash”. So before heading home they sell SSN to recoup at least a portion of program costs. Prices vary. In NYC the SSN can be reportedly sold for $350 – $400[194, ssn_9, in101]. One participant said that “a Mexican offered her $3,000-4,000 for her SSN”[in60]. Another swt student, we spoke with, in private conversation, said that the price for SSN can go up to 80,000 Rub (~$1,200). We asked if she sold it. She said she would sell it to repay the program cost if she was not planning to come to the US again. Obviously, a desperate financial situation is a big driving factor that motivates students to cash out their SSN. But, as explained, students are the only “bad” actors in this corrupt swt chain. Justice does not apply to swt sponsors and agents who essentially set foreign students up for the fraud.

Tax refund fraud

As has been noted in the Myth about taxes [Appendix III], many agents advertise swt program to unsuspecting students without fully explaining tax matters. In contrast, they mislead swt applicants by promising that “you can always refund your taxes, you are not a US citizen. Don’t worry my dear, we are here to help you”. Of course, naive foreign students have no clue how American tax system works. And unscrupulous agents say nothing about additional associated fees charged to refund participants’ taxes. That is because this is just another source of revenue for agents/sponsors. In practice, agencies that promise to refund taxes charge a flat fee of $100-150 and more (% from refund amount).

Even worse is handling of the recently implemented federal tax changes for swt students. The US eliminated personal exemption and starting 2018 all swt participants have to pay 10% in federal income taxes (applicable for income <$9,525)[142]. Out of all taxes collected from swt student’s paycheck, federal taxes compile a very large portion. This Trump administration’ tax reform effectively eliminated refund of US federal taxes to swt foreign participants.

This is surely an unpleasant change for swt agents/sponsors since swt program became less economical for participants and therefore less attractive. Recruiting agents often hush up or divert conversation from the tax reform since full disclosure may hurt their recruitment and therefore revenues. Some agents continue to advertise swt program promising full refund of taxes. Whereas other agents seem to have found a solution to this problem. They refer participants to third parties who are “experts in US tax legislation and know how to refund all federal taxes”. Often immature foreign students get lost in the US tax refund complexity and get easily convinced by so-called “professionals” to let them run the entire tax refund process. Unsuspecting students let them do it without understanding how it is actually being done. Third parties promise to return full federal taxes, for the fee of course. But there is a problem. Third parties refund federal taxes by falsely claiming to the IRS that their clients (non American swt participants) are US residents. They use Turbotax or other softwares to refund the entire amount of federal taxes[in53]. Effectively, they make swt tax refunds just like 2018 swt tax revisions did not take place at all. Publicly, US embassy-approved agents discuss that option as a viable solution to tax refund matters[in53].

Participants get their all federal taxes refunded, third parties get a cut and swt agents continue to recruit more participants. Everyone is happy. Students sign up for the program believing they will be able to refund all taxes which will help them to recover program costs. But in this scheme students often unknowingly become persons who deceive IRS and violate US laws. This workaround “solution”, recommended privately by US sponsors’ “trusted” recruiting agents, is nothing but a tax fraud [in53]. It is a tax fraud facilitated by swt agents and other crooks who are supposed to be American ambassadors not scammers. Participants of course want to repay program costs by all means and obviously do not know US tax matters. So they often have to completely rely on third parties who tell them “no worries, we know this business, we have helped hundreds of students like you and refunded thousands of dollars. Don’t you want your money back?”. Although students clearly violated tax rules, the US Department of State has been continuously issuing them visas (tourist and repeat J-1 for instance)[in53].

That tax fraud situation was at full display when hundreds of Russian students and thousands worldwide (who with or without understanding used shady “helpers” to refund taxes as US residents) got COVID-19 related US federal stimulus payments in April 2020[in115]. Millions of American taxpayers’ money went to the wrong pockets of thousands of foreign nationals. DoS, sponsors and agents did know about it [in115]. If the State was more responsible and proactive it could have saved money for those Americans who really need them. But years of sponsors’ negligence and agents’ corrupt recruiting practices resulted in US financial damage, confusion and mess around the world. Most of the students first were truly surprised to receive $1,200 but then were confused and worried as they did not know whether they should and how to refund stimulus payments. Ultimately many participants gave up and did not refund it.

Should be noted that Russia is not unique in swt tax refund fraud. An article in 2019 revealed that “claiming back tax by deceiving the IRS is becoming a systematic problem” and that in Turkey “J-1 students, either themselves or through other people, have been filing illegal applications to the IRS, and getting money”. And just like in Russia, the article further added that “Using services such as TurboTax and FreeTaxUSA, which are legal for US citizens and residents, Work and Travel students have been claiming back tax illegally” [176].

Cyber fraud

Cyber Fraud 3

US federal inspectors in 2015 described swt participants’ involvement in shady schemes as follows: “U.S. law enforcement investigations revealed that while some SWT participants may have been misled into criminal activities, other participants willingly and deliberately engaged in activities such as tax fraud, health care fraud, and illicit money transfer schemes. In 2012, the State also reported that criminal organizations had involved SWT participants in incidents relating to illegal transfer of cash, the creation of fraudulent businesses, and violations of immigration law” [19].

Interesting that the very same agents, who lie to students and promise mountains of money in the US, on the side admit the opposite. In fact, the head of the large Russian swt agency after meeting with the State’s officials, wrote that “Many students due to low income become victims of financial fraudsters and take part in various criminal financial schemes” [52]. The swt agency  stated the following:

“all US Embassies are concerned that a huge number of foreign students come to the United States under the Work and Travel program without work (confirmed by the employer job offer) and as a result are involved in activities that are contrary to US law. According to law enforcement services, a large number of girls work in the field of the sex entertainment industry, including escort services, strip bars, etc., which is strictly prohibited by official documents establishing the procedure for the Work and Travel program. Many students, because of low earnings, become victims of financial fraudsters and take part in various criminal financial schemes” [in74]

There are plenty of examples, here is one. The saga began when Wikileaks cable from US embassy in Moscow in 2009 cited a joint investigation of a crime ring involving swt participants: “… ARSO-I worked on a joint investigation with DHS and FBI regarding a Eurasian Organized Crime group operating in Colorado and Nevada that is suspected of using 28 Summer Work and Travel (SWT) exchange program students including two female students from Russia to participate in financial fraud schemes to obtain money or goods” [22].

This story soon received continuation. In 2010, the FBI in New York City arrested Stanislav Rastorguev, a 22 years old Russian swt student who came to the US in 2009 [50]. Rastorguev was subsequently used as a mule to “cash out” stolen money from a money laundering crime ring. Once arrived in the US, he was given fake passports and identities to open multiple accounts in different banks. After other cyberthieves wired stolen money to his account, Rastorguev cashed out and kept a portion of proceeds (~10%) for himself. He helped to clear about $30,000 from various companies including Hillary Machinery. After his initial entry in the US in 2009, Rastorguev never returned home per program requirements. More troublesome is that the leader of that organized crime group was also a Russian citizen living in NYC. He presumably recruited Rastorguev still back home and probably crooked swt agents helped Rastorguev to secure a J-1 visa for US entry. The FBI charged Rastorguev with committing bank fraud and use of fake identities for which he faced 40 years in jail.

Although pleased with the investigation, Troy Owen, the owner of the Hillary Machinery was still concerned [50]:  “Even if they do manage to catch all of these crooks, I wonder how many people are waiting in line to take their place,” Owen said. “I still think wholeheartedly that the best approach is to have good, preventative security in place.”

Spot on, Mr. Owen. Indeed, thousands of naive young swt participants, blatantly misled by agents, are “waiting in line” to steal American money.

The story was finalized in November 2011 when more than 37 students from former Soviet Republics (21 Russians) were charged with different kinds of fraud. Some of them  directly cashed out stolen funds, some recruited other students with cultural exchange visas [in47, 238, 245]. Eight of them came to the US as part of swt cultural exchange program [51,52,65,237] to eventually become unconscious “Reshippers and Droppers” – key parts in the global cybercrime system. Important to note that most of the student convicts did not even know they were breaking the law [43, 241]. Exactly for this reason “cyber-scammers of the century” arrested in “Hollywood-style” and who faced “40 years in jail” received less than a year in prison [51, 242]. Also interesting to note that $3 million is not a particularly large amount of money in the US and this type of cyber crime had always existed in America as indicated by former participants[in47] and experts[78]. Moreover, based on runet review it still exists.

These cyber crime jobs were explained to students as some American companies were going out of business and therefore they had to transfer money legally. After keeping 10% students wired the rest via western union and other ways further along the chain [78]. No doubt young students are guilty as the court found. But agents, who lied to them, sponsors, who endorsed/ignored lies and neglected multi year complaints, are guilty as well.

“Well-paid dust-free” jobs

What is worse, Russian swt agencies, accredited by US embassy and “credible partners of American sponsors”, themselves (directly or through third parties who actively advertise on agents’ platforms) arranged “courier” type of jobs for their clients. For example, in 2011 large Moscow newspaper reported the following[43]:

“W&T operating companies accredited at the US Embassy offer students a “dust-free and well-paid” jobs. For example, courier jobs. However, intermediaries “forget” to inform that couriers can sometimes receive and deliver parcels paid for by stolen credit cards. Often, guestworkers, at the request of employers, sell their SSN cards. The document has no photo, and remotely (both by telephone and via the Internet) the SSN code of 9 digits can be used by anyone. Frauds of this kind are called identity theft. In this way, you can take a loan on the name of a student worker, open a bank account and even a one-day shell company without too much difficulty. About high chances to get stuck in a similar story [see mule story], tour operators, as a rule, keep silence…”

In fact, while researching agents’ swt groups, there were found dozens of posts that advertise “well-paid dust free” jobs. Usually they are posted by anonymous accounts on affiliated swt platforms or directly on swt agents’ pages but are not removed by their admins for “some” reason. Typically fraud ads refer to some American bank hiring couriers or American companies trying to evade taxes, or someone looking for a physical US home address to receive parcels. Ads’ authors know how to appeal to swt participants – they say “if you are tired with your American employer or couldn’t find a job we are here to help you” and promise $10-30k of earnings per summer. Sounds very similar to the cash mule story above. It feels that posters are perfectly aware of the hard financial situation that agents put swt participants in and therefore offer an “ultimate easy” solution. Alarmingly, ads like these were posted in 2011 and are posted in 2017 and 2018. So no, those ads and crime are not in the past and so is swt participants’ vulnerability. Here are just a few examples of these “great” jobs.

Electronic Money transfer jobs

That is just another type of swt fraud. For example, this swt VK group openly recruits swt participants since 2008 and has 19k subscribers. The ad usually says that “if you are tired of your US employer or could not find a job, remember we are here. You will transfer $20-30k per day for 2 weeks and get paid 10-20%. This way they avoid taxes. You will make $10-30k per summer, can travel around America and make money for Russia. We are not thieves involved in fraud. Real money. Call us, we’ll meet at any corner of the US”. Related discussion board has more than 100 messages.

So how much does the SWT program cost to American taxpayers?

Often swt lobbyists say that swt program operate at no cost to US taxpayers. Although to average Americans not familiar with the corrupt swt structure that might seem true, there are many indirect costs to the US that swt lobby persistently ignores. In addition to the negative impact on the US labor market, there are also foregone federal revenues for the US. In 2011 EPI estimated that in 2008 alone US employers because of employing swt workers “paid $116 million less in Medicare, Social Security and Federal Unemployment taxes than if those hours had been worked by a U.S. worker earning the federal minimum wage”[215]. If we extrapolate this amount to about 2 millions of swt participants for the last 25 years ($116M/153,000×2,000,000), we get about $1.5 billion of lost revenue for the US government that could have been used for the benefit of American people. That is an approximation but does seem like a lot of foregone revenue to call swt program a success. Add to that $1,200 Coronavirus related payments sent to thousands of foreign students worldwide and tax refund fraud described above. Those “relief” and “tax refund” payments add up pretty quickly to billions of lost American taxpayers’ money. Then let’s not forget the SSN and cyber fraud which continues to flourish and cost millions of dollars to American citizens. Finally, recall suspected usage of swt participants’ personal information to falsify 2020 US Presidential election. Yep, that is pretty bad for the “world-class diplomatic initiative and the cultural exchange” program.

So how much does the SWT program cost to American taxpayers? A lot and you pay for it out of your pockets.

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Published October 2020. Updated October 24, 2020.
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