Six Upstate residents indicted in $1.3 million tax refund fraud scheme

A suspicious IRS letter, a rejected return or a refund that never arrives can be the first sign that someone has already used your Social Security number. The IRS says a tax return flagged for possible identity theft will not move forward until the taxpayer verifies the filing, and warning signs can include accounts created or accessed without permission, unexpected password-reset alerts, or a W-2 or 1099 you never earned.

That is why Central New Yorkers are being urged to lock down tax accounts before filing and to react quickly if a refund is delayed. The IRS recommends getting an Identity Protection PIN, updating online account passwords, keeping records of letters and calls, checking the IRS Online Account, and reporting suspected fraud to the agency and to IdentityTheft.gov. If a return is rejected because someone else already filed with your Social Security number, the IRS says to follow the notice, file Form 14039 if needed, and contact your financial institution right away.

Federal prosecutors say the fraud behind those warning signs was elaborate. A federal grand jury in the Western District of New York indicted six Buffalo-area residents on May 1 on charges of conspiracy to commit bank fraud and aggravated identity theft: Jeffrey Fleischer, 36; Crystal Velez, 36; Blaine Webster, 40; Reginald Seals, 47; Johnny Ray McDuffie, 36; and Anthony Zorilla, also known as Anthony Velazquez, 28. Assistant U.S. Attorney Paul E. Bonanno said the group allegedly used fraudulent identification documents between August 2023 and May 2024 to open bank accounts in the names of tax refund check payees, then deposited stolen U.S. Treasury refund checks and withdrew or transferred the money for their own benefit.

The indictment says more than 12 victims were targeted in New York, Florida, New Jersey, Virginia, Connecticut and Oregon, with losses topping $1.3 million. Prosecutors say accounts were opened at Northwest Bank, Evans Bank, Good Neighbors Credit Union, ServU Credit Union, Sweet Home Federal Credit Union, Erie Federal Credit Union, Corning Credit Union, Greater Niagara Federal Credit Union, Cornerstone Community Federal Credit Union and High Point Federal Credit Union in Buffalo, Amherst, Getzville, Niagara Falls, Painted Post and Corning, as well as Erie, Pennsylvania.

The case carries serious prison exposure, with a mandatory minimum of two years and a maximum of 30 years. It also fits a broader federal effort: the Justice Department says stolen-identity refund fraud has cost the U.S. Treasury billions of dollars, and IRS Criminal Investigation continues to pursue tax-related identity theft as a financial crime that can hit ordinary filers long before they know their refund has been intercepted.