They combined real Social Security numbers with mismatched or phony names to create new identities, according to investigators.

Arena and a partner used synthetic identities to bilk the federal government out of nearly $1 million from the Paycheck Protection Program, designed to help people who had lost their businesses or employment due to the pandemic. The duo used a fake ID to get a $954,000 loan.

Synthetic identity fraud schemes have proliferated in the past few years, becoming the largest form of identity theft in the nation, according to the financial company FiVerity, which in a report last year put the losses at an estimated $20 billion in 2020.

With tax filing season in full swing, the IRS is warning taxpayers to look out for documents pertaining to unemployment benefits they never received. Those documents may indicate someone else filed for unemployment insurance using their information.

“Often times, it’s the financial institutions that are on the hook for liabilities, but make no mistake about it, those costs are at least indirectly passed on to the consumer in the form of higher interest rates and fees.”

Most of the synthetic identity schemes steal Social Security numbers from people who aren’t using credit, such as children, recent immigrants or lower-income older adults who may not have credit cards.

The thieves go for what she called the “long con. They build synthetic IDs, then they will do care and feeding. Then, they max out all of the available credit and don’t pay the bill.”

Arena and about a dozen others created the synthetic identities using Social Security numbers of children, recent immigrants, dead people, older adults and people in prison.

They applied for fake phone and email accounts as well as rewards and library cards to “legitimize” the fake identities before securing loans mostly through credit cards. Then, prosecutors said, Arena created phony corporations that reported the made-up people to credit reporting agencies as reliable borrowers, backdating the reports to make it look like they had years of excellent credit.

Synthetic identity fraudsters are most likely to apply for credit from card companies within the first year of signing up for the card, and that the average loss per card for high credit limit accounts is $13,000. “Identity theft is a ‘smash and grab,’” he said. “They leverage the identity as quickly as possible.”

In his state, identity thieves often use fake identities to procure credit to buy automobiles. Often, the fraudsters spirit the cars over the border and, by the time car dealers catch up, the vehicle is long gone.