Nonprofit Fraud Is Either a Scandal or Invisible. That's the Problem.

At Fintech DevCon 2022, during a panel called “What do fintech builders need to know about fraud?”¹, there was a quote I keep coming back to:

“The idea that you’re not going to have fraud - start with the fact that you absolutely are going to have it.”

Your first customers are friends and family. They’re not defrauding you. So you conclude you don’t have a fraud problem. Then you start growing, and the fraud tax shows up - $20K, $50K, $400K. Simon Taylor jumped in, impersonating every fintech founder he’d ever met: “No no, we don’t have fraud.” The room laughed because everyone recognized the denial. The question was never if. It was when you’d notice.

That framing stuck with me because it applies far beyond fintech. It applies to every system that moves money on trust. Including nonprofits - except in the nonprofit world, it’s the donors who pay the fraud tax. Every fake GoFundMe, every sham charity, every scandal that makes the news erodes the trust that the entire sector runs on. And unlike fintechs, donors don’t have reliable tooling to tell the difference.

The numbers nobody can ignore

Fraud in the US isn’t growing. It’s exploding.

FTC-reported consumer fraud losses went from $1.9 billion in 2019 to $15.9 billion in 2025 - more than eight times higher in six years.² And that’s just what gets reported.

Look at the chart closely: fraud reports stayed in the same rough range for years while losses kept climbing. Scams are getting more effective, not just more frequent. In 2024, 38% of people who reported fraud lost money, up from 27% the year before.²

And with widely accessible LLMs, it’s only going to get worse. Writing a convincing phishing email used to require effort. Now anyone can generate one in seconds - in any language, in any tone, targeting any demographic. The barrier to running a scam has never been lower.

The default posture for most Americans has shifted from trust to suspicion - and that shift didn’t happen in a vacuum.

Fintech learned this lesson the hard way

In financial services, the fraud problem forced an industry-wide reckoning. Banks and fintechs had to accept that fraud isn’t an edge case - it’s a feature of any system that moves money. As Shamir Karkal - co-founder of Simple and former Head of Open APIs at BBVA - noted at that same panel: “Everybody’s SSN is on the dark web somewhere.” KYC - know your customer - is a regulatory requirement, but it’s not fraud prevention. Most fraud comes from fully verified customers, because the data that verifies them is already compromised.

The industry response was layered defenses: behavioral biometrics, device intelligence, real-time transaction monitoring, machine learning models that flag anomalies before money moves. Not because any single tool is sufficient, but because the only honest answer to “how do you stop fraud?” is “you don’t - you detect it faster and limit the damage.”

Financial institutions spent decades building that infrastructure. It’s expensive, imperfect, and constantly evolving. But at least there’s a shared understanding that the problem exists and requires systematic solutions.

Nonprofits haven’t had that reckoning yet.

The nonprofit sector’s fraud problem

When people think about nonprofit fraud, they think of outliers - a rogue executive skimming donations, a fake charity set up after a disaster. But the reality is more systemic than that.

Feeding Our Future, a Minnesota nonprofit, exploited USDA-funded school nutrition programs to steal approximately $250 million during the pandemic. They claimed to have served 92 million meals through hundreds of distribution sites. Many of those sites didn’t exist. The scheme produced 79 indictments and over 60 convictions - the largest pandemic fraud prosecution in the country.³

The “Paying It Forward” GoFundMe - where a couple and a homeless veteran fabricated a heartwarming story about a stranger’s last $20 - raised over $400,000 from 14,000 donors before the whole thing unraveled. All three went to prison.⁴

We Build The Wall, the GoFundMe campaign that raised over $25 million to privately fund a border wall, became a federal fraud case. Steve Bannon was indicted, pardoned, then pleaded guilty to New York state charges.⁵

Four sham cancer charities - Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America, and Breast Cancer Society - bilked $187 million from donors, spending just 3% on actual charitable work. The rest went to professional fundraisers, Disney World trips, and dating site memberships. The case was so egregious it triggered the first-ever joint enforcement action by the FTC and all 50 states.⁶

These cases might look like I’m using scandals to make a point. But that’s exactly the problem - in the nonprofit world, fraud is either a front-page sensation or completely invisible. There’s almost nothing in between. The ones that get caught become spectacles. The ones that don’t just keep going.

And the long tail of fake organizations and questionable spending is harder to see and probably larger - fully fake charities collecting donations with no intention of doing any charitable work, real organizations spending donor money on fundraising campaigns that raise less than they cost, fundraising economics that don’t add up, or “charitable purposes” so loosely defined they’d make a donor’s head spin. Not all of this is illegal. But from a donor’s perspective, it all hits the same trust account. The line between fraud and waste gets blurry fast when nobody’s checking.

The exposure paradox

Here’s where it gets interesting. In fintech, the response to fraud was to build detection systems - automated, scalable, always-on. In the nonprofit world, we’ve been relying on something much less reliable: exposure.

The theory goes: the bigger the organization, the more eyes on it, the harder it is to get away with anything. And there’s some truth to that. FireAid - the benefit concert that raised over $100 million for LA wildfire relief in January 2025 - is the poster case.

Within months, the scrutiny machine kicked in. Community councils demanded accounting. Congress launched an investigation. In January 2026, the House Judiciary Committee released a report alleging that portions of the funds went to causes unrelated to fire relief - voter participation projects, political advocacy groups.⁷ FireAid commissioned an independent review by Latham & Watkins, which found no evidence of fraud or misappropriation.⁸

Two contradictory conclusions from the same set of facts, depending on who’s looking and what they’re looking for. But at least someone was looking. FireAid got scrutinized because $100 million and celebrity involvement made it impossible to ignore.

Now consider the thousands of smaller organizations that raise money after every disaster. They don’t get congressional investigations. They don’t get independent audits by top-tier law firms. They don’t get scrutinized at all - which means they can’t be caught when they’re bad, and they can’t be validated when they’re good.

Exposure isn’t accountability. It’s random. It’s driven by the size of the check, the fame of the people involved, and the political convenience of asking questions. The small food bank doing honest work and the small grifter running a fake campaign are equally invisible to the system. That’s not a feature - it’s a failure.

The infrastructure gap

I recently wrote about the nonprofit transparency infrastructure⁹ - the IRS allows nonprofits up to 11 months after their fiscal year to file a Form 990, then takes months more to process it. If you checked any charity’s finances today, you’d find data from 2023 or 2024. For a sector moving over $500 billion annually, we’re running on archaeology.

Take FireAid again. More than a year on, there’s still no Form 990 you can pull up. Not because they’re hiding anything. Because that’s how the system works: the filing lands long after the money moves, and then takes months more to process.

In fintech, a transaction that looks suspicious gets flagged in milliseconds. In the nonprofit world, the “flag” is a journalist or a congressional staffer who happens to notice something months or years later. One system was built for the reality that fraud exists everywhere. The other was built for a world where most people are honest and exceptions will sort themselves out.

That world is gone. The eightfold increase in fraud losses, the explosion of scam texts and phishing, the growing sophistication of bad actors - all of it means the ambient fraud level has risen past what passive systems can handle. The same forces that make your grandmother suspicious of text messages are making donors suspicious of charities. And unlike your grandmother, the nonprofit sector doesn’t have a spam filter.

The trust equation

Twenty years ago, two out of three Americans gave to charity. Today, fewer than half do. Seventy percent of donors say trusting a charity is essential before giving - but only 20% report high trust.

That trust gap isn’t caused by nonprofits being worse than they used to be. It’s caused by the fraud environment getting worse while the transparency infrastructure stayed the same. People aren’t less generous - they’re more suspicious of everything, because everything has given them reason to be.

The fintech panel at DevCon 2022 ended with a point that stuck: you have to pay the fraud tax either way. In fintech, companies pay it up front - investing in detection, verification, infrastructure. In the nonprofit world, donors pay it after the fact - through lost money, broken trust, and eventually by stopping giving altogether.

The sector has been deferring that reckoning for decades. Donors are done waiting.

I’ve spent years on this problem - first writing about why nonprofit data is so broken, and now working on the fix. That’s what Vianido is: trusted public profiles for nonprofit organizations, built on official IRS records and enriched with public and private data, so donors, funders, and platforms can make trust decisions on current information instead of two-year-old tax filings. But this problem is bigger than any one company. A lot of nonprofit leaders already know the system is broken - they just don’t have the tools to fix it on their own. If you run a nonprofit, work at a foundation, or manage a DAF, I’d love to hear how you’re thinking about this, and what it would actually take to fix it. Vianido is in early access now, so you can request access at vianido.com, or reach out directly on LinkedIn, X, or email.

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P.S. Big shoutout to Wade Arnold for organizing Fintech DevCon. If you’re building in fintech, I’d recommend catching next year’s convention.

Footnotes

1. Fintech DevCon 2022, “What do fintech builders need to know about fraud?” panel. https://www.youtube.com/watch?v=EMhTAtvEiv0 ↩

2. Federal Trade Commission, “2025 Fraud Loss Report” (Consumer Sentinel Network Data Spotlight): consumers filed about 3 million fraud reports and reported $15.9 billion in losses in 2025, up from $12.5 billion in 2024; investment scams accounted for the largest share ($7.9 billion). https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2025-fraud-loss-report ↩ ↩²

3. U.S. Department of Justice, “Federal Jury Finds Feeding Our Future Mastermind and Co-Defendant Guilty in $250 Million Fraud Scheme,” March 2025. https://www.justice.gov/usao-mn/pr/federal-jury-finds-feeding-our-future-mastermind-and-co-defendant-guilty-250-million ↩

4. NBC News, “Woman gets 3 years in Good Samaritan GoFundMe scam that raised $400K,” January 2023. https://www.nbcnews.com/news/us-news/woman-gets-3-years-good-samaritan-gofundme-scam-raised-400k-rcna64774 ↩

5. NPR, “Steve Bannon pleads guilty to border fraud charges,” February 2025. https://www.npr.org/2025/02/12/g-s1-48347/steve-bannon-pleads-guilty-border-fraud ↩

6. Federal Trade Commission, “FTC, All 50 States and D.C. Charge Four Cancer Charities With Bilking Over $187 Million from Consumers.” https://www.ftc.gov/node/44537 ↩

7. House Judiciary Committee Republicans, “FireAid Report,” January 6, 2026. https://judiciary.house.gov/sites/evo-subsites/republicans-judiciary.house.gov/files/evo-media-document/2026-01-06-fireaid-report.pdf ↩

8. The Wrap, “FireAid Did Not Misappropriate $100 Million LA Wildfire Relief Funds, Independent Review Finds,” September 2025. https://www.thewrap.com/fireaid-la-wildfire-relief-funds-misuse-investigation-results/ ↩

9. Alex Bond, “One in Four Donors Stopped Giving. The Reason Isn’t What You Think.” https://alexbond.info/blog/2025-12-nonprofit-data ↩