How scammers used 'social engineering' to steal over $1 million from an Idaho town of less than 4,000 people

• Scammers tricked Gooding, Idaho employees into sending over $1 million to fake contractors.
• The payment was intended for a wastewater project but was diverted into the criminal's account.

A small Idaho city just accidentally gave away over $1 million.

Officials in Gooding said this week that an employee sent a payment of $1,092,519 meant for contractors working on a wastewater project, but it went to scammers instead.

Gooding has a population of about 3,700 residents, so that's no minor mistake.

According to a city press release, the scammers impersonated representatives of a contractor hired by city officials, using a tactic called "social engineering" to gain the employee's trust.

Social engineering fraud broadly refers to techniques for gaining and then exploiting a person's trust, usually through social media. Scammers often gain trust by pretending to be someone they know or a company with which they do business.

In the Idaho case, after the scammers gained the trust of the employee, they told the employee the bank information needed updating before sending payment.

"In this case, the request to change payment information was done with legitimate appearing documentation," city officials said. "The conspirators then waited for the city to transfer the vendor payment. After the funds were unknowingly deposited in the scammers' account, they were diverted to a different account."

The city's bank says it hasn't recovered the funds yet.

It's notoriously difficult for banks and law enforcement to recover money lost to scammers. Police in Florida said they were only able to recover about $40,000 after an older woman lost over $400,000 in a fake sweepstakes scam in April.

"You go obtain subpoenas and then the bank takes their time about getting data back, the money is gone, long gone," the local sheriff said during a press conference at the time.

If you lose money to a scammer, the Federal Trade Commission recommends asking whatever payment service — credit card, bank, or transaction app — you sent the money through to help recover the funds.

The Gooding Sheriff's Office and the FBI are investigating the incident, the city said.

The FBI Salt Lake City office — which oversees investigations in Idaho — did not immediately return a request for comment from Business Insider.