Dec. 4, 2003 — One of the most devastating scams ever devised by Internet thieves, capable of bilking victims out of $10,000 or more at a clip, is still going strong. Consumers lured by the combination of a great deal on their dream car and the false sense of security that goes with the name “escrow service” continue to fall for the staggering scam. In fact, experts say, it’s more common today than one year ago, when the con was first revealed.
Sending $10,000 or more to someone you’ve only met in cyberspace could — and probably should — give anyone a case of the jitters. But consumers who don’t want to miss out on great Internet automobile deals eventually have to take that leap of faith. Unfortunately, many are finding out that when they take that leap, their money just disappears.
Nearly a year ago, MSNBC.com shared the story of Bruce Lachot, an Arizona dentist who sent $55,000 through cyberspace thinking he was getting a great deal on a new BMW. Instead, he ended up with nothing other than a lot of unwanted media attention.
He thought he’d done all the right things. He even sent the money using an escrow service, supposedly the safest way to fund big transactions online. Escrow services act as a middleman, a third party to a transaction that holds on to the money until the goods are delivered and both parties are satisfied.
And that’s where he went wrong. On the Internet, it’s nearly impossible to tell the difference between a real Web site and a scam. Lachot was talked into using a fake escrow site, one operated by the BMW seller. So the seller, who perhaps never had a car in the first place, simply disappeared with the money.
Lachot went public with his story on MSNBC.com in an effort to prevent others from falling for the con. His tale generated a lot of attention; eventually, he appeared on the Oprah Winfrey show, telling his cautionary tale. But all that exposure hasn’t deterred the criminals, and apparently hasn’t done enough to warn online car buyers, either, who continue to fall for the trick.
‘More lucrative than ever'
Jeff Ostorff runs a Web site named CarBuyingTips.com, where he has tracked escrow scams for the past year. He provided MSNBC.com with a spreadsheet of 300 fake escrow sites he has worked to shut down. As fast as he can have the Internet host take down the site, others pop up.
“It’s more lucrative than ever,” Ostorff said. “In the first week of this month we came across 30 new fake escrow sites.”
Alvin Black, general manager of Escrow.com, the largest legitimate online escrow service, said the fake escrow scam “is probably worse than it was a year ago.” The company gets 10 inquires a day from consumers asking about the legitimacy of other escrow sites, and last month, Escrow.com helped shut down 40 fraudulent escrow sites, Black said.
The fake sites hurt his business, he said, because they have made consumers wary of online escrow services.
“It’s our No. 1 problem, surpassing anything else,” he said. “I spend a lot of time reading bulletin boards. There are a lot of people who post and say, ‘I don’t trust any escrow company now.’”
Even legal action taken by the Federal Trade Commission in May against one alleged fake escrow site, Premier-Escrow.com, hasn’t slowed the scam.
Embarrassed victims often find their way to Ostorff’s site after it’s too late, after the money has been wired out of the country by a middle man. One, who requested that her name be withheld, sent $8,000 to an escrow firm named Triple-trader.com on Nov. 11 as a down payment on a new Volvo SUV priced at $29,000. The Pleasant Ridge, Mich., resident said she and her husband had taken out a personal loan from their credit union to make the down payment. Now, they have nothing but loan payments.
The sale price was well below normal sticker price, but the seller offered a believable explanation, she said.
”(He) told me that it was stuck in customs, as he tried to ship it to Germany (since his company transferred him) and that since it didn’t comply with European regulations, it would be cheaper for him to try to sell it,” said the victim. “Also that customs was charging him $20 per day to store it there.”
Almost immediately after the money was transferred, Triple-trader.com disappeared, the victim said. A phone call placed to the telephone number listed in the domain registration for the site went unanswered, as did an e-mail sent to the listed site administrator.
The victim’s efforts to retrieve her money were fruitless.
“After over $150 in phone calls and a dozen e-mails to the bank in Sweden that we transferred the money to, they finally told me that the $8,000 was withdrawn, and due to privacy, they could not tell me any additional information,” she said.
Fake escrow scams don’t just target new-car sales; con artists are prowling used-car Web sites, too. Back in mid-November, Adam thought he had just closed a deal on his cream car, a 1994 Toyota Supra, a cult favorite. The 21-year-old resident of Hampton, Va., wired $2,750 to someone in London via Western Union on Nov. 12, following instructions provided at www.escrowe.com. The site is now unavailable, and attempts to contact the owners listed in its domain registration were unsuccessful.
“He said his lawyer advised him to use escrow,” said Adam, who asked that his last name be withheld. “I should have realized something was wrong when he kept rushing me. But I was in a hurry to get it.”
Lost nearly $20,000
Steven Guiler said he lost nearly $20,000 on his fraudulent used-car deal because he ignored his intuition. The resident of Loveland, Ohio, said he was immediately suspicious when he started dealing with a seller named “Phyllis,” who was selling a 2000 Audi A6 on eBay back in September. Guiler had a few questions about the car and sent a private note to Phyllis using eBay’s “ask the seller” feature. Phyllis immediately wrote back and offered to close the deal for the $19,000 Guiler had already bid, even though that was against eBay rules. But speed was of the essence, the seller said.
”(Phyllis) really needed to move the car and would pay for half the shipping,” Guiler said.
Guiler was directed to use an escrow service named “Safesale.net.” The site was convincing.
“It all looked legit and contained plenty of legalese that seemed to cover everything,” Guiler said. “I signed up for their service, received a password and got a very professional looking document that listed car VIN (Vehicle Identification Number), buyer’s and seller’s names, shipping costs, shipping info, etc. They also gave the bank wire account numbers and names and information to transfer the funds.”
E-mails sent to Safesale.net’s domain name registration contacts went unanswered.
The money — in all, $19,300 — was sent to Deutsche Bank of America in New York on Sept. 9. For a week, both seller and escrow strung Guiler along, promising that the car was on the way. He hasn’t heard from either since Sept. 22. Guilder said that on the same day he wired the money to Deutsche Bank, it was transferred to a bank in Latvia. Both accounts were closed almost immediately.
Money sent to U.S. account
A couple from Weatherford, Texas, who asked that their name be withheld, say they lost $11,000 when they also wired money to a New York-based bank, Harris Bank International. The couple were bidding on a Dodge Durango at eBay.com when the seller, allegedly based in Sugarland, Texas, offered them a lower-than-market price. They agreed, and signed up for an escrow site named “Guardings.com.” On Oct. 28, the couple wired the money. They haven’t heard from the seller since. Attempts to reach the contacts listed at Guardings.com domain registration were unsuccessful.
The fact that some victims are now getting instructions to wire money within the United States is a disturbing development, Postal Inspector Barry Mew says. The cons have evolved into much more elaborate schemes involving unwitting middlemen hired to help the criminals move money out of the country.
Con artists are now placing classified ads on Web sites like Monster.com seeking applicants willing to work in the so-called “postal forwarding” industry. Once “hired,” U.S.-based Internet users become an essential cog in the scam. They are instructed to accept packages or money on behalf of the con artists, then forward them out of the country. This way, the con artist can give a U.S.-based address or bank account to the consumer, allaying the fear many rightly have of sending money outside the country.
The postal forwarding scams are “out of control,” Mew says. “Right now, there are job postings for this at 25 Web sites all over the U.S. and Canada.”
Ostorff, who has been watching the evolution of car-sale scams, agrees.
“This escrow thing is now four or five scams at once,” he said. “And now they are scamming patsies to open bank accounts for them.”
Both Mew and Ostorff concedes there are so many fake escrow sites that they can’t shut them all down. Escrow.com’s Black says his company is actively working with law enforcement agencies, but so far, nothing has really slowed down the con artists. Consumer education is the only effective form of prevention, he said.
Rescued her $35,000
Public warnings about fake escrow sites have not gone completely unheeded. Sharon, a Long Island, N.Y., resident, almost lost $35,000 last month buying a used Hummer. She had gone as far as wiring the money to a Bank of America account in Sumter, S.C., on Nov. 12. But later that night, a sick feeling in her stomach led her to do some Internet research, and at 3 o’clock in the morning, she happened upon an MSNBC.com story about escrow scams.
Immediately, she knew she’d been had. First thing in the morning, she tried to stop the transaction. While her bank, Fleet Bank, said the funds had already been transferred, Bank of America said the money hadn’t been withdrawn. She got a full refund.
“Thank you and everyone at MSNBC. You saved me $35,000,” she wrote.
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