Five Online Scam Horror Stories You Need to Read

Five Online Scam Horror Stories You Need to Read

By Jim Erickson, October 18, 2012

International Trading Tips: The examples below are actual fraud cases that were handled over the last several years by the security team at B2B trading website Alibaba.com. We're sharing them so international buyers will be better able to recognize and circumvent the various traps fraudsters set in order to strip-mine the bank accounts of the unwary.

Whether you are buying online or trying to stay alive in a horror movie, the best advice is to keep your wits about you. Use common sense. If an ax murderer was on the loose, you wouldn't go into the basement, would you? You especially wouldn't go into the basement of a deserted cabin in the woods built on an indian burial ground just so you could fool around with your sultry, half-naked,binge-drinking teenage girlfriend during a thunderstorm when your cell phone is showing zero bars. Also, the bridge is out.

But we digress. On to the scams:

1) The Masque of the Red Death

The Victim's Story: "I received an e-mail from a salesman named Mike from a company named Sun Tzu Electronics [Ed: names have been changed]. Mike told me he could supply PlayStation 3s at a low price. I searched on Alibaba.com and discovered Mike's company was an Alibaba.com Gold Supplier, so I was confident about this transaction. I placed an order for 10 PS3s. But after I paid, I was no longer able to contact Mike and I never received my order."

What Went Wrong: Sun Tzu Electronics was a legitimate Alibaba.com Gold Supplier. Mike was a scammer who stole the company name to disguise himself as their representative in spam e-mails he sent to random victims. Mike's bait was a low price on a popular consumer electronics item. Sun Tzu Electronics did not sell video game machines.

Lessons Learned:

•• Don't respond to unsolicited e-mail offers and spam. It's the same as going into the basement.

•• Make sure that the e-mail address for the person claiming to be a company representative matches the company's official e-mail address.

•• Contact the company directly to confirm the person you are dealing with works there. Be aware that a scammer may have stolen not only the company name, but also the identity of their representative, too. All the better to eat you with, my dear.

•• Compare the type of products listed on the company's website with the products you are being offered. A company that normally sells handbags won't try to sell you discounted mobile phones. Likewise, someone purporting to be the cable guy won't have a chainsaw hanging from his toolbelt, so don't open the door for him.

2) Candyman

The Victim's Story: "I contacted a seller to buy 100 Nokia mobile phones at $20 per phone. After I paid $1,000 (half the total price) up front, the supplier refused to send the phones unless I agreed to buy more products from him. He also threatened to raise his unit price. I refused, and I never got the phones or my $1,000 back."

What Went Wrong: Scammers, like slashers, routinely use the emotions of their victims against them. Here, the buyer was lured into the basement by a stranger offering candy: a too-sweet-to-be-true deal on Nokia phones that retailed in authorized Nokia shops for $250.

Spoiler alert: Our victim got his head handed to him. In a not-so-shocking plot twist, the scammer even tried to relieve him of more cash after the down payment was made. This grift often works, because buyers don't want to risk their up-front investment by resisting additional cash demands. This buyer didn't fall for it, but he wised up too late to save himself $1,000.

Lessons Learned:

•• Anyone offering freakishly deep discounts on well-known products is not to be trusted, obviously. Yet this common scammer's trick consistently separates the gullible from their cash.

•• Don't believe suppliers who claim they can offer cheap prices because they have access to grey market, smuggled or stolen merch. Know the average retail and, if possible, wholesale prices of products you are looking for, so you can recognize abnormal quotes. To find the suggested retail price of a brand-name product, check the brand owner's official website.

•• When dealing with unfamiliar companies, use a secure payment method such as escrow, which prevents suppliers from arbitrarily changing the terms of a deal before delivery. They don't get paid until you receive and are happy with the goods.

3) FeardotCom

The Victim's Story: "I lost more than $2,000 on an order for consumer electronics. The original deal called for me to pay $200 for shipping, $1,000 when I verified the package had been shipped, and the balance of $1,460 once the package was received. The seller said that he was going to use a small, local delivery company. He gave me the URL for the delivery company's website along with the shipment tracking number.

"When I used the tracking number on the delivery company website and it showed 'package now on hold in London,' I sent the supplier $1,000 per our agreement. After that the supplier began demanding I pay the balance right away. He said his superiors wanted payment in full due to something about an audit and not being allowed to give credit to people from the U.S. He said I needed to send at least $800 more and he'd take care of the rest. So I scraped up $800 more and sent it. Then he came up with a new excuse, something about a death in the family and if I wanted my package I needed to go ahead and pay the last $660! I never received anything."

What Went Wrong: Clever Internet scammers have been known to set up fake shipping websites so their victims think a third party is keeping the transaction honest. In this case, a fake delivery service site and a fictitious package-tracking number were used to deceive the victim into believing his package was on the way, and then to con him into thinking he needed to pay more to receive it.

Lessons Learned:

•• Before you agree to accept delivery through an unknown shipper, search the Internet to see if others have used the company. You can also check a suspicious website's registration information at whois.com. Be careful if the domain name was registered fairly recently, within the last several months.

•• When your supplier makes excuses about delayed delivery and asks for additional payment to solve the "problem," this is a strong indication you are being conned. When you find yourself in the basement, the first thing you should do is stop digging.

•• When doing business with an unfamiliar company, order a small number of samples first to check product quality and minimize losses if the supplier proves unreliable. To pay, use a well-known escrow service whenever possible.

4) The Man Who Wasn't There

The Victim's Story: "The company I dealt with was registered on Alibaba.com as a U.S. company, but the company representative had me pay through Western Union to a Chinese address. After I paid, the supplier said the goods were detained in the customs office because customs didn't find the original invoice attached to the goods. The supplier explained that his company's policy was to issue invoices only when quantities are above 5 units. He told me to pay for another 2 units for another $150 so they could issue an invoice, but I refused. I didn't receive the products. I later discovered this is a Chinese company. All his information is fraudulent!"

What Went Wrong: Scammers living in fraud-prone regions (i.e. Nigeria, parts of China, etc.) will set up websites for front companies with fake addresses in more stable, law-abiding countries to give their marks a false sense of security. Alibaba.com has safeguards to prevent such geographic shenanigans, but occasionally a scammer slips through the screening process. In this case, the buyer should have been suspicious when this "U.S." company asked for payment to be sent to China.

Lessons Learned:

•• Don’t do the deal if a seller asks you to send payment to a country not shown on the company website or Alibaba.com online storefront as its headquarters.

•• If you have doubts about a company's actual location, do a quick background check. Call the number listed on the website, making sure the country code is correct. Ask questions.

5) Let The Right One In
The Victim's Story: "When I paid for products through Western Union, the supplier told me I could keep the Money Transfer Control Number (MTCN) secret, releasing it to him only after I received the merchandise. He claimed I would be protected this way. But I found out he picked up the money I sent him right after I sent it, even though I never gave him the MTCN. The products never arrived and the supplier never answered any of my e-mails."

What Went Wrong: The MTCN is a number assigned to money transfers by Western Union for tracking each transaction. Thieves posing as suppliers may claim they cannot collect the money until you release the MTCN to them, but that's not true. All they need to collect is the name, address and country of the cash receiver (which the scammer already knows. He gave these details to you so you could wire him the funds) and the name and address of the sender (which you gave to the scammer so he could ship your order) - or just the MTCN alone.

Scammers don't need to show proof of identity to pick up cash from Western Union. This means that you can wire money to anyone, including your friends or relatives, and as long as a thief can trick you into divulging the receiver's name and address or the MTCN, he can grab your cash and disappear without a trace. Western Union does not give refunds.

Lessons Learned:
•• Western Union Money Transferand similar services are great for quickly and easily wiring cash to people you know and trust. They are unsafe for international e-commerce.

Hope it will help for your international business trade.

Jason