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Phony online escrow sites snare victims

Nervous about buying or selling a big-ticket, to-die-for item on the Internet? You should be.

Scammers are using phony escrow sites to rip off online buyers and sellers. And they're going after people buying and selling some pretty pricey stuff -- plasma TVs, jewelry, digital cameras, laptops, motorcycles, even luxury cars.

A legitimate escrow service acts as a middleman for large, person-to-person transactions over the Internet. The escrow service holds on to the money until the goods are delivered and both parties are satisfied.

Phony escrow services rip off online buyers and sellers alike. They take your money and never deliver the merchandise you spotted on an online auction or classified site. Or they take your merchandise, never pay you a penny and disappear.

About 100 phony escrow sites pop up every month.

"You knock one down and it's popping up somewhere else," says Alvin Black, general manager of Escrow.com, a legitimate escrow service recommended by eBay.

How they operate
Escrow scammers pay for these phony Web sites with stolen credit cards. Once they've snared enough victims, they abandon the Web sites and move on to the next scam.

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"They know their escrows will get at least 10 victims or maybe 80 or 90 before they shut down," says Jeff Ostroff, who runs CarBuyingTips.com. Ostroff has helped shut down 500 phony escrow sites since last summer.

A thief can net anywhere from $500 to $50,000 from a single scam victim. That's a lot of money to lose for trusting the wrong person on the Internet. And the scam isn't over yet.

The thief, who also swiped your personal information, can use your identity anyway he wants. He could go on a shopping spree or use your identity when ripping off his next victims.

Ask Jennifer, a widow and mother of two living in Minnesota.

She had a $50,000 emerald and diamond ring that she wanted to sell. So in March, she listed the ring on eBay.

A buyer from Georgia contacted Jennifer and suggested that they use an online escrow service called Escrow-secure.net as a go-between "because of all the fraud out there."

"The only thing I knew about escrow services is you use them to buy homes," Jennifer says. "So I thought this is really safe."

She did a quick check of Escrow-secure.net and it looked like a secure site. So Jennifer registered on the site and mailed out the ring on a Thursday night. That Friday, the buyer picked up the ring. But there was a hold-up with the payment.

"By 8 p.m. that night nothing had happened. The bank hadn't seen anything," Jennifer says.

The payment never arrived. She e-mailed the escrow company but there was no answer. She tried calling the buyer in Georgia but there was no answer. She contacted a police department in Georgia, the Federal Trade Commission and the Better Business Bureau, but she never got her ring back.

They took more than her ring
Scammers robbed her young family of $50,000. And her battle is just beginning. The crooks also swiped her identity.

"Not only did these people take my ring, they've taken part of my identity. They've applied for things. They've taken money out of my bank account. They're just scam artists. I've had to change my bank account twice."

The crooks were using her bank account to collect and wire money across the country.

"They know how to work it. I want to see them prosecuted," Jennifer says. "I want to see them stopped from hurting somebody else."

Catch me if you can
Unfortunately for victims, escrow scammers can be awfully difficult to catch.

"Nine out of 10 times there's no trail leading to the scammers," Ostroff says. "They're using all these patsies in between."

Escrow fraud is just one of an intricate web of scams that these crooks have going on at any given time.

They wire money through stolen bank accounts. They run phony auctions with stolen eBay accounts. They shop with stolen credit cards.

They'll even pay the Internet service provider for a fake escrow Web site with a stolen credit card. And they reserve the domain name for a fake escrow site with a stolen identity.

"It's usually a victim they've already ripped off," Ostroff says.

Oblivious middlemen
They hire unsuspecting consumers to receive packages and payments for them in America and ship these items overseas.

"Sometimes the actual fraudsters have one or two levels of intermediaries between them and the people being defrauded," Escrow.com's Black says.

(continued on next page)
-- Posted: May 17, 2004
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See Also
PLUS: 10 tips for spotting online escrow fraud
8 common scams: How to spot and stop them
How to bid safely in online auctions
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