
The Seller Who Allegedly Defrauded Square Out of Millions - coloneltcb
http://www.buzzfeed.com/nitashatiku/square-fraud-losses-single-seller#.uj8Rj1JExk
======
mediumdeviation
The lawyer's words don't pass the smell test.

> “I don’t know with 100% certainty, ma’am, but I would guess that [Urbanovsky
> and the single seller] probably are [the same person],” her lawyer Steven
> Lefler told BuzzFeed News.

He just admitted on record that his client cost the payments company they used
several million dollars.

> “This is a case that I didn’t charge enough money for,” Lefler told BuzzFeed
> News.

> “But of course, I’m her lawyer. So who gives a shit what I think.”

This is quite possibly the single least professional lawyer I've ever seen.

~~~
jacquesm
The only words he should have spoken were 'no comment' and hung up.

If he were my lawyer he'd be out on his ass.

~~~
URSpider94
I'm guessing he is figuring out that he's not getting paid for this gig ...

------
mherdeg
I was confused about what "bogus discounted travel vouchers" were so I found
some more detail about the fraudulent business in this local TV story:
[http://www.ketv.com/news/company-sold-flight-vouchers-but-
no...](http://www.ketv.com/news/company-sold-flight-vouchers-but-now-cant-
honor-them-all/31926228)

> "The price that I was look at was for a 90 day in advance reservation for
> $139 round trip anywhere that Southwest flies," Creative Creations customer
> Phyllis Hicks said.

> Hicks paid for several tickets and received a receipt. The voucher explained
> that customers would fly on the days they requested, and a confirmation
> should arrive at least month before departure.

> However, Hicks never received her confirmation email because Creative
> Creations exceeded the 2,000 vouchers for flights in March.

> "They're asking people to cancel their March vouchers. Well, I travel March
> 26, and it's not an option to cancel," Hicks said.

What a weird model. The "you can only redeem 2,000 of these per month" angle
almost makes this sound like the business was trying to be a Ponzi scheme. But
it just doesn't make a lot of sense.

~~~
sjburt
It sounds like they resold the vouchers before buying them from Southwest
expecting that they could buy an unlimited number. But Southwest got wise to
it and limited the program. And then their business didn't maintain enough
cash reserve for refunds (or had customers unwilling to accept refunds).

I wonder if the intent was ever to defraud, or if they just made a colossal
mistake.

~~~
mherdeg
To my knowledge Southwest doesn't sell such a 'voucher' product, though.

It seems possible that this company was just selling 'vouchers' and, when it
came time to fulfill the 'voucher', they were just buying a plane ticket with
cash.

You could get away with this for a while by booking flights only for the
people who wanted the least expensive itineraries and only on sale … and by
taking in new money promised against future months to pay for the current
month's sales.

------
steven2012
I find the 0.1% loss rate for Square to be much, much lower than expected. I'm
actually shocked by that, especially given their size.

------
coldcode
"But of course, I’m her lawyer. So who gives a shit what I think". Wow, I've
never heard that from a lawyer. I bet he's not getting any money either.

------
jacquesm
If square is the 'merchant of record' that is a very risky proposition. See
also: DMR and iBill.

~~~
jasonlotito
This should not be surprising to anyone. This is how these things work. It's
the reason PayPal is so brutal. To avoid things like this.

~~~
jacquesm
> This is how these things work.

It isn't always. Segregated merchant accounts are the way to go if millions of
dollars change hands at that level the overhead of setting up a merchant
account are negligible, and if you can't get one then that's a pretty good
sign you shouldn't be working with that kind of money.

A couple of these instances and square will get shut down by VISA and that's
the end of that. That's the references to iBill and DMR, that's exactly what
happened to them and all their merchants were left without recourse.

~~~
pbreit
How would segregated accounts help? Square's 0.1% loss rate would never be
grounds for a shut down. Do you have any idea what you're talking about?

~~~
jacquesm
Yes, I have an idea what I'm talking about.

I followed the shut-down of Dacotah Marketing and Research and iBill from 'row
#1' (as a mid-sized merchant with an inside line into the company about what
was going on) and the main problem was that amongst the 1000's of good
merchants there were a few bad ones. VISA warned them once, fined them the
second time and shut them down the third.

In both cases I lost a ton of money and I am definitely not the only party
that did so.

Since then I have my own merchant account and never a problem since.

What is the main difference between 2015 and 2004?

~~~
jasonlotito
> Yes, I have an idea what I'm talking about. > I followed the shut-down of
> Dacotah Marketing and Research and iBill from 'row #1' (as a mid-sized
> merchant with an inside line into the company about what was going on)

To be fair, that's still as an outsider for one particular incident. Has
someone who was basically on stage to your "row #1" for other companies, you
are missing a few pieces. Maybe not in that case, but the idea that segregated
accounts is some magical pill for someone in the IPSP space isn't entirely
true.

And if Visa was involved, it wouldn't do anything.

