
Kickstarter pledger scammed multiple projects for rewards - babuskov
http://comicsbeat.com/report-kickstarter-scammer-encik-farhan/
======
robomartin
Not necessarily applicable to Kickstarter but I thought this might be of use
to less experienced HN readers.

Tip of the day: When dealing with international orders of any magnitude
always, always, always get paid via EFT (electronic funds transfer/wire
transfer). Far safer than credit cards.

Tip #2: Don't be too eager to ship. Give your bank time to fully "digest" the
payment. The money showing up in your bank account isn't the end of the story.

Tip #3: Get out from behind that desk and go meet your bank manager. When you
receive a sizable payment. Ask about that payment from your international
customer and how/if the funds can be rescinded. Under some circumstances and
with some countries there are ways your customer could pull back funds even a
year after the transaction took place.

Tip #4: I hate to say it but I have scars to prove it: When it comes to
international commerce you have to have your guard up all the time. I've dealt
with many people all over the world and the vast majority are on the level. No
issues. However, every so often someone shows-up who wants to take you for all
he can.

Tip #5: Come to think of it, you have to be guarded, period. I had a supplier
take me for $12,000 a number of years ago. He was in Florida and simply
evaporated. After much interfacing with police we learned he did this to a
bunch of companies and bolted with anywhere between $100K and maybe even over
$200K, never to be found.

Tip #6: Business is a contact sport. You are going to get bloody every now and
then. Price your products and services in order to be able to absorb a blow
here and there or it will really hurt when it happens. And, as always, if it
is too good to be true, stay the fuck away from it.

~~~
OWaz
What do you mean by “Give your bank time to fully "digest" the payment.”?

~~~
robomartin
With international trade the payment doesn't necessarily end with the money
showing up in your account. There are countries and circumstances that could
result in money being pulled out of your account even a year later.

I remember a situation with a payment from Greece where my bank basically said
"you would be nuts to do it this way". I would not have known had I not taken
the time to meet with the bank manager who reviewed the issues and guided me
through the process of structuring a safe transaction.

If I remember correctly it involved telling my customer to go to the bank and
do a wire transfer with cash as opposed to writing a check. Details are fuzzy.
I think I remember him saying that their banking system allowed them to recall
the check up to a year later. All of the banks involved in that transaction
would have to honor this and you would end-up on the hook for the money. Cash
or a cashiers check used for the EFT would break that link and result in a
solid transaction.

------
kylec
I have not used Kickstarter, so the surprising revelation in this article for
me is that charge backs come out of the dispersed funds and not Kickstarter
itself. I'm sure if Kickstarter itself had been eating the losses they would
have detected it a lot sooner and would have taken faster, stronger measures
to identify and remove suspected fraudulent transactions than they seem to be
taking now.

~~~
smoyer
Yes ... Kickstarter's interests are not at all aligned with the project
creators or the backers, but rather benefits from the highest possible
pledges. Stepping aside of all the other issues works perfectly for them so
long as their reputation isn't too tarnished.

~~~
nonchalance
Does Indiegogo have a shot at unseating Kickstarter (or do they engage in the
same tactics)?

~~~
tedivm
They don't have the skill or resources, in my opinion. I've funded a few
projects there and it's often a nightmare- pages timing out, extreme load
times, outright failures.

While the code for displaying projects seems to work, the actual act of
pledging to them doesn't. I imagine they lose a ton of pledges simply because
people aren't willing to jump through hoops to make the site work.

------
ada1981
Anyone who has done ecommerce for any period of time is used to weird orders
that come in from stolen credit cards.. I learned this the hard way when I
shipped $10,000 in XL ultimate frisbee tshirts to (I can't believe I'm
admitting this) Nigeria when I was a college student - only to have a charge
back a few months later. I get wierd charges on CreditCovers.com all the time,
and sure enough in a month there is a charge back. People just hit up all
sorts of sites and order products in hopes something will come of it.

~~~
pavel_lishin
I'm trying to come up with a reason why someone would want, specifically, $10k
worth of XL ultimate frisbee tshirts.

~~~
ada1981
Well.. the story is actually probably worth it.. The way it went down was I
got this request for a big order (My memory says it was $10k, could have been
less).. I only had basic PayPal and couldn't accept credit cards. I was on the
phone with my screen printer and the convo went something like this:

"So, I have this big $10k order for t-shirts, but I can't process the credit
card."

"Oh, well, we could process it if you want and then just credit you with your
markup."

"Well I've never done this before, so like, what if they are a scam or
something..."

"As long as the card goes through, there is no risk to you." !!!!!

"Oh, well in that case, sure."

You can imagine in 3 months when they called to tell me there was a charge
back I was surprised! I insisted that I wasn't in the wrong because their
sales rep (who wanted a commission) gave me incorrect information that I made
a decision on.

In the end, the company owner offered to split it with me 50/50, but only like
a hard ass 21 year old can, I told him I wasn't paying a dime. (I didn't have
the money and I really felt like it was his problem.) I won my moral battle
with him, but I lost the relationship. I ended up losing my screen printer and
after trying to print shirts myself in a dorm room, ended up folding the
company....

I think the lesson learned here, aside from the obvious one about Nigerian
Ultimate Frisbee players, was that the relationship is the most important
thing -- even if you are technically right, preserving relationships is much
more important. I ought to have taken the 50/50 offer and asked to pay it back
over time, perhaps just with increased prices per unit.

Luckily, I didn't "help out" the buyer of the shirts and ship him all those
cell phones he asked about. When I confronted him about the scam, he sent me a
weird email about being a revolutionary.

If you are ever over in Nigeria, keep an eye out for some long sleeve yellow
tshirts that say "Flick & Hammer" on them.

------
simias
I don't really understand how that works, surely by the time the rewards are
shipped surely the money is already in the hands of the creator? How can the
scammer retract his pledge by that point?

~~~
peroo
Presumably he pays with a credit card and does a chargeback two or three
months after payment, at which point physical rewards have already been
shipped. Most payment processors will hold a reserve for a set amount of time
for this exact reason.

~~~
JoshTriplett
While I can understand how this would cause problems for a merchant accepting
a continuous cycle of payments, why would someone doing a Kickstarter not
withdraw all of the payment to a separate account _before_ shipping any of the
orders? To the best of my knowledge, Kickstarter pays out the full amount
right away; they don't force you to withdraw it incrementally as you need it.

~~~
ceejayoz
That's not going to stop the bank from giving you a negative balance and
sending you to a collections agency.

~~~
JoshTriplett
Sure, you're still going to have to deal with the dispute resolution process,
but you get to negotiate from a position of strength (you have the money and
they want it, rather than the other way around), and you're not in the red by
having paid the costs to ship products without getting paid for them.

~~~
ceejayoz
If you think being in arrears to a bank is "a position of strength", you must
have never overdrawn your account.

~~~
X-Istence
It depends on the amount of money you owe the bank.

Owe the bank 10 dollars, it's your problem.

Owe the bank 10 million dollars, it's their problem.

~~~
ceejayoz
Kickstarter's limit is $10k, so it's likely to be your problem. On top of
that, bankruptcy would be a problem for most people, even if the bank suffered
too.

------
nicholassmith
I'm not surprised it has happened, the system was open to gaming after all,
but I am surprised Kickstarter didn't notice it and do some proactive
investigation. Surely they get a copy of the dispute notice as well, and
surely it means they're losing a reasonable amount of money each time it's
done as well?

~~~
makomk
Kickstarter aren't really losing any money from this. Their policy is to pass
on all the costs of chargebacks to project creators, including chargeback fees
and I think possibly even their cut of the pledge.

------
chewxy
Fun fact: Encik Farhan literally translates to Mr. Farhan. It's a pseudonym.

~~~
300bps
Not only a pseudonym, but likely paying with stolen credit cards. If a real
person attempted to do 100 chargebacks on a single credit card - or even 10,
that would be a massive red flag to his credit card company.

I think it's just as likely this person is using stolen credit cards and the
real owners of the credit cards are the ones that are initiating the
(legitimate) chargebacks as soon as they discover the fraudulent charge.

~~~
ghaff
If someone is using stolen credit cards, why would they bother using them for
kickstarters? This whole thing just seems very odd.

~~~
ceejayoz
Giving thousands of dollars to some Kickstarters gets you pretty neat stuff.
Amazon's also less likely to run up the fraud flag if they're not on the hook
for the stolen items as they would be if ordered from Amazon rather than a
Kickstarter project.

~~~
uxp
Also, Ebay is just around the corner. Buying merchandise, especially high end
or expensive merchandise, has always been a simple way to "drain" a stolen
card, even if you end up selling it for less than retail price on the third
market. It's a lot less suspicious (generally) to go on a shopping spree than
it is to withdraw 10 grand from an ATM.

Between about December of last year and August of this year, a Pebble watch
was running at about $300, new in box, until Pebble was able to finally build
up enough supply to begin shipping them from their storefront. That's a 100%
return on someone else's money, if you don't get caught.

------
ChrisNorstrom
This has gone on long enough, and is everywhere. I'd love to see a lawsuit
against the credit card companies for automatically siding with a customer on
chargeback disputes (which they do all the time).

 _" only to then claim a charge dispute once the project is funded."_

\- the credit card companies fault.

 _" It also appears that this particular pledger has done this over a hundred
times"_

\- also the credit card companies fault.

It's time to seriously criticize them. Charge backs should be noted on one's
credit report. Allowing and siding with an individual to chargeback over 3
times a year is just negligence and fraud on the credit card company's behalf.

~~~
pedalpete
Have you evern been on the other side of this equation Chris? I have, having
had my credit card number stolen and used by the thief to make a bunch of
purchases. In times like that, it is nice to know that the credit card
companies have your back.

At the same time, I suspect the credit card companies do track the
chargebacks. But how many is a lot? 3 in a year sounds like it would likely
slip through the cracks.

It's a tough thing to manage.

~~~
ChrisNorstrom
I've had customers use their credit card on my online store. Buy the product.
Have it mailed to their house with their name on it. Forget what they bought
and initiate a chargeback. I would then give the credit card company
everything they asked for. Phone numbers, addresses, delivery confirmations,
emails. And the chargeback would still go through. Until I hound the customer
down and explain to them what the charge is for then they finally after weeks
call back their credit card company and explain everything and me finally end
up getting paid.

The CC companies Do. Not. Listen. It's not "tough", they're just stupid and
don't investigate. It's cheaper that way. They need you to use their card so
they can make money, and we need them to accept payments so they screw us
over. They need you so they side with the card holder, we sellers need them so
they treat us like crap. They assume that we businesses have money to spare
and can handle a few chargebacks so they don't bother with any investigating.

You losing your card, not having a pin number and someone else using it to buy
products is not my fault. That is your fault and the credit card companies
fault for making a little piece of plastic representing $3,000-$12,000 work
without a password. Why should I get screwed over for that?

------
TomGullen
They should accept Bank Transfer and/or Bitcoins to avoid this for high value
donations if it's a problem, but I suspect it's an exception not common place.

~~~
McGuffin
Opening disputes (either with amazon or the credit card company) is basically
the only way for funders to recoup any money from scam kickstarters. Saying
they should accept it as an option would only mean more honest funders getting
scammed out of their money if a project falls through should they go for e.g.
bank transfer/cryptocurrency. No dishonest funder would willingly go for a
payment method where their MO doesn't work. Enforcing it for high value
investments means the honest investors have no way of getting their money back
from a less than honest KS campaign.

~~~
furyg3
Yep, I would never give money to a kickstarter project with anything but a
credit card.

A donation to a new project requires a lot of trust. I know that when I donate
I may not see anything from my donation (depending on the project), but that
doesn't mean I am ok with it going to beer and hookers.

------
RuggeroAltair
Isn't this the same problem eBay has been having for seller who aren't stores?

In that case buyers just buy expensive objects and then open a dispute under
the 'object not respondent to description' or 'broken' or something like
that... (and they don't send the objects back)

Does anyone know a good list of approaches to take against this kind of scams?

------
dromidas
Needs to be a criminal punishment for this sort of behavior. Kickstarter is
not somewhere this kinda thing can be allowed :/

