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Kickstarter pledger scammed multiple projects for rewards (comicsbeat.com)
107 points by babuskov on Nov 8, 2013 | hide | past | favorite | 59 comments

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 Ask about that payment from your international customer and how/if the funds can be rescinded.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.

"Tip #2: Don't be too eager to ship."

Honestly, I'm surprised to hear that anyone's managed to ship their Kickstarter rewards within three months. I've backed a variety of projects (mostly books and software), and I think only once have I ever seen a physical product shipped within six months. Even t-shirts usually take a while.

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

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.

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.

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.

This is exactly what we're trying to fix with IgnitionDeck (shameless plug: http://IgnitionDeck.com). Kickstarter fails in a lot of areas, but this is a failure they should be ashamed of.

'Read the FAQ' is not good enough, but that's the same vibe I got from them when applying for my first project many years ago, and why I never went with their platform.

At some point, this will unravel and significantly damage the industry. They need to step up and back their creators, without whom they wouldn't have a platform.

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

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.

Indiegogo came before Kickstarter by about two years and has fallen behind in project count:


This is pretty much identical to what eBay and PayPal have been doing to sellers for years. They do offer "seller protection", though, which guarantees that that will come up with a valid reason for taking your money away when a chargeback occurs.

If an end-user experiences a chargeback, why should Kickstarter pay for that and not the end-user? The end-user would be getting free money at that point, if the funds weren't withdrawn from their account.

Kickstarter charges fees.

These are taken from the kick-started funds.

When a project sees a chargeback that should be repaid by both the kick-start project owner and kickstarter.

Otherwise, Kickstarter is getting free money. (From the kick-start project owner, who is the victim of a crime.)

If the campaign receives $100, then let's assume Kickstarter takes $5, and $95 goes to the campaign.

If the campaign receives a $100 chargeback, then the campaign should get charged $95 and Kickstarter should give back their $5. This is the proper way to do it. I don't know how Kickstarter does it, but if they don't give back the portion of fees that they charge, that would be strange to me.

However, usually chargebacks come with fees, around $15. I see no problems with the campaign having to pay these chargeback fees. I believe it's the cost of doing business for any campaign that accepts anonymous donations from the internet.

They're a funding platform. They should handle funding errors.

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.

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

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.

Ouch! Was that 10K lesson worth all the classes it would have paid for? (I suspect it might be)

Wow, you took 10K hit while being in college. Brutal. So does a payment gateway not handle weed these scams for you?

Isn't it amazing how credit companies manage risk so well?

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?

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.

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.

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

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.

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

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.

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.

It's not about who has the money, it's about who is owed money. A chargeback means that you legally owe them the money.

Interesting how they're facilitating fraud, instead of you know, checking to make sure the person who made the order is real..

How long after a payment can I do a chargeback on my CC?

It seems the problem here I can use my CC for whatever, then months and months later do a charge back, even though I got what I originally paid for.

It sounds like the only defense would be to not ship the actual product (reward in this case) until the charge back grace period has elapsed.

Visa and MasterCard allow 2 months. But if you do a chargeback, the vendor can dispute it. Amex allows 4 months (atleast) and the vendor cannot dispute the charge.

So it seems like sites like kickstarter should only allow Visa and MasterCard, and people should not start sending rewards until > 2 months after payment has been received...

Aren't there repercussions for unfounded chargebacks?

Also, if the rewards are physical, surely that leaves a trail - they have to be sent somewhere.

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?

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.

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

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.

Wouldn't Amazon Payments have some kind of red flag on their end if this person keeps changing the credit card they have on file each time they make a payment?

I agree with your theory though, just seems like Amazon might have a blind spot

Why use the same Amazon Payments account?

If it's the same backer, using the same kickstarter account, then it's likely that it's the same amazon payments account.

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

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.

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.

If I had to guess, Kickstarter probably has looser fraud protection.

Is this guy Malaysian?

entah :P

Apparently his email for his (her?) kickstarter account is akusukaiphone@gmail.com, so yeah. This is why we can't have nice things.

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.

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.

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?

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.

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.

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.

Even beyond that, I have issues using Amazon payments so I'm not capable of using kick starter.

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?

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

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