Virtual vehicle vendor scams

Nearly every day, Better Business Bureau (BBB) hears from people across the U.S. and Canada who find a car or other vehicle at an online site, agree to buy it, send thousands of dollars to someone they don’t know and then wait. No vehicle ever arrives. The car doesn’t exist or was advertised elsewhere months or years ago.

Scammers simply post pictures and descriptions of cars used in other ads, and then ask interested buyers to wire money to supposed third-party escrow businesses operated by the scammers. It is nearly impossible to get money back.

Scams involving motorized vehicles have flourished during the COVID-19 pandemic, and there has been a reported surge in overall used car sales. Many buyers ask to inspect the car or to meet the seller in person, but scammers often use COVID-19 as an excuse to avoid meeting, which makes this type of fraud more successful.

Hallmarks of a vehicle escrow scam:

  • The price of the vehicle for sale is almost always far below market value.
  • To justify selling the car quickly at a low price, the bogus seller may claim to be deploying overseas, going through a divorce or suffering the loss of a husband or son who owned the car, which brings painful memories.
  • Sellers never meet buyers in person nor allow the buyer to see the actual vehicle.
  • Bogus sellers claim it is safe for interested buyers to send money. They assert that the transaction is protected by eBay Motors or an independent third party shipping company that will hold the funds in escrow until the buyer receives and approves the vehicle. In reality, eBay’s protections only apply to items where the transaction is all on its platform. Crooks regularly use eBay’s name, even sending fake invoices with the company’s letterhead or sending emails that appear to be from the company.

BBB has been active in identifying, investigating and warning consumers about fake shipping and escrow companies, which claim to be located in many towns across the U.S. and Canada.

Investigations suggest these scams are operated by Romanian organized crime gangs. Criminal authorities in both the U.S. and Europe have arrested dozens of the scammers, responsible for millions of dollars in losses, but this scam continues to operate.

This study explores the scope of this scam, who it affects, the elements of the fraud, the role BBB plays in combating it, and major law enforcement actions to fight it.

How common are car buying scams, and who are the victims?

Available data suggest fake online vehicle sale scams may be increasing. It is difficult to determine the precise size and scope of this type of fraud, but the criminal cases to date reflect millions of dollars in losses. Neither the Federal Trade Commission (FTC), the Internet Crime Complaint Center (IC3), nor BBB track this type of fraud as a separate complaint category, though the Canadian Antifraud Centre does. However, In May 2018, the FBI reported that between May 2014 and December 2017, the IC3 received 26,967 complaints with losses of $57 million.

In Canada, the Canadian Antifraud Centre received 1386 complaints from 2017 to July 2020 with reported losses of nearly $3 million ($2,926,034), reflecting an average loss of $5,124.

While complaints to BBB about this scam may reach an all-time high in 2020, complaints may represent a fraction of the consumers who have encountered this scam. BBB receives thousands of inquiries each year about the bogus shipping and escrow companies from consumers who likely haven’t filed complaints. Of the consumers filing Scam Tracker reports with BBB, 41% reported losing money.

Who are the scammers

Though other criminal gangs may be engaged in this fraud, almost all of those prosecuted in the U.S. and Europe are Romanians, though knowledgeable sources at AA419 and petscam.com tell BBB that there are other fraudsters in Cameroon engaged in similar scams.

Why Romania? An article in Wired Magazine examines how cyber fraud developed in that country following the end of communist rule. It seems to have developed early on in the town of Valcea. Soon people began making money by selling goods online that they did not really have. As the scams succeeded, the threat quickly grew with gang members located across Europe, the U.S. and Canada.

Law enforcement has recognized that this is organized crime. Different groups or cells provide specialized roles to make the scams work. Some post fake advertisements while others create fake websites. Some handle telephone calls or other communications with victims. One group may forge fake passports and other legal documents used for opening bank accounts. Still others may recruit money mules to receive the funds from victims. And some launder the money, making it difficult to trace back to the fraudsters.

The U.S. Embassy in Romania posted a warning about fraud emanating from that country, stating:

“Economic crime is a growing problem in Romania. Due to the high level of computer skills in this country cybercrimes [including internet fraud, credit card fraud, auction site fraud, and hacking/extortion schemes] are occurring on an increasing basis. American companies and citizens are very often the victims of this type of crime… It is important that you save any emails or documents that were generated as a result of the fraud. You should also notify the relevant credit card companies forthwith, and make immediate efforts to retrieve your goods or funds if they have not yet been delivered.”

Another group that engages in offering nonexistent vehicles online are scammers centered in Cameroon, an African country that shares a border with Nigeria. These scammers are widely involved in selling fictitious puppies and other pets online, the subject of an earlier BBB study. Both petscams.com, which helps victims with that scam, and Artists Against 419 (AA419), a group of volunteers that track the activities of scammers, confirm that the same groups engage in car scams. A website called scam.directory collects examples of such frauds.

How to recognize a car scam

Several elements come together to create a convincing, elaborate con with different scammer cells playing a variety of roles.

Online advertisements

Car scammers lure prospective buyers with ads in high-traffic, online classified ads. These include:

Craigslist is one of the primary places where fake ads are placed. Craigslist is free and relatively easy to use. Those who want to post an ad simply go to the site for their area and open a free account. One simply has to enter a description of the vehicle, the price, upload a few photos and provide contact information. Craigslist is organized by city or region, allowing users to concentrate on a local area. But anyone can create an account, and they don’t need to live in the city where the unit is advertised. It offers safety tips for those on its site.

Though not widely known, it is possible to search all of Craigslist. Sites that allow this include searchcraigslist.org. People can do a search for an interesting or unusual term used in the description of a vehicle or even search for the picture of the car. If the same car is advertised in many different locations, you can be sure it is a scam.

Examples of car scam ads can be found on the Craigslist.org website.

Kijiji is a similar online classified marketplace operating in Canada. Kijiji told BBB that bogus car sales are one of the major types of frauds they see, and they constantly work to keep fraud off of its platform. As with Craigslist, those posting items have to have an online account, and Kijiji tries to keep scammers from opening accounts through the use of algorithms and filters.

If ads are in a high risk category (like cars) they may delay posting them until they can look at them more closely. Of the 1.3 or 1.4 million new posts they see every week, they delay about 10,000 posts, but find that only 1% (100) of those are scams. In addition, they take down scam ads that they identify, though they recognize that some scam ads will evade their efforts. Kijiji has warnings about car scams. The company strongly encourages the public to let them know about scam ads.

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Facebook Marketplace also allows users to search for listings in particular areas. Facebook Marketplace told BBB that they proactively view listings for a wide range of scam behavior before they are listed, and when they get reports of scams, they investigate and take action. In addition, each car listing has a drop down box in the upper right hand corner allowing viewers to report it as a scam. Marketplace explains how to report a problematic listing and also offers tips on how to stay safe using its platform.

There may be dozens of other online places where people advertise cars and other vehicles. Autotrader warns users of car scams, as does CycleTrader.com. In addition, BBB has seen scam ads posted in local free shopping papers such as Pennysaver, which may not have the ability to do as much screening to remove ads from crooked entities. Despite screening efforts by eBay Motors, some scammers have managed to post some ads, tricking victims into moving off the eBay platform to pay and complete the transaction.

No matter what type of vehicle is posted for sale, the ads target buyers with too-good-to-be true prices and sad stories.

An explanation for the urgency to sell the vehicle may be given in the ad or later when the prospective buyer contacts the bogus seller. In reports to BBB, consumers cite three different reasons given by the seller who claims:

  • To be in the military and is set to soon deploy overseas
  • To have been recently divorced and now has a car they do not want
  • The car belonged to a husband or child who recently died and it brings back painful memories.

Not just car or RV scams: it’s motorcycles, boats, farm equipment, and ATVs, too

Although the fake ads most frequently offer cars for sale, there are also a large number of recreational vehicles (RVs) being advertised, likely in response to a surge in demand for RVs during the pandemic. BBB complaints also include motorcycles, golf carts, horse trailers, campers, boats, pontoon boats, jet skis, lawn tractors, skid steers, all-terrain vehicles (ATV’s), and even food trucks offered for sale by scammers. For the sake of simplicity in this study, the term “car,” may refer to other types of vehicles as well.

Consumers often tell BBB that the vehicle was in such good shape and the price was so low that they ignored red flags and acted quickly out of fear that someone else may beat them to the sale.

Payment through third parties

Cars and other vehicles offered by scammers tend to cost several thousand dollars, so credit cards usually are not an available alternative to paying. The scammers usually send people an invoice directing them to a supposed third party escrow and shipping service. The invoice usually specifies the payment method. Several years ago, at least one prosecution of this scam noted the widespread use of money transfer companies – Western Union and MoneyGram – to pay, but those methods do not appear to be common today.

Scammers may simply invent escrow and shipping companies. Scammers provide buyers with an invoice that has a link to the web site of a fake company that will supposedly handle these services. Victims believe that these are honest third parties and do not realize that their money is not being handled by a neutral intermediary but is instead going directly to scammers. Escrow.com provides information about how fraudulent escrow sites operate.

Scammers posing as shipping/escrow company employees frequently ask victims to make a bank-to-bank wire transfer. Law enforcement actions detail how scammers recruit “money mules” or “arrows,” as some scammers call them, to open accounts using forged passports or stolen identity information in the account applications. As soon as money is wired into one of those accounts, it is promptly withdrawn and generally cannot be recovered.

Criminal law enforcement of car scams

Despite the difficulties of investigating and prosecuting frauds that operate from different countries, there have been significant efforts to battle this scam involving Romanian crime operations in the U.S. and Europe over the last ten years.

In July 2011, the Justice Department announced a major effort against this fraud. Over 100 people were arrested a for selling nonexistent cars, motorcycles and boats online. Victim losses were more than $10 million, much of it sent through Western Union and MoneyGram. Prosecutions occurred in the Eastern District of Pennsylvania, the Eastern District of Missouri, and the Southern District of Florida.

In 2012, federal prosecutors undertook a similar effort, headed up by the U.S. Attorney’s office in Brooklyn, New York. Cars, motorcycles and boats were “sold” for prices ranging from $10,000 to $45,000. They were offered on eBay, Autotrader.com and CycleTrader.com. There were at least $3 million in losses. Thirteen people were indicted, including one from the U.K., one from Canada and another from the Czech Republic. Three people were extradited from Romania. Some members of the group designed and produced counterfeit passports that were then used to open the bank accounts which received money wired by victims.

In September 2013, federal authorities in the Eastern District of Pennsylvania (Philadelphia) announced criminal charges against a Romanian man for his role in selling nonexistent vehicles.

In 2014, police in London arrested two men and did a search of an identity theft factory involving a Romanian car fraud operation. Victims’ money was wired to U.K. bank accounts and then transferred out of the country.

In 2016, Scotland Yard in London arrested three men who were not only selling nonexistent cars online but also operating a rental fraud, collecting money for vacation homes that were not actually available. They also operated a business email compromise fraud. Losses were more than £1 million.

In May 2017, Polish Police and Europol announced nine arrests of a gang advertising and taking payments for cars, construction and agricultural machinery but never delivering them. The group reportedly bought small businesses with a good reputation and used those to add credibility to their scheme.

In May 2018, Europol announced 33 arrests of a Romanian crime ring operating from Spain. Europol reports that the major operation was online car fraud, but the group was also engaged in business email compromise fraud and vacation rental fraud. The group was organized in cells across Europe, and scammed victims out of at least €8 million. Police discovered 700 bank accounts in Spain used in this fraud. They also discovered and busted a location that was counterfeiting documents.

Another major prosecution against organized crime gangs, this one employing the RICO statute, was announced in Kentucky in February 2019, and is ongoing. It was led by the Secret Service and the Kentucky State Police. Twenty people were charged, including fifteen Romanians, a Bulgarian, and four Americans. Twelve people were extradited to the U.S.

The group primarily advertised cars, motorcycles, ATVs, a few RVs, trucks, and even snowmobiles, primarily advertising on Craigslist. Common tactics included claiming that the seller was in the military and due to deploy overseas shortly. The scammers even created a fake Facebook page for at least one supposed seller, “Sergeant Judith Lane.” Often the ads run by this gang claimed that the sale was handled though eBay and therefore was protected. Some ads were also in Spanish. In addition, at least some victims were sent links to a fake eBay website where they could “buy it now.” eBay has assisted in this prosecution.

The group took in multiple millions of dollars. Victim funds were converted to bitcoin, and at least $1.8 million was transferred to Romania and converted to local currency. Fifteen defendants have pleaded guilty, three are fugitives, and two others are scheduled to go to trial in fall 2020. Romanian law enforcement provided key support in the case.

In August 2020 police in Ireland announced Operation Omena. Police say that they have identified 130 people, all from Valcea, Romania , operating in five cells in Ireland. They were offering caravans (campers), tractors, farm machinery, vintage cars and designer watches across Europe – though not in Ireland. Other victims were in Colombia, South Korea, Lebanon, and the US.

This scam took in €22 million across Europe, and police say the proceeds were used to fund prostitution, invoice redirect fraud and phishing scams. Irish Police and Detective Superintendent Michael Cryan said it was an organized crime group, stating: “They were structured, organized, skilled, IT proficient, had knowledge of banking systems, had organizational skills, language skills and the expertise to make false identification cards.” And “We established that the funds from this criminal enterprise were helping to establish other forms of serious organized crime.”

How to avoid car scams

Watch for red flags.

  • The price is significantly below market for the car.
  • You cannot meet the seller or inspect the car in person.
  • Money must be sent to a supposed third party recommended by the seller.
  • Payment is by gift card or bank to bank wire transfer.
  • Do an internet search of the photo of the car, an interesting sentence in the text, the phone number or the email address, to see if there are online complaints tied to those elements.
  • Use Whois to tell how long the website for an escrow or shipping company has been active and compare it to how long it claims to have been in operation elsewhere on the website.
  • Examine emails or links “from” eBay carefully. There is no eBay protection unless the whole transaction takes place on eBay.
  • Never pay for a vehicle through Western Union, MoneyGram, with a gift card or a reloadable card.
  • Check a blue book for the real market value of the vehicle.
  • Get a vehicle history report, such as Carfax or AutoCheck, on the car.

Recommendations

  • Craigslistt recommends that law enforcement efforts to battle this fraud continue or increase. Coordination and training in this fraud throughout the law enforcement community could prove useful.
  • International cooperation between law enforcement agencies should be a priority.
  • Craigslistt can provide key education for the public and data for law enforcement and should maintain or increase those efforts.
  • Craigslistt should consider creating a task force that can share intelligence with both law enforcement and with the major platforms where this scam advertises.
  • The platforms that scammers use should consider ways they can improve efforts to screen out deceptive ads and educate users on how to avoid them.

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