E-Merchant Coin Dealer Flipped in Latest Luxury Scam
by Srii Srinivasan
“Silver and gold are not the only coin; virtue too passes current all over the world.” – Ancient Greek playwright Euripides
An east coast coin and bullion dealer is the latest e-merchant to fall victim to a recent scam against luxury online retailers. A customer bought an expensive collectible coin via credit, and then said he never got it – a $40,000 lie.
It is a whopper of a chargeback, and even though the customer later admitted he had definitely received the coin, the merchant is out the $40,000 due to a breakdown in back office procedures and the lack of a secure and verifiable transfer of the coin.
With gold up more than 16% in the first quarter of this year, there’s a lot of activity among legitimate gold and coin dealers, and lots of stories of counterfeit coins. But for every fake dealer selling fake gold on Craigslist, there are real e-merchants being scammed by fraudsters who pose as legitimate buyers.
In this case, the merchant, who wishes to remain anonymous, followed a fairly standard practice. The client, negotiating through an existing and trusted concierge, expressed interest in a rare and valuable coin worth approximately $40,000.
After a sizable deposit cleared, and a payment plan for three more payments was established between the merchant and the customer, the merchant sent the coin via express delivery service. While that delivery system may be effective enough for the entry-level $29.99 transactions this merchant processes several times a day, it was not safe enough for a $40,000 purchase – especially one on a payment plan.
Still, the transaction seemed secure – the first of the remaining three payments ran on a credit card provided. But that’s when this coin deal flipped.
Here’s where the scam came in. The client filed a chargeback, without even consulting the dealer, and told his card issuer he never received the coin.
The merchant, which averages $4 to $6 million annually, did not immediately respond to the chargeback. By the time they had, the customer had already agreed to a pre-arbitration settlement with the credit card.
But the merchant was indignant, since they were in possession of a delivery receipt, even though the customer told the card issuer he had never received the coin. The merchant called the delivery service, which also did not respond immediately. When they did, they confirmed that they properly delivered the coin. To make matters worse, during their investigation, the customer was coldhearted enough to admit “in confidence” that he in fact had the coin, but was going to stick to his story of never receiving it!
By the time all involved parties compared notes, the pre-arbitration settlement was already dispersed, and the card carrier had closed the case. In this instance, the dealer was out the cost of the coin, and the $40,000 it expected to earn for it. The dealer was left without two nickels to rub together.
Of course, had the merchant had a chargeback representative like Chargeback Gurus, this would have been unlikely to have happened. First, Chargeback Gurus would have already given a risk assessment review of the merchant’s back office process, and vastly improved the verification and fulfillment process.
For a transaction that large, Chargeback Gurus would have recommended the merchant use a private delivery service, which would have brought a certificate of delivery for the client to sign, a verified hard copy of the recipient’s driver’s license number and credit card, and once again had him sign the payment plan authorization.
In addition, the private delivery service would have taken a photo of the client accepting the coin, and signing the appropriate documents.
And of course, if the fraudster had still tried to file a chargeback, Chargeback Gurus, which wins upwards of 83% of its contested chargeback, would have immediately responded and fought that report with all the necessary documentation, long before a pre-arbitration settlement would have even been discussed.
Alas, this particular merchant didn’t have those services at that point. Thus, the fraudster got away with it. At least it’s good to know that his name, address, credit info and most importantly his fraudulent activity is now a part of Chargeback Gurus’ proprietary black list, and all our other clients in the industry are aware of it as well. The odds are, he’ll strike again – only this time, the coin toss may not go his way.
“Peace and justice are two sides of the same coin.”
— Dwight D. Eisenhower
