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Escrow Scam Investigations

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Cybertrace Team

April 11, 2023 · 6 min read

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Cybertrace’s experienced investigators are issuing an urgent alert about a new scam technique using fake escrow services. As we know, real escrow services play an important role as a trusted intermediary in high-value transactions. Whether involving real estate, cars or luxury goods, they provide both buyers and sellers with peace of mind. Sadly, we are seeing increasing numbers of ruthless scammers exploiting victims’ trust through the use of fake online escrow services. This has gone so far as to even expand into cryptocurrency fraud where escrow scams proliferate. Not only are scammers duping buyers and sellers – they even pose as asset recovery agents pretending to help scam victims. Just as victims start feeling some hope of getting their money back, these crooks fleece them a second time through mirror transaction fraud. Learn how to protect yourself from cyberfraud by reading how Cybertrace’s escrow scam investigations can help you get justice.

What is an escrow?

According to Investopedia, an escrow is ‘a legal concept describing a financial agreement whereby an asset or money is held by a third party on behalf of two other parties that are in the process of completing a transaction’. Deriving from the French word escroue (a scroll of parchment), it denotes a third party holding a deed until a transaction is completed and is used widely in high-value transactions such as real estate, cars, stocks or luxury goods. Throughout history, sellers and buyers have used trusted third parties to mitigate uncertainty and as protection against deceptive conduct. Because of the very trust inherent in these, escrow scam investigations would not have been necessary. But how does an escrow work in practice?

Let’s use real estate as an example. When a property is for sale on the market, there might be a lot of enquiries. But how does a seller know whether a buyer is genuinely interested? And how does a buyer know the seller won’t just pocket their deposit and sell to someone else? The answer: an escrow. An interested buyer places 1-2% of the purchase price with an independent for-fee escrow agent. Knowing that the interest is genuine, the seller takes their property off the market and the two parties settle contracts. Once they have finalised the sale, the 1-2% gets taken off the purchase price and everyone is happy. So far, so not in need of escrow scam investigations. But what about online escrow?

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Does escrow work online?

Allowing buyers to make risk-free, good-faith deposits and sellers to know that buyers are serious is vital for internet commerce. For a fee, buyers of high-value goods like cars, jewelry and art can place funds in escrow with an agent. Once the seller knows the escrow agent has received the funds from the buyer, they send the ordered merchandise. Once the buyer has received the goods in appropriate condition, the escrow agent releases the funds to the seller. Such online escrow, similar to real estate or stock market escrow, thus protects sellers and buyers from non-payment and fraud. Having existed since the beginning of internet commerce and auctions, it helped to establish trust in the online sphere. However, there are very few genuine online escrow companies and, as with so many unregulated spaces, scammers have moved in. As a result, escrow scam investigations have become increasingly necessary.

How do online escrow scams work?

Like all scams, escrow fraud involves scammers manipulating victims and appealing to base emotions such as greed, lust or fear. As such, they can scam both buyers and sellers, all via fake escrow services that they control. When scamming sellers, fraudsters pretend to be buyers depositing money with a supposedly “independent” online escrow agent. After getting the go-ahead from the fake online escrow, the seller ships the goods but never receives any money. Often, scammers use unwitting middlemen to receive and send the goods on to others, usually located abroad. When defrauding buyers, the playbook is even easier. Fraudsters simply pose as sellers with valuable (but non-existent) items and provide buyers with a fake escrow account. If a buyer bites, they simply wait for them to deposit the money, take it and run. Sadly, escrow scam investigations reveal that the buyer is left wondering why they never received the goods.

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What about escrow cryptocurrency scams?

Many of Cybertrace’s escrow scam investigations now target escrow cryptocurrency scams. Typically, they follow a familiar pattern: first, scammers contact victims directly via phone calls or WhatsApp. On the phone, they often pretend to be blockchain representatives or administrators overseeing the liquidation of a claim broker/investment platform. Alternatively, they may pose as an asset recovery agent helping scam victims to get their stolen funds back. Whatever the fake backstory, they make victims feel as if they can easily get their money. Then comes the hitch: the scammers claim that they first must “synchronise” cryptocurrency wallets or “verify” bank accounts. Connivingly, they convince victims to transfer 10% of the funds they are due to receive back into an “escrow wallet”. Unfortunately, this is simply another iteration of the mirror transaction fraud. The wallet is definitely not an escrow but simply another of the fraudsters’ pockets into which victims’ money disappears.

Sadly, when scammers defraud them, many victims just blame themselves. What most don’t realise is that these fraudsters run sophisticated operations with elaborate fake stories and persuasive phone sales tactics. Some even manage to pressure victims into sharing banking password or installing remote access apps such as AnyDesk and TeamViewer. Under the pretext of “verifying” bank accounts, scammers send money to victims’ crypto wallets and on to their own wallets. While victims faithfully wait for their “escrow” to be returned, fraudsters simply keep asking for more funds. It’s a vicious cycle that often only ends when victims run out of money.

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How do I protect myself from escrow scams?

There are some useful general tips on how to protect yourself from escrow scams. Most importantly, make sure you independently verify any escrow services that others ask you to use. Additionally, only use peer-to-peer services like WesternUnion or MoneyGram to pay people you already know and love, not strangers. Do not under any circumstances share your internet banking login with outsiders or install remote access apps on your devices. It’s the equivalent of opening your front doors to burglars! And if all else fails and the scammers got to you anyway, Cybertrace’s escrow scam investigations can help.

What does a Cybertrace escrow scam investigation offer?

Pernicious cryptocurrency escrow scam artists turn people’s healthy skepticism and wariness at dealing with unknown parties online against them. They exploit such caution by guiding victims to use bogus escrow services. Luckily, Cybertrace’s escrow scam investigations put the spotlight on perpetrators and help victims get justice. Our experienced investigators can trace cryptocurrencies across the blockchain to identify where your funds ended up, forensically analyse websites to identify the mastermind behind them and investigate scams via a variety of methodologies and tools. Talk to us today about how we can help you regain both lost funds and peace of mind.

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