Every year, 40 million used cars are sold in the US. People use sites like Craigslist or Ebay to list their cars and any other goods they want to sell. It’s like a garage sale, but it’s done online. It’s no wonder so many scammers find it to be a prime hunting ground for their shady activities – because they can stay anywhere in the world and be relatively safe; they get the luxury of avoiding punishment for their actions. So, how does the fraud scheme with escrow work? Let’s find out.
The big fraud
People who get scammed are usually attracted to the low prices at the start. As a first step, scammers find photos of used cars in good condition. Then they post them from their own account with a great discount, making it look like a great deal. Who wouldn’t buy a good car at a 30% discount? That’s the mindset that allows fraudsters to find their victims. Usually, the victims contact fake sellers and here is where it all starts.
The goal of a fake seller is to give the impression that everything goes fine. It may be hard to achieve, as there’s nothing substantial to prove it, only an attractive low price. But in most cases, that’s enough to strike a deal. The fake seller claims to be out of the country, maybe he’s in the military, and unable to use his car, which is why he wants to sell it at such a low price. There’s no way to check the car, and more often than not, he claims there are other interested buyers, so the victim is pressed for time.
If all these red flags didn’t scare the potential buyer, then it’s time for the final part – actually fooling him into sending the money. The scammer proposes to use a particular 3rd party escrow site claiming that he used it many times before. In reality, that’s a site created by the scammer itself with only one purpose – to become bait for a careless buyer. The victim registers on the suggested fake escrow site, sends the money via Western Union or MoneyGram (there’s no way to reverse a Western Union transaction), and the scammer disappears along with his fake website and your money.
A single ad can be used multiple times, scamming many people at once before being purged by the moderators. Is there any way to protect yourself against this kind of situation?
Smart contracts – a viable alternative to escrow services
This situation described above can be easily avoided by using a reliable decentralized service. Instead of trusting your money to some third party, you can store them in a blockchain smart contract. It means that nobody would be able to touch your funds until you receive what you paid for. There are many decentralized escrow services: Escaroo, Setescrow, Lockscrow. All of them are based on the same principle: you can use crypto to pay for something, and keep it somewhere in a safe place where both you and the other party can’t reach it until the deal is closed. Out of these, the most reliable service is Escaroo: it’s the only peer-to-peer, decentralized service that doesn’t require a third party to participate in the process at any stage. When the deal is created, the funds are locked in a smart contract and stay there until the buyer releases them. Let’s see what’s so unique about it.
Many existing crypto escrow solutions have one critical flaw: they store clients’ funds in a common pool, making them an interesting target for hackers. Escaroo solves this problem by creating a unique smart contract for each transaction. Every deal has a unique transaction address, thus making it not worth the time for hackers.
It’s important to understand that the platform isn’t involved in its transactions. The only thing that it does is create smart contracts for the clients automatically. When a transaction occurs, it happens between the two parties. There’re only a few solutions with such security on the market. On June 21st, 2019 the startup filed a patent application for its escrow service with the US Patent Office to register their unique solution.
Escaroo can be used for any type of deals: both between individuals and in commercial deals. Personal deals involve the purchase of various items or something more expensive, such as cars or even real estate. The value of the deal can vary from 10 dollars to millions of dollars, it doesn’t matter, because the decentralized escrow solution provides the same high security for any deal, regardless of the amount of money involved. Once the buyer receives the goods, and once he/she is happy with the order, the funds can be released from the smart contract. In the same way, sellers can be sure that once they ship their goods, their money is there.
In the case of commercial deals, Escaroo can become a solution for a wide range of commercial companies, providing them with:
- Real estate escrow services: by partnering with Escaroo, real estate dealers can offer cryptocurrency as a payment option for their clients.
- Aviation and marine escrow services: buying and selling private yachts and jets for cryptocurrency becomes easier on a global scale.
- Letters of Credit: this payment mechanism is widely used as a guarantee that a buyer’s payment to a seller will be received on time and for the correct amount. If the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. With Escaroo’s decentralized escrow services and cryptocurrency these traditional letters of credit will eventually become obsolete, as everything will be done programmatically in the smart contract.
Finances are one of the most natural and convenient applications for blockchain technology. The invention of decentralized digital money solves so many problems related to the financial interaction between multiple parties that someday it’ll be possible that it will be deemed one of the most important technologies of the century. Not everyone has good intentions; some people desperately want to make a living by stealing from others, and by doing it online they can stay anonymous in most cases. Now we have the technology and the tools to offer trust while keeping the Internet’s anonymity intact. Escrow services can protect ourselves against fraudulent activities but, remember, you can’t trust anyone online, and always being a little bit