This old-fashioned scam is more prevalent than you think — and your customers could be at risk. If you run a cryptocurrency exchange, kiosk network, or other crypto MSB, here’s what you need to do about this fraud.
BitAML is continuing its blog series cataloging the various financial scams that result in hundreds of millions of dollars being fraudulently stolen from honest consumers every single year.
Because consumer protection awareness is evolving in cryptocurrency, many businesses in the industry may be underprepared to address suspected instances of financial crime. Nonetheless, it is critical to AML compliance, as well as a fair and safe marketplace, for businesses to do their part to combat financial fraud and crime in the cryptocurrency industry.
These blog posts are intended to inform cryptocurrency business owners about the different scam typologies, as well as to prescribe action that should be taken when encountering an instance of suspected fraud.
While consumer education is not our primary focus in this series, anyone reading this article who suspects they may have fallen victim to the scam detailed in this blog post should find it useful. We will also offer some tips on what consumers can do to resolve or avoid scams altogether.
Today we’re looking at the so-called ‘ticket scam,’ a well-worn scheme that a surprising number of victims fall prey to every single year.
The term “ticket scam” might conjure a familiar, stereotypical image of an unkempt man wearing a long trenchcoat hiding in an alleyway attempting to lure consumers approaching a theater or sports venue with the promise of tickets half-off the box office price and in a great location.
These tickets, of course, end up being in the nosebleeds, if they are real at all.
But this is not the kind of ticket scam we’re talking about today.
Indeed, while a scalper selling tickets outside of a venue should be easy enough to avoid, ticket scammers have become increasingly sophisticated and have successfully used new technologies like the internet and social media to their advantage.
In an increasingly digital world, with so many transactions taking place online, it’s more important than ever for consumers to be aware of illicit financial activity, including scams.
Businesses need to do their part as well, and crypto businesses are uniquely suited to address scams like the one we’re going to detail in this post. Let’s get started.
How a ticket scam works
A typical ticket scam is fairly straightforward, though there are variations and other red flags to be aware of.
Overall, a ticket scam involves a fraudster posting an advertisement on an online classified website (e.g. Craigslist) offering phony, non-existent, or fraudulent concert or event tickets in exchange for remuneration (for our purposes here, a cryptocurrency like bitcoin). These tickets are often sold at a premium much higher than the face value of a real ticket.
The context for the sale is usually a popular act whose show has already sold out, which causes a consumer who missed out on the original ticket sale window to justify paying the premium for the re-sold tickets.
The fraudster generally instructs the victim to transfer cryptocurrency prior to taking receipt of the tickets.
Ultimately the fraudster disappears with the funds and no tickets ever materialize.
Variations and other red flags
You might think that spotting a suspicious individual seller on Craigslist is as easy to avoid as the alleyway fraudster in the example above, but it’s not often that simple.
Consumers should be mindful that a fraudster may appear to be a legitimate business, and is certainly not limited to sites with reputations for scam listings like Craigslist.
In fact, recent reports have shown Facebook to be a large driver of ticket scam activity, with fraudsters going as far as impersonating legitimate venues to further confuse a potential victim.
Scammers may also be able to produce a ticket which appears to be legitimate but is in fact counterfeit, with a forged barcode or QR code.
Some scammers may actually possess a legitimate ticket but have no intention of sending it to you. In fact, they may be attempting to sell the same legitimate ticket to a number of buyers.
Lastly, scammers posing as legitimate box offices or venues may merely use the pretense to steal credit card information, tell you to check your email for a confirmation, only to vanish.
What potential victims should do
The golden rule for consumers concerning scam activity is this: DO NOT pay for goods or services with cryptocurrency on any online classified website. Never send cryptocurrency to anyone pressuring you to do so.
Purchase from the venue directly whenever possible. If the venue has sold out and you want to take a chance on a reseller, things can get dicey. You can always check BBB.org to see if a seller is licensed, or what other customers have experienced with the particular seller. If there is no information available, that’s a red flag.
You can also insist on payment methods that offer some protection. Credit cards offer some recourse. Debit cards and wire transfers, less so. Pre-paid gift cards and cryptocurrency, none whatsoever. All cryptocurrency transactions are final.
What crypto businesses can do to help
Cryptocurrency business owners can and should practice robust consumer protection. This means having a clear and detailed consumer protection policy, as well as other protocols and procedures in place to detect suspicious activity that could be related to scams.
In practical terms, if a potential victim of a ticket scam approaches your kiosk or exchange and are first time customers, they will go through your KYC processes which will help you identify the nature of the transaction. If scam activity is suspected, you may be able to save a first-time crypto customer a significant headache.
Disclosures about scam activity, including ticket scams, are also essential tools consumers should see and be aware of before executing a transaction with your business. Include other details for consumers unfamiliar with cryptocurrency, like disclosures about volatility and the fact that transactions are non-refundable by nature.
Key takeaways for bitcoin compliance
Consumer protection is the responsibility of every business operating in the cryptocurrency industry. We can only protect the fairness and safety of the ecosystem if we enforce strict policies that help consumers avoid falling victim to scam activity.
If you need help setting up consumer protection protocols, or an AML compliance regime for your cryptocurrency business, reach out to BitAML today.