It’s an unfortunate truth that not everyone on a marketplace deals in good faith. Some deliberately mislead others to get something for nothing, or at least more than their fair share. These people are known as fraudsters, and marketplaces (and, by extension, their customers) end up paying the price for their dishonest activities.
This piece will explain what a fraudster is, including some of the different types and famous ones you may have heard of. Then it will outline some general tips for Trust and Safety teams on how to keep their marketplaces safe from fraudulent activity.
A fraudster is someone who engages in deceptive practices to achieve financial or another personal gain. They could impersonate someone, spend counterfeit money, or trick others into revealing private information. Fraudsters can target several different industries and use many different tactics.
Marketplace Trust and Safety teams need to be especially on guard against fraudsters. Since marketplaces are transactional hubs, they’re prime places for fraudsters to use their tricks to make money or get goods unfairly.
Meanwhile, customers end up footing the bill by having their money – and, in worst cases, their private financial and identity information – stolen or used without consent. Businesses also lose out by having their inventories drained by fraudulent purchases, and by having to refund legitimate customers who have their stolen payment information used to make these purchases.
The above fraudster definition can apply loosely to other titles of people who engage in illegal (or at least unfair) dishonest practices. These names can include:
Fraudsters are connected by their purpose: to achieve financial or other personal gains through dishonest means. There are many of these means available, though, so fraudster characteristics and tactics can vary.
Four general categories of fraudsters to be aware of are the following:
The smooth talker is a fraudster who specializes in social engineering techniques to get others to do what they want, or give them what they want. These may include lying to a person, or knowingly withholding relevant information, to make a situation seem better or worse than it is.
After gaining a victim’s trust, a smooth talker may use coercive tactics such as threats and bribery to exploit that person. They may take the person’s money, financial information, or personal information, or otherwise force them to do things they don’t want to do.
The professional is a fraudster who has a legitimate job or position of authority, but exploits it to ignore their associated responsibilities if they see an opportunity to personally benefit. One example is a company representative who negotiates a work contract they know their company won’t be able to fulfill (or never intends to). Another is members of a company’s upper management illicitly using investors’ funds for personal expenses or ventures.
The impersonator is a fraudster who reaps benefits and/or avoids consequences by pretending to be someone else. Typical marketplace fraud involving this profile of a fraudster consists of someone paying for a product or service using stolen or forged payment information.
More elaborate schemes can involve forging identity credentials to pose as legitimate companies (or company representatives) in order to influence business deals. They can also consist of account takeovers to steal the victims’ money or information; trick the victims’ contacts; or damage the victims’ reputations by making it appear as if they’re acting out of character.
The insider is a fraudster who abuses access to sensitive information for their own benefit. An example is an employee at a company who discovers a security vulnerability in the company’s tech stack. However, instead of reporting the problem so it can be fixed, they deliberately exploit it to steal money or private information.
Many fraudsters are opportunists simply looking to make some fast money. Others are dedicated criminals who keep up their deception for years. Sometimes they will even work as part of a group to extend their reach while making themselves more difficult to trace.
Here are four famous fraudsters who have been the subjects of extensive media coverage, books, films, television shows, podcasts, and more.
Bernie Madoff was a fraudster from the professional category. He was an American stockbroker who founded an investment firm in the 1960s. However, in 2009, the wealth management branch of his company was exposed as the largest Ponzi scheme in history. He solicited investment money and then used it to pay his previous investors.
For a fraud that cost nearly $65 billion in losses, Madoff was sentenced to life in prison. He died in 2021.
Fraudster Anna Sorokin was a smooth-talking con artist originally from Russia. While visiting New York in 2013, she changed her name to Anna Delvey and convinced people she was the wealthy heiress to an art foundation. This included forging checks, wire transfers, and other financial documents to make her fake enterprise seem legitimate. She then tricked banks, real estate agents, hotels, and New York’s cultural elites into funding her lavish lifestyle.
Her fraud is estimated to have caused over $275,000 in losses. She was caught in 2017, and sentenced to 4-12 years in prison in 2019.
Elizabeth Holmes was another fraudster from the professional category. An American entrepreneur, she founded a biotechnology company called Theranos in 2003. The company attracted investors and government funding with its claims of inventing techniques for drastically reducing the amount of blood required for blood tests.
Eventually, journalists and regulators began to question the credibility of Theranos’s claims. Their investigations led to Holmes being arrested in 2018. In 2022, Holmes was sentenced to over 11 years in prison for wire fraud.
Frank Abagnale Jr. was an American impersonator type fraudster. In his 1980 autobiography, Catch Me If You Can (which was adapted into a movie in 2002), he claims to have defrauded individuals, small businesses, and even large corporations by impersonating several different types of professionals over his career. These include a lawyer, a federal investigator, a doctor, and an airline pilot.
To this day, there is still debate over which stories of Abagnale’s criminal exploits are accurate, and which ones he exaggerated or entirely fabricated.
There are several things Trust and Safety teams can do to block fraudsters from entering their marketplaces, as well as identify and deal with existing fraudsters. They include the following:
Many fraudsters fake their personal or financial information (or both) to avoid having it traced back to themselves. But this often creates inconsistencies that Trust and Safety teams can exploit to spot and keep out bad actors.
For example, requiring multi-factor authentication on marketplace accounts creates an extra hurdle for fraudsters. They have to not only know what an account’s username and password are, but also have access to a phone number or e-mail address associated with that account.
Trust and Safety teams can perform link analysis to visualize a marketplace’s user base and search for odd connections between their credentials. For example, a group of accounts may have been created from the same IP address or device signature, or have the same shipping address.
Trust and Safety teams can then monitor transactions from these accounts much more closely for signs of fraud, money laundering, or other marketplace rules violations.
Another way Trust and Safety teams can stop fraudsters is by teaching a marketplace’s customers how to not fall prey to them. These include tips such as:
Certain law enforcement officials are trained to understand how fraudsters operate and thus spot their hallmarks. Trust and Safety teams should make use of that expertise to teach team members how to spot signs of fraud. Law enforcement can also help to investigate potential fraud rings that may be too large for a marketplace to handle on its own.