Reversing transactions is really the only way to protect themselves against (ACH) fraud, so this shouldn't be much of a surprise despite their claims about "no chargebacks".
How does it protect them against fraud? They've still been defrauded out of exactly the same amount of money. They've just additionally defrauded one of their customers. If Jack steals $10 from me, and I respond by stealing $10 from Joe, I haven't "protected myself" against Jack. I've just victimized Joe.
Topic: TradeHill - Dwolla is being scammed and reversing transactions - page 6. (Read 19245 times)
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them.Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't.
It's 4:15, I'm going to get some sleep, I'll be available tomorrow.
Jered
Well there goes Dwolla and Paypal. Too bad traditional banking institutions are the ones causing the currency fraud.
For the time being Dwolla is still here, thankfully. IMO, they helped boost the bitcoin economy as much as bitcoin did theirs. They are still the cheapest and most convenient way for US customers to fund exchanges.
However, since it is clear that Dwolla transactions are in fact reversible (contrary to their claims), exchanges like TradeHill might need to change how they process Dwolla deposits. To protect themselves, they may have to start withholding bitcoins purchased with dwolla deposits for a couple of weeks, until it is clear the deposit won't be reversed.
Reversing transactions is really the only way to protect themselves against (ACH) fraud, so this shouldn't be much of a surprise despite their claims about "no chargebacks".
Dwolla is still friendly to bitcoin, just not to fraud. We are lucky that bitcoin makes up the bulk of their business. Otherwise, they would probably choose to freeze MtGox and TradeHill's entire accounts (like PayPal would) rather than just reversing a few of their transactions.
They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't.
It's 4:15, I'm going to get some sleep, I'll be available tomorrow.
They told everyone, and continue to tell everyone, that they don't. I presume they're going to reimburse you, change their terms of service, and notify their customers. If not, they cannot be trusted to honor their commitments.It's 4:15, I'm going to get some sleep, I'll be available tomorrow.
"Remember, these are cash-based transactions! No credit card fees, chargeback concerns, or signing necessary!" -- Dwolla
I bet they were thinking something like, "this is so easy, why isn't everyone doing it?" Now they know. It's never easy.
If this goes to arbitration, you should win. Dwolla can't excuse their reneging on their agreement with you because a third party reneged on them. Otherwise, you could excuse any non-performance simply by laundering a contract through a third-party who you would rely on to perform your part of the contract.
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them.Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't.
It's 4:15, I'm going to get some sleep, I'll be available tomorrow.
Jered
Well there goes Dwolla and Paypal. Too bad traditional banking institutions are the ones causing the currency fraud.
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them.Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't.
It's 4:15, I'm going to get some sleep, I'll be available tomorrow.
Jered
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them. Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
There are more exchanges than 2, you know. Heck, just go bitcoins -> namecoins -> bitcoins and you're laundered.
I believe this was possible because in the US EFTs can be reversed in case of error for up to 60 days even though funds clear in 2-5. This is how it would go down, with no risk to scammer:
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Dwolla: K. Um. Wait, what? This sucks, let's just pretend we never transfered those funds to Trade Hill.
Trade Hill: WHAT IN THE BUTT?!?!
Kids, don't try this at home. Not being an expert in wire fraud and money laundering I'm sure I left some important details out. You're more likely to win 15 years of prison rape for wire fraud as opposed to a few bitcoins following the above script yourself.
I believe this was possible because in the US EFTs can be reversed in case of error for up to 60 days even though funds clear in 2-5. This is how it would go down, with no risk to scammer:
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Dwolla: K. Um. Wait, what? This sucks, let's just pretend we never transfered those funds to Trade Hill.
Trade Hill: WHAT IN THE BUTT?!?!
Kids, don't try this at home. Not being an expert in wire fraud and money laundering I'm sure I left some important details out. You're more likely to win 15 years of prison rape for wire fraud as opposed to a few bitcoins following the above script yourself.
Sounds pretty accurate, I think you nailed it.
There are more exchanges than 2, you know. Heck, just go bitcoins -> namecoins -> bitcoins and you're laundered.
I believe this was possible because in the US EFTs can be reversed in case of error for up to 60 days even though funds clear in 2-5. This is how it would go down, with no risk to scammer:
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Dwolla: K. Um. Wait, what? This sucks, let's just pretend we never transfered those funds to Trade Hill.
Trade Hill: WHAT IN THE BUTT?!?!
Kids, don't try this at home. Not being an expert in wire fraud and money laundering I'm sure I left some important details out. You're more likely to win 15 years of prison rape for wire fraud as opposed to a few bitcoins following the above script yourself.
I believe this was possible because in the US EFTs can be reversed in case of error for up to 60 days even though funds clear in 2-5. This is how it would go down, with no risk to scammer:
Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.
Dwolla: K. Um. Wait, what? This sucks, let's just pretend we never transfered those funds to Trade Hill.
Trade Hill: WHAT IN THE BUTT?!?!
Kids, don't try this at home. Not being an expert in wire fraud and money laundering I'm sure I left some important details out. You're more likely to win 15 years of prison rape for wire fraud as opposed to a few bitcoins following the above script yourself.
Maybe the scammers were buying on TradeHill with fraudulent Dwolla money, and selling on Mt. Gox. It would be kind of silly to try and sell BTC that you stole from an exchange on the same exchange.
It's worth talking to Mt. Gox to see if they can trace the coins to them. They may not be willing to freeze them (which would, IMO, be completely understandable), and it may already be too late, but it's worth pursuing.Don't freeze them, watch where they go, then have Dwolla reverse the transaction
. Apparently it's possible, and you at least get another scammer account, if not a name and address. However, if the coins were not transferred straight to mtgox from tradehill, it's much tougher to link. Maybe the scammers were buying on TradeHill with fraudulent Dwolla money, and selling on Mt. Gox. It would be kind of silly to try and sell BTC that you stole from an exchange on the same exchange.
It's worth talking to Mt. Gox to see if they can trace the coins to them. They may not be willing to freeze them (which would, IMO, be completely understandable), and it may already be too late, but it's worth pursuing.
I kindly requested that they fix this situation with tradehill on their facebook wall. Surprised I was the first one. lol
Maybe the scammers were buying on TradeHill with fraudulent Dwolla money, and selling on Mt. Gox. It would be kind of silly to try and sell BTC that you stole from an exchange on the same exchange.
2) I should clarify that, when Dwolla credited the account the user bought BTC and moved it out.
Jered
Jered
Jered - quick question. How exactly did Dwolla take this money back from you? Did they take it from your account balance with Dwolla? And how long after the transfer IN was it taken back OUT?
The transfers simply changed from credited to pending and the funds were removed from our account. They were most likely taken out after 3 or 4 days. There were 17 instances and they varied.
Jered
Quite frankly Dwolla needs to hire more competent people!
2) I should clarify that, when Dwolla credited the account the user bought BTC and moved it out.
Jered
Jered
Jered - quick question. How exactly did Dwolla take this money back from you? Did they take it from your account balance with Dwolla? And how long after the transfer IN was it taken back OUT?
That sucks that Tradehill got hit with this. Dwolla should be very motivated to set it straight, or I won't be using their service again.
first GOXED, now DWOLLA'D.
So how and why did this happen to tradehill and not mtgox?
Has Mt. Gox reported in to this forum on this subject (as have some of the other exchanges) and I missed it? I am quite interested in their experiences here. One would anticipate that being a larger exchange with no obvious means of discouraging scammers beyond the rest, they would have been vexed by the same issues.
He's spoken on IRC and said publicly that they haven't experienced any loses. We've spoken some in private and I won't quote anything else. I'll allow him to speak for himself and see where we go from here.
Jered
So how and why did this happen to tradehill and not mtgox?
Has Mt. Gox reported in to this forum on this subject (as have some of the other exchanges) and I missed it? I am quite interested in their experiences here. One would anticipate that being a larger exchange with no obvious means of discouraging scammers beyond the rest, they would have been vexed by the same issues.
Hello - first of all, this is horrible news, and I hope it is resolved very soon. We're behind you 100%.
I am still unclear on 2 issues you mentioned.
1) Does Dwolla owe you guys any money? Have you lost any funds after reversals?
2) You said your blog post was going to walk us through how this happened, but I only see that it did happen, not how they/you were scammed. First the funds in the transaction you got were confirmed and then they were reversed. Do you know how the scammer got his transfer confirmed in the first place?
Best wishes.
I am still unclear on 2 issues you mentioned.
1) Does Dwolla owe you guys any money? Have you lost any funds after reversals?
2) You said your blog post was going to walk us through how this happened, but I only see that it did happen, not how they/you were scammed. First the funds in the transaction you got were confirmed and then they were reversed. Do you know how the scammer got his transfer confirmed in the first place?
Best wishes.
1) $37,000 lost roughly, we caught another $27,000 and prevented it from leaving.
2) I should clarify that, when Dwolla credited the account the user bought BTC and moved it out.
Thank you for your support! Hopefully Dwolla will do the right thing and reimburse this.
So how and why did this happen to tradehill and not mtgox?
Surely the "scammer" would attempt to defraud the largest, already-proven-to-be-incompetent exchange, no?
Surely the "scammer" would attempt to defraud the largest, already-proven-to-be-incompetent exchange, no?
It's impossible to guess why they would attack TradeHill and not Mt Gox. I see no reason they wouldn't try. I hope they haven't. It's possible that they stopped after we caught them and this is the end of it.
We're going to have to wait and see what comes of this. It's going to be very interesting to say the least.
Jered
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