How Scammers Turned Nespresso Lovers Into Money Mules

I recently wrote a short series of blogs on the topic of credit card theft, security and protection.

There are many potential problems for travellers
and gamblers both online and in the real world and I encourage you to read
those as a reminder of what’s out there.

After writing those articles, I wondered how
difficult it was to use a stolen card and how scammers might monetise the card
details they buy online.

The “Pump And Dump” Method

Years ago, I used to eat at a restaurant in Los Angeles that had the best steaks I’d ever tasted yet were far cheaper than the big steak houses.

It later turned out that the beef was being provided by dubious sources who were somehow selling the very best dry-aged slabs for a fraction of their normal value.

Sometime later, this caught up with the manager
and I was sad to hear he got into trouble – I really liked the guy (and his
steaks).

As it turned out, this restaurant might have
been at the end of a classic “pump and dump” scam that was illustrated
perfectly in one of my favourite movies, Goodfellas.

Goodfellas movie poster
Image: Wikipedia

In a classic scene, mobster Henry Hill introduces the owner of a popular restaurant to his mob boss, Paulie.

After Joe Pesci’s character Tommy beat the owner up for demanding payment of his tab, the owner wanted to protect himself by partnering with Tommy’s boss.

In that beautifully measured scene, Paulie seems
reluctant to take part-ownership of the restaurant since he knows nothing about
that business, but Ray Liotta’s Henry offers to help and a deal is struck.

The truth is that Paulie always wanted to take
the restaurant and Tommy and Henry were simply working a con to force the owner
into a corner where Paulie seemed like his best and only way out.

In fact, the mob boss was a shortcut to arson
and an insurance claim.

So, what does this have to do with your stolen
credit card?

While researching current scams that use stolen
credit cards, I stumbled onto a variation of Paulie’s method for using the restaurant
in Goodfellas to steal large sums of money from a line of credit.

The restaurant in Henry Hill’s story was a huge
success and already had a good reputation with providers of food, alcohol, furnishings,
clothes, or anything the owner might order, then pay for via an invoice.

Once Paulie was the owner’s supposed “partner”
Henry stepped in, took the reigns and started ordering everything he could
under the restaurant’s name – from cases of booze and boxes of prime steaks to
airplane tickets and Italian suits – whatever the restaurant’s previously good
credit would allow him to buy.

All of this stuff was delivered through the
front door then straight out the back door to be resold for a fraction of its
value, but an enormous profit to Paulie and his crew.

The restaurant owner kept signing these crooked
orders until the only thing left to sign was another insurance policy before
Henry and Tommy firebombed the joint.

It’s a terrific illustration of mob mentality
and ingenuity and, as it turns out, the inspiration for modern credit card
thieves.

How Scammers Used eBay To Turn Nespresso Fans
Into Money Mules

Nespresso machine
Image: Shutterstock

At last year’s DEFCON in Las Vegas, Professor Nina Kollars gave a clear illustration of how credit card scammers use eBay to create a simple buying triangle that turns stolen card details into hard cash.

After Ms Kollars bought herself a Nespresso machine, she decided to try buying coffee pods online since buying direct from Nespresso can be quite expensive depending on your coffee drinking habits.

Sure enough, she found a couple of hundred pods
at an excellent price, paid the seller and waited for her purchase to arrive.

When the package landed, she was shocked to find double the number of pods plus another brand-new machine that was not on the eBay auction!

Naturally, she contacted the seller, but they had vanished so being a professor at the US Navy’s war college, she decided to dig a little deeper.

What she found was a scam she calls
“triangulation fraud”, though it’s really just a variation on the Mob’s “pump
and dump”.

Kollars began by contacting Nespresso who had shipped the pods and machine to her and tried to return the items, but Nespresso didn’t want them since they had already been paid for at their end.

This forced the question: if Nina only paid half
price for 200 pods but received 400 and a brand-new machine, which had all been
paid for and shipped by the manufacturer – where is the scam?

Nina Kollars already had an idea so decided to try and prove her theory.

Theorising that scammers tend to be lazy, she
searched eBay for new and current auctions that used the same text or
photographs as her original Nespresso bonanza.

Sure enough, she found a few and repeated the
process of buying pods for a bargain price and just like before, received
double what she paid for and more.

Again, the product came directly from Nespresso
who played no part in anything illegal but thanks to the wonders of drop
shipping, might have been used to help fraudsters turn stolen credit cards into
real money.

How The Nespresso Scam Worked

As Kollars discovered, the system is simple but effective.

The fraudsters advertise something on eBay or
any other auction site and wait for a buyer who sends them money via an online
or electronic payment method.

To ensure that payment is not later reclaimed,
the scammers then use a stolen credit card to buy the items they were selling
from an online manufacturer or provider and ship directly to the buyer.

So the triangle works like this:

1. The buyer orders something at a bargain
price.

2. The seller receives the buyer’s cash then
uses a stolen card to buy the advertised items directly from a provider who
will then ship directly to the buyer.

3. The provider receives an order, which has
been paid in full and ships the product to the address given.

In order to make absolutely sure that the buyer
is happy (and won’t quibble or cancel payment), the scammer may double the
order or add a coffee machine to the deal; something I like to call “greed by
proxy”.

Theoretically, most buyers will be delighted by the additional items and may stay quiet for fear of having to return the extra items (for shame!) but Nina Kollars wanted to figure out exactly what was going on and did so.

In her talk at DEFCON, she accurately surmised
that this seemingly victimless crime was anything but.

Most likely, those cards belonged to people who
had no idea their details were compromised and if they were to report the
crime, Nespresso would most likely point investigators to the shipping address
given for whatever was sold.

This method therefore allowed the sellers to
remain hidden behind constantly changing auction accounts, bank details and
fake IDs while the innocent buyer might have some explaining to do but has
technically done nothing wrong (unless they knowingly work this system to get
more free stuff).

The Con Must Go On

Just like Henry Hill and Paulie, these
fraudsters abuse someone’s line of credit until the well runs dry then burn the
store down (ditch the stolen identity) only to repeat the whole deal with
another victim.

So if you wake up one morning and find you’ve
unexpectedly bought an enormous flat-screen television that was shipped to
Alaska or Idaho, don’t be surprised if the recipient is completely unaware that
they’re part of a con game.

The real scammers are elsewhere, hiding (and
operating) in plain sight.

If you’re interested in reading the other
credit card scam articles, check out the four-part series below:

  • Part 1 for not-so-secure ATMs and Lebanese Loop devices.
  • Part 2 for how people can steal your details from contactless cards.
  • Part 3 for more direct methods on how people can steal your details.
  • Part 4 for a story about when R. Paul Wilson’s accounts were compromised.

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