A fool and his money are easily parted: e-gold and PayPal scams abound!

People who do business online frequently have their earnings held by pseudo-banks such as PayPal and e-gold. A problem then arises when the same people need their money out of these pseudo-banks or transferred between them.

The most common way to do it appears to be to find someone who is happy to trade. So A puts money into B‘s PayPal account and B puts money into A‘s e-gold account.

All fine and dandy (so long as you are happy to ignore the TOS of both pseudo-banks). Everybody is happy.

Until a day or so later when B cleans out his PayPal account and requests a reversal from e-gold. A is left with no money and PayPal can’t do a reversal because there are no funds available.

You are left without much come back as neither system can be told the true nature of the business so A must lie to PayPal and e-gold if A is to protest the scam.

On top of that A and B have a trust relationship – where they have limited knowledge of each other, are probably in different countries and have no real ability to resolve the dispute. Made worse is when B comes online and says “lol, it was only $x and I really needed it, sorry I had to scam you”.

Over at DigitalPoint traders try to ensure the other party has a certain number of posts, reputation and iTraders but time and again the desire to make a trade sees unproven members being trusted and, surprise! they turn out to be scammers. All the problems of international trading and legal restrictions on contracts with minors (as they frequently turn out to be) become very obvious.

I’d love to say I had a solution to this but I don’t. However if you are tempted to move your money around in this way build a relationship with the other person before you ever need to do such a trade. If the amount is more than you can afford to lose consider using escrow. And most of all, be incredibly professional.

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Sarah King Written by:

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13 Comments

  1. Jerry
    July 16, 2007

    I’m a paypal user and I’ve never had any problems. I mainly use it for purchase transactions via ebay. However, I’ve of people who have had to fight with paypal because paypal made a bogus transaction. One person told me they were out 3,000 and couldn’t make their mortgage payment. They any up getting the money back, but after hours of phone calls and hours of frustration.

    the point is that these are wonderfully services, but nothing is that good and we should always watch our backs (per say).

  2. July 22, 2007

    Nice post but why don’t e-gold users in these forums use a known exchange agent to change digital gold into national currency? Its clearly against PayPal rules so you know if someone is telling you, “I’ll do it” is almost guaranteed a to be a thief. If they are not an outright thief, someone will eventually ‘phone’ them into PayPal and that account will be closed, it always happens, Moneybookers also. e-currency debit cards are cheap and easy to get, also there are tons of good agents exchanging e-gold, I just did a post on about 50 of them:
    60 e-gold Exchange Agents, Who’s Still Alive? You Might Be Surprised…

    Mark
    DigitalMoneyWorld

  3. Mateo
    July 28, 2007

    I Had a paypal account and they locked it for six months with thousands of dollars in it. They said it was common for them to do this when large sums of money were transfered in. It was coming from legitimate sales I made on Ebay. And even though paypal is owned by ebay or vise versa they didnt communicate with each other to verify legitimate sales. Needless to say i finally got the money but they locked my information so I can never use paypal again. Im not really bothered, though, the whole thing was a nightmare.

  4. chris
    July 30, 2007

    Thanks for the article and the comments..I have been thinking about using PayPal because a lot of people do but now I will investigate a little further.

  5. Ryan Grone
    July 31, 2007

    This is a great article. I think a little common sense is definitely necessary to use those services safely.

  6. August 3, 2007

    I just came across your article, and wanted to alert you to a small glitch: “Until a day or so later when B cleans out his PayPal account and requests a reversal from e-gold. A is left with no money and PayPal can’t do a reversal because there are no funds available.”

    It is actually the other way around. E-Gold is (and has always been) non-refundable. This is one of the reasons some people prefer it over PayPal: once you have your money, it’s yours to keep. For the same reason, E-Gold is the currency most commonly used by people running scams.

    PayPal on the other hand can (and does) do reversals. Even if your account is empty; they just debit your balance below zero, and tell you to pay your debt, or lose your account.

    I should also add, that the reversals in these cases usually aren’t initiated by the person you refer to as A in your article. Instead, there is a C: the legitimate owner of the PayPal account that A used to send money from (read: hacked).

    In summary, what happens is this:
    – A sends B PayPal;
    – B sends A E-Gold;
    – A files a complaint with PayPal and asks for a refund (or: C finds out and asks for his PayPal to be refunded).

    B then loses his PayPal funds. Even if he could hide the fact that it was for an exchange, PayPal does not offer insurance for intangible items, so there’s nothing he can do.

    The person sending the E-Gold is the one that takes the risk; the person sending the PayPal does not risk losing his money (just his PayPal account).

  7. Ayodele Bello
    August 16, 2007

    Thanks for your concerns, really it is quite unfortunate that some sites that proclaimed that they are doing a legit business, via e-gold ended up to be scam.
    I invested in high-profits.net, nortelinvestment.com
    global-investment.info, only to later found out that they are fraudsters. The most anointing is that things have to be done on this otherwise they will end up destroying egold currency which somebody like believed that it is one of the most secured ways of transaction
    These sites ended sending me mail that profits made on my investment had been credited to the egold account n/a, and batch nos n/a, whereas when i made a payment into there account, my account nos and the batch nos were clearly stated
    I still have the batch nos and all other details in my mail box for further references.
    Thanks

  8. Mercedes
    August 22, 2007

    You have considered very actual theme.
    My supervision and some practice expert that PAY PAL in the lead, certainly.For example, transactions with EBAY occured amazingly.But there was such case when has transferred money in one doubtful company and operation has been cancelled PAY PAL(the refund occured about two weeks and I think PAY PAL have made good check of this company)And one more ,I have noticed one thing, that all of a SCAMs try to work with E-GOLD…They say: ´´It works very quickly and without any problem!´´Now I understand very good the true reason.

  9. Aggie
    August 28, 2007

    Thanks for the input. The internet is laced with scam artists. It’s unfortunately so…especially a newbie like myself who is trying to provide an income. There should be a licensing requirement to provide internet money exchanges.It surprises me that no large banking institution is providing a service to the internet.

    I guess one could say, “Welcome to the Internet World of Business,”…watch your wallet!

  10. September 9, 2007

    I am a paypal user and i never had any problems using it. As far as i know paypal has a regualar banking licsense now.

    I can recommend using escrow service like on elance.com

  11. December 5, 2007

    Good article!I never exchange E-gold to PayPal and vice versa as PayPal is a reversible currency AND PAyPAl deny in TERMS exchanges . so if paypal knows the guy who you exchange with is a exchanger you’ll get your account terminated..
    If you want to trasfer from PP to E-gold just withdraw money from PP in the bank and then buy E-gold

    http://www.lrhyip.com/

  12. February 12, 2008

    Do you know, that E-gold have a great problems with government. Black cash go from it’s accounts. Just becouse this system will be closed 2-3 years.

  13. Paypal is one of the largest group of thieves that has ever existed on the planet. They are the scammers who have cleverly disguised themselves as an institution.

    For example…. Say a PayPal ‘scammer’ accepts payments from buyers for goods on Paypal, but never provides the goods and just ends up refunding the money a week or two later, when the purchaser realizes what has happened…. Essentially, the ‘scammer’ is using other people’s money as a Bank Account… he takes some in, refunds a previous purchase, takes more in, etc..

    Now look at what happens when PayPal ‘freezes’ your account, for whatever reason. They don’t give the money back to anyone, THEY KEEP IT! And for as long as they have your ‘frozen’ money, They are honestly free to do whatever they want with it!.. They could use it to make short-term investments, anything really, as long as they give it back to the rightful owner eventually. There is no statement in PayPal’s legal documents constricting them to NOT USE peopl’s money when accounts are frozen.

    Paypal is so fucking crooked it makes me sick.

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