Micropayment Scam

by john on May 28, 2008

Have you ever opened a brokerage account or other account that linked to your bank account? To verify things are setup correctly you will often need to wait until two small micropayments have been deposited, then you use your knowledge of the amount to prove you are the owner of the account.

I’ve always been surprised to see that upon verification those micropayments are not withdrawn – I guess it’s part of the cost of doing business. It never even occured to me that those micropayments could add up.

Apparently it did occur to one gentleman, according to this story in Wired:

Michael Largent, of Plumas Lake, California, allegedly exploited a loophole in a common procedure both companies follow when a customer links his brokerage account to a bank account for the first time. To verify that the account number and routing information is correct, the brokerages automatically send small “micro-deposits” of between two cents to one dollar to the account, and ask the customer to verify that they’ve received it.

Largent allegedly used an automated script to open 58,000 online brokerage accounts, linking each of them to a handful of online bank accounts, and accumulating thousands of dollars in micro-deposits.

Genius, but of course illegal – four counts each of computer fraud, wire fraud and mail fraud.

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