How Do Scammers / Money Launderers Profit From Loans To Victims
"What was the true reason they wanted to use my accounts for? We wouldn't know the true reason. The scammer can do multiple things. What exactly he would do in your case ... I am very eager to know what a person was up to who would give to me so much information about themselves. I know some of you will jump on the chance to yell ""it was not their true address"", but.... it is where they wanted me to send the cards to. And I was to give proof of my identification ie; a copy of my drivers license, my articles of incorporation and the real estate development project prospectus. Also they were only willing to work with certain banks ie; Citibank, Bank of America etc. I can not understand what they were doing wanting such access to accounts that had no money in them save the amount I used to open them with. It looks more like they would open accounts under your name, but they would be controlling the accounts. i.e. what goes in and out. i.e. they would be able to deposit and withdraw from a new account they set-up. They would want to use this account for illegal activities, so that if caught, the account opening paper trail leads to you. Even if they gave you an address, it could be rental. Like they have copies of your Company registration and ID proofs, they can use these to get another rental property ... and then send letters to some and ask them to met there." If they have your account numbers (which are necessary for direct deposits) they could possibly initiate ACH withdrawals from your accounts too (requires some setup but they may have accomplices). Note that even if you didn't have money there, depending on the local bank rules you may be still on the hook for overdrafts they create, at least by default. You may be able to prove later that this was fraud but the burden of proof will be on you, and in the meantime they might be gone with the money.   They could use your documents to either establish other accounts in your name (identity theft) or take over your accounts (e.g. by contacting customer service of the bank and claiming to be you, and presenting the documents you sent as a proof), request credits under your identity (possibly using the money on the account as a collateral since the bank may not know where the money is from), etc. This is even easier given you will give them all the documents and information needed for a loan, your signature, etc.  And the fact that they ask you to send documents to a specific address doesn't mean they could be found at that address when the problems start - it may be rented short-term, belong to either knowing or unknowing accomplice, be a forwarding service, etc. Could be money laundering of course too. That's just what comes to mind after a short while thinking about it.
I'd imagine it is the same for an adult. The money probably gets withdrawn and that's it.  However, if the scammer were to go to a branch in person, I'd imagine there would need to be some sort of photo identification to withdraw money. If it were online, then the scammer would also need the account holder's username and password.  Either way, chances are that once the money is gone, it's gone - unless the scammer can be found. Even then, the scammer might not have that money anymore. In many countries it is a legal requirement or in some other way mandatory for the banks to ban the owner(s) of an account to allow a third party to use the account. In some countries if you willing give someone access in this way you get no compensation what so ever and you'll be lucky if they catch the crooks and even luckier if you get any of your money back. Don't forget the possibility of jail time due to the criminal activities going on under your name. Ok, few things to understand first: Secondly, think about the way a scam usually flows. A person (scammer) with an actual bank account with money issues a valid cashiers check, trick someone else (victim) into receiving it (typically in exchange for a percent) and passing along a portion to another account (back to the scammer). The scammer then reports the first transaction as fraudulent and the bank takes back that transaction. Now the victim is stuck with the second transaction, and without the funds from the first. Meanwhile the scammer has both the original funds and the percentage from the second one. In a way they're attractive for scammers because they're so trusted. To short a stock you actually borrow shares and sell them. The shorter gets the money from selling immediately, and pays interest for the share he borrows until he covers the short. The amount of interest varies depending on the stock. It's typically under 1% a year for large cap stocks, but can be 20% or more for small, illiquid, or heavily shorted stocks. In this scam only a few people own the shares that are lent to shorters, so they essentially have a monopoly and can set really high borrow costs. The shorter probably assumes that a pump-and-dump will crash quickly, so wouldn't mind paying a high borrow cost. "Not entirely. For a creditor to go after the ""parent company"" in one of these cases requires the courts to be willing to ""pierce the corporate veil"" (in legal parlance). Typically this is only done if the parent company set up the wholly-owned-subsidiary in order to perpetrate a fraud. In this case, the subsidiary has a totally legitimate function - to sequester risk.  While you're right that the parent company may have to offer some form of credit guarantees to get the subsidiary to get a loan, often those guarantees still don't create nearly as much exposure for the parent company." Unless I am missing something subtle, nothing happens to the buyer. Suppose Alice wants to sell short 1000 shares of XYZ at $5.  She borrows the shares from Bob and sells them to Charlie.  Now Charlie actually owns the shares; they are in his account. If the stock later goes up to $10, Charlie is happy; he could sell the shares he now owns, and make a $5000 profit. Alice still has the $5000 she received from her short sale, and she owes 1000 shares to Bob.  So she's effectively $5000 in debt.  If Bob calls in the loan, she'll have to try to come up with another $5000 to buy 1000 shares at $10 on the open market.   If she can't, well, that's between her and Bob.  Maybe she goes bankrupt and Bob has to write off a loss.   But none of this has any effect on Charlie!  He got the shares he paid for, and nobody's going to take them away from him.  He has no reason to care where they came from, or what sort of complicated transactions brought them into Alice's possession.  She had them, and she sold them to him, and that's the end of the story as far as he's concerned. "It all comes down to how the loan itself is structured and reported - the exact details of how they run the loan paperwork, and how/if they report the activity on the loan to one of the credit bureaus (and which one they report to).  It can go generally one of three ways: A) The loan company reports the status to a credit reporting agency on behalf of both the initiating borrower and the cosigner. In this scenario, both individuals get a new account on their credit report. Initially this will generally drop related credit scores somewhat (it's a ""hard pull"", new account with zero history, and increased debt), but over time this can have a positive effect on both people's credit rating. This is the typical scenario one might logically expect to be the norm, and it effects both parties credit just as if they were a sole signor for the loan. And as always, if the loan is not paid properly it will negatively effect both people's credit, and the owner of the loan can choose to come after either or both parties in whatever order they want. B) The loan company just runs the loan with one person, and only reports to a credit agency on one of you (probably the co-signor), leaving the other as just a backup. If you aren't paying close attention they may even arrange it where the initial party wanting to take the loan isn't even on most of the paperwork. This let the person trying to run the loan get something accepted that might not have been otherwise, or save some time, or was just an error. In this case it will have no effect on Person A's credit. We've had a number of question like this, and this isn't really a rare occurrence. Never assume people selling you things are necessarily accurate or honest - always verify. C) The loan company just doesn't report the loan at all to a credit agency, or does so incorrectly. They are under no obligation to report to credit agencies, it's strictly up to them. If you don't pay then they can report it as something ""in collections"". This isn't the typical way of doing business for most places, but some businesses still operate this way, including some places that advertise how doing business with them (paying them grossly inflated interest rates) will ""help build your credit"". Most advertising fraud goes unpunished. Note: Under all of the above scenarios, the loan can only effect the credit rating attached to the bureau it is reported to. If the loan is reported to Equifax, it will not help you with a TransUnion or Experian rating at all. Some loans report to multiple credit bureaus, but many don't bother, and credit bureaus don't automatically copy each other. It's important to remember that there isn't so much a thing as a singular ""consumer credit rating"", as there are ""consumer credit ratings"" - 3 of them, for most purposes, and they can vary widely depending on your reported histories. Also, if it is only a short-term loan of 3-6 months then it is unlikely to have a powerful impact on anyone's credit rating. Credit scores are formulas calibrated to care about long-term behavior, where 3 years of perfect credit history is still considered a short period of time and you will be deemed to have a significant risk of default without more data. So don't expect to qualify for a prime-rate mortgage because of a car loan that was paid off in a few months; it might be enough to give you a score if you don't have one, but don't expect much more. As always, please remember that taking out a loan just to improve credit is almost always a terrible idea. Unless you have a very specific reason with a carefully researched and well-vetted plan that means that it's very important you build credit in this specific way, you should generally focus on establishing credit in ways that don't actually cost you any money at all. Look for no fee credit cards that you pay in full each month, even if you have to start with credit-building secured card plans, and switch to cash-value no-fee rewards cards for a 1-3% if you operate your financial life in a way that this doesn't end up manipulating your purchasing decisions to cost you money. Words to the wise: ""Don't let the credit score tail wag the personal financial dog!""" "Some of it is very simple but almost all of it is very non-intuitive. Imagine that Donald Trump owns a lot of property that is valued at $1bn. So he puts that up as collateral to buy some gold worth $2bn dollars. A little while later the banks discover that the properties are only worth $100mm.   In this case $900mm has suddenly disappeared and moreover the banks are in deep shit because the Donald owes them $2bn and has posted collateral worth $100mm.   When they try to rough up Donald he tells them that instead if they go along with his ponzi scheme they might be able to sell his new $2bn property to someone else for $4bn, this way the banks will get their money bank and Donald will make a nice little profit. So the banks lend him some more money.   This scheme only works until people start refusing to buy these properties at Donald's prices. This is a nutshell what has happened. Property prices were much higher than they should have been and Banks had derivatives which weren't worth as much as they claimed. When the market/people wised up to this fact the prices came crashing down and money ""disappeared""." "The ""just accounting"" is how money market works these days. Lets look at this simplified example: The bank creates an asset - loan in the amount of X, secured by a house worth 1.25*X (assuming 20% downpayment). The bank also creates a liability in the amount of X to its depositors, because the money lent was the money first deposited into the bank by someone else (or borrowed by the bank from the Federal Reserve(*), which is, again, a liability). That liability is not secured. Now the person defaults on the loan in the amount of X, but at that time the prices dropped, and the house is now worth 0.8*X. The bank forecloses, sells the house, recovers 80% of the loan, and removes the asset of the loan, creating an asset of cash in the value of 0.8*X. But the liability in the amount of X didn't go anywhere. Bank still has to repay the X amount of money back to its depositors/Feds. The difference? 20% of X in our scenario - that's the bank's loss. (*) Federal Reserve is the US equivalent of a central bank." This is either laundering money or laundering non-money.  All the other answers point out how a cheque or bank transfer will take days to actually clear.  That is a red herring! There are lots of ways to illegally transfer real money out of existing accounts.  Stolen cheque books, stolen banking details (partly in connection with stolen smartphones and credit cards) and cards, money transfers from other people duped in a similar manner as you are: it is much easier to steal money than invent it, and it takes quite longer until stolen rather than invented money will blow up at the banks. All of those payments will likely properly clear but not leave you in actual legal possession of money.  People will notice the missing money and notify police and banks and you will be on the hook for paying back all of it. Cheques and transfers from non-existing accounts, in contrast, tend to blow up very fast and thus are less viable for this kind of scam as the time window for operating the scam is rather small. Whether or not the cheque actually clears is about as relevant of whether or not the Rolls Royce you are buying for $500 because the owner has an ingrown toe nail and cannot press down the accelerator any more has four wheels. Better hope for the Rolls to be imaginary because then you'll only be out of $500 and that's the end of it.  If it is real, your trouble is only starting. "(Disclosure - PeerStreet was at FinCon, a financial blogger conference I attended last month. I had the chance to briefly meet a couple people from this company. Also, I recognize a number of the names of their financial backers. This doesn't guarantee anything, of course, except the people behind the scenes are no slackers.) The same way Prosper and Lending Club have created a market for personal loans, this is a company that offers real estate loans.  The ""too good to be true"" aspect is what I'll try to address. I've disclosed in other answers that I have my Real Estate license. Earlier this year, I sold a house that was financed with a ""Hard Money"" loan. Not a bank, but a group of investors. They charged the buyer 10%. Let me state - I represented the seller, and when I found out the terms of the loan, it would have been a breach of my own moral and legal responsibility to her to do anything to kill the deal. I felt sick for days after that sale.  There are many people with little credit history who are hard workers and have saved their 20% down. For PeerStreet, 25%. The same way there's a business, local to my area, that offered a 10% loan, PeerStreet is doing something similar but in a 'crowd sourced' way. It seems to me that since they show the duration as only 6-24 months, the buyer typically manages to refinance during that time. I'm guessing that these may be people who are selling their house, but have bad timing, i.e. they need to first close on the sale to qualify to buy the new home. Or simply need the time to get their regular loan approved.  (As a final side note - I recalled the 10% story in a social setting, and more than one person responded they'd have been happy to invest their money at 6%. I could have saved the buyer 4% and gotten someone else nearly 6% more than they get on their cash.)" "They're taking advantage of float.  Like so many things in the financial world today, this practice is a (strictly legal) fraud. When you make the transaction, the money is available immediately, for reasons that should be intuitively obvious to anyone who's ever used PayPal.  It doesn't take 3 minutes for the broker to get that money, let alone 3 days.  But if they can hold on to that money instead of turning it over to you, they can make money from it for themselves, putting money that rightfully belongs to you to work for them instead, earning interest on short-term loans, money market accounts, etc. The SEC mandates that this money must be turned over to you within 3 days so it should not surprise anyone that that's exactly how long the ""we have to wait for it to clear"" scam runs for.  Even if it doesn't seem like very much money per transaction, for a large brokerage with hundreds of thousands of clients, all the little bits add up very quickly.  This is why they feel no need to compete by offering better service: offering poor service is making them a lot of money that they would lose by offering better service." "Because the value of distressed assets is close to what they are selling for.   When you lend money, you know there is a risk of default.  You gamble on that risk, and you take the responsibility if you lose because the person taking the money can't pay.  People who buy distressed debt on the idea that they can make more money off of it are only able to do that in two ways:  not giving a shit what the impacts of wringing more money out create, figuring out a legal way to make someone else pay for it through ripple blackmail effects (other people also are impacted when a country can't function.)  If you back Klarman, you may say the point is you are ""teaching"" Puerto Rico and everyone else that they shouldn't take on debt they can't afford.   But when has that ever worked?  The pensioners who are bankrupt are the ones actually getting the pain of the lesson.  Another lesson could be to investors not to lend to people who can't pay them back.  The people lending the money are the ones who now don't have it because they made a bad choice.    Seth Klarman could also learn a lesson about taking on distressed debt being a non-lucrative pastime.  Or we can all learn a lesson that taking on distressed debt is very lucrative.  A big change America implemented was getting rid of debtor's prisons.  This looks a lot like getting excited about debtor's prison to me.  EDIT:  I should note I am thinking of the Algerian version of making a ton of money off of distressed national debt.  As opposed to making a bit more money off of distressed debt because you were willing to let the collapse figure itself out.  Though I'm not so sure about that either." I know this is broad, but this isn't a scam -- it's a   workshop/educational thing about teaching people of investing in the   real estate market, and how to profit The scam is that the free or cheap class doesn't give you enough info to make money; so they sell you a more advanced and expensive class that gets you almost enough info; but the goal of the 2nd class is to get you to pay for the specialized seminar and coaching sessions that either fail to materialize or  are so basic they aren't worth the money. For people who are good with money (presumably), Kiva.org gives your money to such people who apply for loans through social service organizations in various countries (I believe this is how it's done). The people state what they will use the money for. It can be as simple as 'buying provisions for food truck business' or 'replacing wheels on tractor.' Then they pay the money back and you (who donated x number of dollars) use that repaid money to make another loan.