Seller Beware!

A Timely and True Yacht Scam Story

By M. Glenn Curran, III, Esquire, and Jim Brown

“Hey, we got a good buyer for that yacht!”  Have you received an offer to purchase your yacht that seems a little “too good to be true”?  Please be aware that there is a new scam – actually a variation on an old scam – that is making the rounds in yacht sales.  We at Lighthouse Yachts^®  have been seeing an increase in yacht scams – even targeting knowledgeable yacht brokers!  Think you are too smart to get tricked?  Let us tell you a real-life story:[1]

We received a normal inquiry on a yacht that had been listed with us for sale for several months.  There was the usual amount and nature of questions, requests for more pictures, and the like.  Afterwards, what seemed like typical sale negotiations took place between the buyer and the seller.  Eventually a good price was agreed upon – not even a great price or anything that was facially “too good to be true.”

Because the buyer was from out of the country, there would be additional monies necessary to complete the sale beyond just the purchase price (e.g., surveys, captain’s fees, transportation to buyer’s location, et cetera).  A cashier’s check was being sent to cover the purchase price plus an additional $20,000 for these expected additional expenses.

Sound pretty good so far?  Would you deposit the cashier’s check in your brokerage trust account?  (Being aware of these scams, we did not.)  If you would have, though, then here is what could have happened to you:

A Seemingly Normal Transaction.  You deposit the check in your trust account.  Being the savvy broker that you are, you wait a few days until it “clears” and the bank releases the funds.  The buyer then advises you that his business associate in the United States will handle the transportation of the vessel and all the remaining work to be done (maybe some interior design modifications or additional equipment).  You are instructed to send the additional $20,000 to this third person.  Because your cashier’s check cleared your bank and you’re still holding the rest of the funds, you write a check on your account to this other person.

Then there is an unexpected delay in closing the transaction (captain, surveyor, buyer, or his wife gets sick, has travel problems, whatever) for a week or more.  No problem, you think, you’ve still got the full purchase price in your account and the yacht.

Then, a week or more later, your bank is advised by the issuing bank that the “cashier’s check” was a forgery!  Your bank deducts the full amount from your trust account (and possibly your other accounts with the bank if necessary to cover the debt, depending upon your banking agreement).  The buyer?  He’s gone like ether on a hot night – along with his “agent” that has your $20k.  The yacht?  It is probably still there because he never wanted the yacht in the first place (though some variations on this scam also take off with the vessel).

The Scam Itself.  Most versions of this scheme seem to originate in Africa, and more specifically, Nigeria.  The same scam is appearing everywhere, however, including right in the United States.  They all, however, prey upon the cashier’s check device.  This is due to what some see as a little-known quirk in the law that allows your bank to release funds after a few days while retaining the ability to charge-back if the issuing bank does not honor the forged check – which might take weeks.  Note that the check is not always on a foreign bank:  Sometimes it is on a US bank, and often times it is a “washed” forged check.

Sure, you would have preferred a wire transfer, but the buyer had such “good reasons” for using the cashier’s check:  (1) currency exchange rates, (2) some person who works for the buyer accidentally wrote the check for too much, or (3) just plain anticipated expenses such as transportation.  We even heard from one “buyer” that he wanted to use a cashier’s check because his bank charged too much for issuing a wire transfer.  (That excuse died a sudden death when we asked how much this wire transfer charge was and suggested that we would absorb his bank’s wire transfer fees in order to facilitate the sale!)

The scam is not limited to yachts.  In fact, it seems to have started with motorcycles, cars, and horses for lesser amounts.  (The first time we heard of it was with a friend’s airboat here in Fort Lauderdale.)

How to protect yourself:  One word:  Cash.  Not feasible for that 100+ foot Feadship you’ve been trying to unload?  Okay, then, two words:  Wire transfer.  Still concerned?  Talk to your banking officer about how to protect yourself for the specific transaction.  We did, and we learned that even if we had waited for the cashier’s check to clear the issuing bank before we disbursed, banks really hate these transactions and we would likely have our accounts closed down!  Yikes!  (Did we mention that banks really hate these transactions?)

Should you notify some governmental authority?  You could, and we did, but frankly, it became clear that law enforcement was inundated with these scams and probably couldn’t do anything to help us anyhow.  (Still want to talk to someone? You can contact your local United States Secret Service Field Office:  http://www.secretservice.gov/field_offices.shtml.)

We hope you sell your yacht – and get a great price as well – but we hope you are careful too.  So Sellers (and seller’s brokers!) Beware!

M. Glenn Curran, III, Esquire, is a practicing attorney in Fort Lauderdale, Florida, and the President of LighthouseYachts.com.  Jim Brown, the Vice President of LighthouseYachts.com is one of Florida’s earliest licensed yacht brokers (bearing license number 117!) and has over forty-four years in the marine industry.  If you have had a similar experience, please let them know.  They can be reached at sales1@lighthouseyachts.com.  © 2003 Lighthouse Yachts.