How A Russian Syndicate Scammed Us For $25K

Share 20 Shares

“Buddy… we’ve been scammed.”

Words you do NOT want to hear from your business partner ten minutes before your weekly team meeting.

It’s hard to describe how getting scammed feels, but if you’re reading this and it’s happened to you, you’ll know exactly what I’m talking about. It’s one part feeling like you were punched in the gut, another part rage at the person that scammed you, with a dash of embarrassment at putting yourself in the position in the first place.

I immediately had questions:

How did this happen?

How bad is the damage?

How much did they actually take from us?

It was mid-February and all of these thoughts were running through my mind as we painfully dug through the details. I knew it was bad, but neither of us would understand the extent of the damage for several more days.

Let’s Back Up A Bit

To properly tell this story, I need to explain a little about how our business operates.

We run a marketplace for website buyers and sellers. In addition to the challenges that come with running a double-sided marketplace, we also operate in a niche industry that is ripe for fraud. Website sellers looking to pawn their value-less website onto others with fake earnings, trumped-up traffic, or fake/illegal products—these are the reasons we have chosen to vet our sellers and investigate their listings carefully.

On the other side, we have website buyers. While we’ve gone to great lengths to better understand and serve this side of the market, we spend much less time verifying their legitimacy. As long as they’re paying the money and it spends…

We’ve successfully completed more than 1,000 transactions. When starting out, most of those sales were in the 3-4 figure range, but we’ve recently been listing and selling websites into the 5-6 figures.

Even though we’d successfully taken credit cards and Paypal transactions for the 3-4 figure sites, we knew we’d have to open up other payment methods. We set the bar at $20K. With sites under $20K we’d still accept credit cards and Paypal, but sites over $20K would require a bank wire.

We knew there were risks taking credit cards and Paypal. Buyers could reverse the charges and, if we’d already paid out the seller, leave us holding the bag. But we figured the ease of use with our customers by allowing credit cards and Paypal was worth it. With more than 1,000 transactions and only one chargeback via Paypal from a disgruntled buyer (we won the dispute), we didn’t consider this a major risk.

What could go wrong?

Uncovering The Scam

After the sale was complete, and through the transfer process for listing #40118, there was a bit of disruption between the buyer and seller. This was a very small eCommerce site valued at just over $2K. The seller, a good personal friend of ours named Brendan, had mentioned that the new buyer seemed a bit dodgy and was “not responding like a sane person.”

It wasn’t totally unusual, though, for a buyer and seller to have a few hiccups during migration. In reviewing the tickets our team was on it and, for the most part, everything seemed to be moving along.

In late December, Brendan reached out to me again with some concerns. He said the buyer was using various email addresses and claimed to be in Canada, but there were some clear signs (to him) that this person was in Russia. He was concerned about a Paypal chargeback and being on the hook for that. Seeing as this almost never happened with us and it was such a small site, I told Brendan that there really wasn’t anything to worry about. We’d be on the hook should there be a problem as we’d already paid him, so he shouldn’t worry. Once we’ve paid out the seller the deal’s done on our side – we won’t be getting that money back.

January 19th we had another purchase, but nothing was particularly strange about the transaction at the time. This one was nearly $8.4K for listing #40142. We did notice that this was an out-of-the-blue purchase from someone we’d never communicated with before, but that wasn’t completely unheard of for sites under $20K.

February 1st we had a third purchase—this time for nearly $15K with listing #40138. Again, nothing out of the ordinary, although I do remember some odd communication with 1-5 word replies, incomplete sentences, etc.

Four days later, on February 5th, we received a chargeback for the first purchase. While it was a small purchase, Joe jumped into action by contacting the buyer to see what was wrong, while also collecting documentation to help us win the chargeback. Worst case scenario (we figured), the buyer had cold feet and we could take the site back and then refund the money. We’d hold the site for a few months ourselves and then put it back up for sale again to recollect our losses.

In Joe’s research, he’d acquired plenty of proof to show the site had been transferred and received on the buyer’s end, but he also noticed some peculiarities. In addition to the strangeness Brendan had described, he realized that the communication was eerily familiar between the buyers for listings #40118, #40142, and #40138. It seemed very likely that all three buyers (using different names, email addresses, etc.) were likely the same person.

We needed more, though, and spent the next two hours seeing if we could find something… anything that would tie these purchases together. It wouldn’t necessarily have to hold up in court, but we wanted to at least be reasonably sure we were onto something and not heading into some black hole with our witch hunt.

All of the research at this point was external. We were looking at email addresses, user names, phone numbers, social accounts, etc.

We found some connections:

All three buyers had some ties to Russia All three had connections to the name “Vladislav” All three had used credit cards from women in Canada

In any event, it was clear we were scammed… now we had to figure out what to do about it.

We’re In Damage Control

After our digging into the details the previous night and the subsequent morning, we met up for lunch to share our findings and figure out what we were going to do about it. There were a few questions we had to answer first.

How deep does this rabbit hole go?

Had this been happening for months? Years? We assumed the credit cards were stolen, but how many other deals had gone through under similar circumstances?

We immediately had our team dig through all of our deals in recent months. The three deals we’d already uncovered were clear, as were the connections. We told our team to look through all credit card/Paypal purchase that had any of the following:

Canadian credit card used

Any connections to Russia

Short, 1-5 word replies or incomplete sentences

It turns out there was a fourth purchase attempted the previous day, which we immediately refunded and reversed.

How do we keep this from happening again?

The best and safest option would be to simply remove the ability to purchase sites via credit card or Paypal and require wire transfers for every purchase. This would end the stolen credit card purchases and keep us sleeping easy at night.

Our worry, though, was that this might make the process significantly harder for our customers (the 99% that were legitimate had done nothing wrong, and are looking to do business.) Why should we punish them?

So we looked at other routes we could take. These included:

1. Using an escrow service.

This is the route some brokers take, using a 3rd party to facilitate the transaction between the buyer and seller. This wouldn’t have protected us on one of the deals, but would have on the other two. The thing is… it’s not “escrow” that would have protected us—it’s simply their option to only take wire transfers for the larger deals. We have the same option without having to inject a 3rd party that doesn’t understand our industry.

2. Increasing credit card security levels.

Our merchant account lets us loosen or tighten the security levels required to determine whether the card can go through. These levels were already set pretty high, but we could increase them even further. In reviewing this option, we saw that most of these transactions still would have happened, and we’d probably have more declines and issues with our “real” customers.

3. Chargeback and credit card insurance.

There are companies out there that offer services and will actually allow you to insure against this type of thing. We looked into it, but realized this was primarily built for eCommerce companies shipping physical goods in the $50 – $500 range. The premiums we’d have to pay would significantly cut into our (smaller) margins on every transaction, and not be worth it for us.

4. Requiring the buyer to hold up a picture ID along with the credit card.

This was my idea and, although it sounds a little crazy, hear me out! If our problem lies in scammers using stolen credit cards, having a picture of the person holding both the card and an ID makes it much, much less likely the scammer will get away with it. Unfortunately, though, this still makes the process a bit more difficult (and awkward) than just sending a wire.

We realized that any short-term hack or fix wouldn’t solve the underlying problem. Also, because we knew we’d be talking about this publicly, we needed to put something in place that would work beyond this particular scammer’s methodology.

Ultimately, we decided to go with our original instinct, and shut down all credit card and Paypal purchases publicly.

We are still able to take deposits, though. When a depositor decides to purchase a site, we end up refunding the deposit back to the credit card or Paypal account and requiring the total purchase price to be wired to us. That way, one hundred percent of the deposits coming in actually end up being refunded to the original depositor, leaving no chance for fraud.

What are the next steps to dealing with the scammers?

As this was happening across international borders, we figured our options were pretty limited. With only $25K at stake, there’s probably not enough to recover.

Still—the thought of paying a blood-sucking lawyer $25K with a guarantee that the scammers would get nothing was a pleasant thought, even if it was fantasy.

We knew we should at least explore our options, so Joe was tasked with reaching out to our connections to find a Uniform Domain Name Dispute Resolution (UDRP) attorney. We ended up with Eric Misterovich at RevisionLegal.com, who was really helpful in walking us through the process. It was a $2,500 retainer that we considered well spent.

Eric explained our options, including trying to get the domains back from GoDaddy, having the sites shut down, having the sellers return the money, and even fighting the chargebacks. While we would have happily fought the chargebacks if they were from the actual buyers, going after other victims (those who had their credit cards stolen) or our customers (the sellers who had already been paid out) wasn’t an option. It did open us up to the possibility, though, that SELLERS could have been involved in the scam. Just another reason to switch over to wire transfers only.

We also had to ask ourselves what the scammers really wanted here. Were they looking for website assets they could maintain and grow? Probably not. Instead, our guess was that they wanted to sell these sites as quickly as possible to cash in on them quickly.

Sure enough, we saw the sites for sale on Flippa (and Digital Point) a few days later. Since these companies don’t look at how recently a new site was bought/sold, and only require them to prove they have control, of course the sites were easily listed. We immediately reached out to Flippa and, to their credit, they reacted swiftly by removing the auction and banning the user.

Note: I really think there would be value in having a blacklist in our industry. Most brokers and marketplaces have them internally, but I’d really like to see something we could use industry-wide.

And, finally… The nuclear option.

If, for whatever reason, we’re not able to recover the domains, we’re going to blast these sites to kingdom come. We thought, at the very least, it might make a great case study on the effects of purposeful, negative SEO campaigns and might make for some great content or a case study, heh.

Keep in mind, all of this was going down in February, which, as you can see from our monthly report, was our WORST month in business to date. Not only did we have a horrible month, we’d also been scammed out of $25K which, by this point, had all been charged back by the actual credit card holders—the other victims here.

The Empire Flippers Strike Back

We felt like we’d acted rationally by assessing the damage, stopping the bleeding, and discussing our options, but now we wanted to do something about it.

And, if I’m being honest… illegal acts and thoughts of violence, while never seriously considered, were hanging just outside our conversations.

To start, we wanted to see if we could pinpoint exactly who the scammers were. Sure, we had a pretty good idea they were linked and were reasonably certain about their MO, but could we find out their names and who they are, specifically?

Time for some deep-diving, password hacking, and advanced Google-Fu.

Who the hell are these guys?

The good news is that these scammers weren’t very smart. There were some emails shared during that first two transactions: smolensev@gmail.com and smolensev2@gmail.com.

Using the assumed account name, “smolensev”, we were able to find out quite a bit about our scammers.

Introducing Our Scammers: Vladislav Smolentsev & Alexandr Smolentsev

The main scammer’s on the left. His name is Vladislav Smolensev and it turns out he likes to brag about his escapades on Instagram.

He really digs, selfies:

Lots and lots of selfies:

That’s not all, though. Because we helped with the website migration, we also had one of his passwords. As it turns out, he likes to use this password for his email address and other accounts as well.

We ended up with access to multiple private email accounts, one of his registrar accounts (NameCheap), his eBay account, SitePoint account and more.

We found out there was another scammer – his brother, Alexandr Smolentsev.

Vladislav Smolensev was trying to get his brother a Payoneer account and had to use his real ID:

It turns out that Vladislav Smolentsev considers himself quite the traveler. (And wishes he knew Dan Bilzerian)

He enjoyed Songkran in Chiang Mai:

And likes to fart around with his buddy on a kayak near Koh Samui:

He’s also recently decided to apply for a US tourist Visa:

We even got a physical address and phone number:

Vladislav & Alexandr Smolensev

Pushkinskaya st. 283

Izhevsk, Udmurt Republic 426000

+79127440410

If anyone else has any information on these scammers, please feel free to dig in further or shoot us an email. Here’s some additional information we’re happy to share:

Username: smolentsev, smolensev, or smolentcev

Password: St516bg9

Known Emails:

satana740@gmail.com

smolensev@gmail.com

smolensev2@gmail.com

dayrusgate@gmail.com

mobilebirds@outlook.com

iramarka12@gmail.com

IP address used from Gmail: 92.39.221.142

http://instagram.com/smolensev/

Is their last name Smolensev, Smolentcev, or Smolentsev?

It’s hard to say. The brother’s name is listed as Alekandr Smolentsev on the ID, but Smolentcev on the Payoneer card. It’s Vladislav Smolensev on his Instagram and other social media accounts, but uses Smolentcev on his FB account.

In any event, we’re 100% positive we’ve got the right guys, it may just be that their last name doesn’t translate well or that they’re scammers and are happy to swap out names, interchangeably.

It anyone would like to dig into this further, we’d appreciate it and you can feel free to leave more details in the comments – we’d be interested to see what you come up with!

The Legal Road Ends

Throughout March and while all of this research was going on, our attorney was going through everything, step-by-step, and coming up empty. GoDaddy wasn’t very helpful and didn’t want to get involved, the scammers themselves never responded to our attorney’s inquiries, and we were down to our last couple options.

Option 1: Litigation

Our attorney mentioned we could fight this in a US court and, with a court order, might be able to get the domains back. It wouldn’t be a quick or cheap process. We were looking at (at least) $15K in legal fees and only the possibility of getting the sites back. Our attorney didn’t advise this approach, realizing it probably wouldn’t be worth it.

Option 2: Shut The Sites Down

We could submit a DMCA takedown request via GoDaddy and Media Temple. Starting with a broad request to see if that works, and then lay out the details if we get any pushback from the companies.

This seemed the more reasonable of the two options, so Joe gave the go-ahead to our attorney to start the process.

Justin & Joe Get A Happy Ending

This is where it gets weird.

Okay, not THAT kind of weird… but there were a remarkable set of circumstances that played out that I have to share.

Before I do, I should point out that we’re big believers in transparency when it comes to business. That’s one of the reasons we write our monthly business reports, talk openly about our lawsuit in the Philippines, and write posts like this one.

In fact, a good friend of ours who questions the transparent approach and knows the story asked us (over beers), “Okay, you guys are into transparency and all, but are you REALLY going to talk about this situation publicly?”

Our answer? Of course! These are exactly the type of situations where being open and honest has real value. There are enough blog posts with advice given from those who’ve never tried/implemented their suggestions, provide vagaries, and platitudes, etc. If we can share an actual business issue (even if it’s painful) that can solve another’s problem, we consider that a win.

We’ve gone through our reasoning on why transparency is valuable in podcast episodes and blog posts, but what happens next is, I think, an acute example of the random, hard-to-quantify cases where this is valuable in our business.

After briefly foreshadowing these circumstances in our March monthly report, Nate Kay from New-Startups.com reached out to us asking more details about the specific sites for listing #40142 and #40138.

Remember how we contacted Flippa and they removed the listing for these sites right away? It turns out that Nate was one of the early bidders on that auction!

While Flippa shut the listing down, it was up long enough to get a few bids and the seller was still able to reach out to the previous bidders and see if they’d be willing to purchase the sites anyway.

Nate ended up buying both sites for only $5,000—amazing value, considering they were fraudulently purchased from us for nearly $23K!

I have to give a ton of credit to Nate, not only for reaching out initially, but also for immediately offering to transfer the sites back to us. Not wanting to leave yet another victim and him out $5K, Joe offered to pay him back his payments out of the proceeds of the sale at Empire Flippers in a few months.

We immediately contacted the attorney to reverse the DMCA takedown requests.

If it all works out, that would leave us initially down $25K, but able to recover $20K of that due to our transparency, reach, and Nate’s graciousness.

I considered using the title, “How Transparency Saved Us $20K” for this article, but we’re still not exactly sure how it will play out. Hell, after keeping the sites for a few months, we may even cover Nate’s losses and MAKE money if the sites continue to increase in earnings. I’ll make sure to come back here with an update when we do end up selling the sites.

Wrapping It Up

If you’re looking for a tl;dr, this is it. We were scammed by Vladislav Smolensev and Aleksandr Smolensev out of Russia using stolen credit cards from women in Canada. When the real credit card owners charged back, we were left holding the bag. After uncovering the damage, stopping the bleeding, and reviewing our options, we went to work uncovering exactly how this went down.

Luckily, one of our readers ended up purchasing the sites from the scammers (not knowing they were stolen) and gave them back to us to sell and recoup our losses.

I’m not sure exactly the lessons learned here. This is all still pretty raw, even though we’re excited to have recovered the sites in April.

I’ll give it a shot, though:

1. Listen to your customers—especially when they’re trying to help you.

I’ve apologized privately to Brendan, but I should do it publicly, too. I essentially blew him off when he was talking about his communication issues with the buyer. He was a first-time seller and I’d dealt with “that” before. It’s common for first-time sellers to get a little jittery towards the end.

However, if I had dug into the issue right then and there, we might have saved ourselves a considerable amount of hassle and caught the other two deals before they were completed. Really stupid of me…

2. Be cautious taking credit cards or Paypal, especially if you’re selling high-ticket items.

This is doubly true when you’re dealing with low margins. This is a common topic of discussion in the eCommerce world and pops up often with those using stolen credit cards and trying to ship to an address not attached to that credit card. For more reading on this, check out:

10 Tips On Preventing Credit Card Fraud

When A Big Ecommerce Order Is Likely A Scam

Scams And Fraud In Dropshipping

3. Amazing things happen when you are transparent in your business.

This is more of a reinforcement of something we already know, but I truly believe there’s no way we would have recovered these sites if we hadn’t mentioned it publicly. How could we? The fact that we’ve been so public about our failures and successes has offered us an awfully wide audience in our niche which, in turn, is the only reason Nate knew about us and had read our blog. The fact that he so readily and willingly offered the sites back to us shows how much he trusts and respects us. Amazing…

So—what do you think about all of this? Anything you learned here that will help your business? Have you dealt with credit card scammers before? Let us know in the comments!

And if you liked this article, please share on Twitter, Facebook, Reddit, or any other places you hang out on the internets.

As always, you can find all of our current websites for sale on the marketplace. Just don’t plan on paying for them with credit cards or Paypal.

We’re not falling for that again!