Hoverboards are the two-wheeled, self-balancing boards that are the hottest ticket this Christmas. But entrepreneurs rushing to satisfy demand are finding themselves relentlessly targeted by fraudsters — sometimes scamming them out of hundreds of thousands of pounds.
BuzzFeed News has published a report on the spate of scams, based on documents apparently leaked from payment processor Stripe.
Sellers are reportedly getting huge numbers of “chargebacks” — disputes over payments from cardholders. These typically happen because a card has been stolen and used by the thief (or sold by the thief to someone else to use); the owner of the card then notices it has been used by someone else to buy products without their knowledge, and disputes it with their credit card company.
The average number of chargebacks on Stripe is reportedly just 1% — but for some hoverboard merchants, this is jumping to 75%. To put that another way: Three in four hoverboards sold by some sellers are being bought by fraudsters using stolen credit cards.
American rapper Soulja Boy is one high-profile victim of this trend. He has a side business in selling hoverboards online, and uses Stripe to process payments. At one point, he reportedly had a negative balance of nearly $175,000 (£115,00). “The vast majority of your negative balance is due to fraud,” support staff at Stripe reportedly told him.
IO Hawk, another hoverboard vendor, reportedly had a Stripe balance $900,000 (£593,000) in the red — “one of our largest losses ever,” one internal Stripe document says. “Merchant was not suited to run a business of this size and with such a risky product.”
It’s yet more bad news for the hoverboard industry. In October, the Metropolitan Police said that under existing legislation, the boards are illegal to use in public in London.
And cheap knock-off are frequently catching fire and exploding — causing considerable damage and injuries.