A couple from Massachusetts, who wanted to build the swimming pool of their dreams, became victims of a scam online perpetrated by unknown parties. Devin Friedman reported this pool scam to Business Insider. He initially imagined transforming his backyard with a beautiful pool into an oasis. The journey, however, took a distressing and unexpected turn which ultimately cost him a lot.
In April 2020, the Friedmans had signed a contract for pool construction with Gary Kruglitz who was purportedly the owner of Royal Palace Pools and Spas. Their plans were halted by pandemic-induced delays, and then frozen ground during the off-season. Friedman called Kruglitz in 2021 to ask to be the first to get in line when the ground thawed. Kruglitz promised to try and Friedman took it as a promise.
Unanswered calls in April and may. The Friedmans became anxious. The Friedmans let it be known that they had been promised to be the first to build a swimming pool in spring, but could not get hold of Kruglitz. After expressing their dissatisfaction via email, the Friedmans received a reply on July 5 from Kruglitz who stated that he would finally begin construction of their pool. What’s the catch? As stipulated in the contract, a payment of more than $30,000 was required to begin construction. Kruglitz, who was navigating closed branches of banks due to COVID-19 and advised incremental transfers because of daily limits, suggested Zelle to make transactions.
The Friedmans, eager to start their pool project, followed this advice and sent Zelles of $3,500, $3,500, $5,500, and another $5,000, on the sixth, seventh, eighth, and ninth days. Kruglitz became more responsive as money was paid. They asked him if he was in possession of all the materials required to build the swimming pool. He replied that he had most of the materials needed to build a pool. He was asked if construction could start the following week. He said he would. Friedmans did not notice that the emails were odd, but Kruglitz used bad grammar and sent short responses.
After making several large payments, the Friedmans finally requested a receipt from Royal Palace Pools and Spas for the $23,000 they sent. They received what looked to be an official invoice.
The anticipated start date of July 13 arrived with great hope. Kruglitz sent an email claiming that he and his team were on their way early the next morning. The hours passed but the construction crew did not appear. The Friedmans were concerned and called Royal Palace Pools & Spas. They left messages for Kruglitz.
Kruglitz was confused when he finally returned the call. He said he had not received an email from Friedmans for weeks. Kruglitz asked Kruglitz, who stormed into Kruglitz’s office, a simple but probing question: “What is a Zelle?”. It was only then that it became clear that he had never sent them an email or asked them to send him money directly. Instead, they unknowingly transferred $30,500 to strangers.
What Happened
How did the pool scam occur? Evan Kohlmann, a cyber-intelligence expert, believes that Kruglitz’s emails were likely compromised by phishing and the purchase of stolen credentials on the dark internet. Infiltrating Kruglitz’s correspondence, the scammers orchestrated fraudulent transactions.
The scam was carried out in a very sinister way. Hackers chose Kruglitz and may have obtained his password via hacking or phishing. They could also have purchased it on the dark net. They then accessed Kruglitz’s emails to see what customers had written, and used this information to ask for money.
Friedman admitted that their eagerness to achieve their pool dream led them into a pitfall. When Kruglitz instructed them to “Zelle him,” to two email addresses –[email protected] and [email protected]. Unwittingly, the Friedmans were blinded by their enthusiasm and complied with this unusual instruction.
The Friedmans had never heard of–Zelle. The peer to peer app Zelle allows instantaneous transfers of money between people who only know each other through a phone number or email address.
To distance themselves from the scam, the scammers enlisted intermediaries–unwitting participants in various scams. These intermediaries acted as conduits to the money. All likelihood, the funds were converted to cryptocurrency or gift cards, before being resold at a discounted price for cryptocurrency on the darkweb.
Sen. Elizabeth Warren, who is often at odds against the financial industry and has a history of being opposed to it, has called for a closer look at Zelle because frauds are so common. US Bank, one of the consortium members, reported 45,000 Zelle scams last year.
The Friedmans were only able to recover $278 despite their best efforts. Unfazed, the couple continued to save for another two years and finally realized their dream of having a pool in their backyard. Ironically, Kruglitz was the seller. The Friedmans chose to use a check this time, which is a more traditional way of protecting their money.
Source: The Great Zelle Pool Scam. All I wanted was to have a status sign. What I got instead was a $31,000 lesson on the downsides of payment apps.
Avoiding Pool Scams
To avoid scams, contractors should be paid for their services in a secure and thoughtful manner. Here are some tips that anyone purchasing a pool or the Friedmans should follow in order to protect themselves from scams.
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Verify Credentials and Research:
Do thorough research on the contractor before you sign a contract. Verify credentials, licenses and reputation. Ask for references and check online reviews. Verify that the contractor operates from a physical address or office and not only online. -
Get A Written Contract:
Insist on a written contract detailing the scope of work and describing timelines, materials and costs. Before signing, make sure both parties have read and understood the contract. -
Check for insurance and bonding:
Verify that the contractor is insured and bonded. You are protected in the event of an accident or damage during construction. -
Establish a Payment Schedule:
Create a clear schedule for payments based on the project milestones. Paying the entire amount up front is not recommended. A deposit is usually paid upfront, and subsequent payments are tied to the progress of the project. -
Use secure payment methods:
Consider using safe payment methods, such as bank transfers or checks. These methods leave a paper record and provide an extra layer of security. -
Beware Unusual Payment Requests
Be wary if the contractor insists that payment be made immediately and in large amounts, or if they request unconventional methods of payment. Verify changes to payment methods and amounts with the contractor. -
Confirm contact information:
Verify that all contact information, such as phone numbers and address, provided by the contractor is accurate. Scammers can use fake information in order to make it difficult to track them down. -
Be aware of common scams:
Be familiar with common construction scams. Be wary of contractors that pressure you into making quick decisions, offer estimates significantly lower than others or have poor communication. -
Regular Communications:
Keep in constant contact with your contractor. You can communicate with the contractor not only by email but also via phone and text message. Avoid misunderstandings by promptly addressing any concerns or discrepancies. -
Verify receipt of payments:
Request and check receipts after making payments. Verify that receipts contain details like the amount, the date and the reason for the payment. -
Document Everything:
Keep detailed records for all communications, contracts, payments and any modifications to the original contract. These records are valuable in the event of a dispute. -
Do not accept unsolicited offers:
If a contractor approaches uninvited, be cautious. Especially if the contractor claims to have significant discounts available or that they may have leftover materials left over from a recent job.
Following these best practices will help homeowners reduce their risk of being a victim of a scam and make the transaction between them and their pool contractor more smooth and secure.
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