Phase 1 — Classic Fraud Schemes · 8 min read
8 · Similar Business Names and Undisclosed Accounts
A second entity with a name close enough to confuse customers and divert payments.
01The shadow entity
A new company is formed with a name nearly identical to the real business — the same words in a different order, a slightly different suffix, a plural instead of a singular. Customers and vendors who are not paying close attention send payments to the shadow entity, which is owned entirely by the fraudster. The scheme is invisible inside the real company's books because the money never enters them.
- Secretary of State filings for entities with names confusingly similar to the business.
- Customer complaints about paying the “wrong” company that no one can explain.
- Bank statements for an entity the partners never authorized.
- A domain name, email address, or letterhead that mimics the real business.
Search the state business registry for every variation of the company name. Formation records are public and dated.
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Buy the guidebookMore in Phase 1 — Classic Fraud Schemes
1 · Owner Withdrawals Disguised as Loans
Cash taken out of the company and recorded as a loan receivable instead of a distribution or salary.
2 · Gift Cards and Concealed Personal Spending
Gift cards bought as business expense and converted into anonymous personal spending power.
3 · Undisclosed Debt and Pledged Assets
Loans taken against company assets without partner knowledge or consent.
4 · Inventory Theft and Cash Skimming
The two oldest schemes — taking product before it is recorded, and taking cash before it is deposited.