A Los Angeles bakery, Eat Your Flowers, fell victim to a counterfeit check scam involving a $7,500 cupcake order. Owner Loria Stern initially saw the large order as a major opportunity for her business but grew suspicious when the customer requested a reduction and refund after the funds appeared in her account. Despite verifying the check with her bank, it was later revealed to be counterfeit, leading to a financial loss of around $2,000 for the bakery.
This incident is part of a broader surge in check fraud, which has increased by 385% since the COVID-19 pandemic. The scam involved fraudsters using stolen checkbooks to deceive vendors. Stern’s experience highlights the growing issue of check fraud and the emotional and financial toll it can have on small businesses.
The Good:
- Awareness Raised: The incident brings attention to the growing issue of check fraud, potentially helping other businesses become more vigilant and prevent similar scams.
- Public Advisory Support: The case reinforces the importance of adhering to public advisories issued by authorities, like the US Justice Department’s guidelines on recognizing counterfeit checks.
- Education Opportunity: Stern’s experience provides a learning opportunity for other small business owners to understand the warning signs of fraud and implement better verification practices.
- Community Response: Despite the financial loss, Stern managed to donate some of the cupcakes, demonstrating community spirit and resilience.
The Bad:
- Financial Loss: The bakery incurred a significant financial loss of approximately $2,000, impacting its operations and morale.
- Emotional Toll: The scam had a profound emotional impact on Stern, leaving her disheartened and stressed, which can affect her well-being and business performance.
- Disruption to Business: The scam disrupted the bakery’s normal operations, including the waste of ingredients and the inability to fulfil orders as planned.
- Increased Fraud Risk: The surge in check fraud, up 385% since the pandemic, indicates a growing threat to businesses, particularly small enterprises that may lack the resources to combat such scams effectively.
The Take:
In a troubling case that underscores the increasing threat of financial fraud, Loria Stern, owner of Eat Your Flowers, a Los Angeles-based bakery, fell victim to a sophisticated counterfeit check scam. The scam involved a purported $7,500 order for 1,000 cupcakes, a request that initially seemed like a significant opportunity for Stern’s business. However, the order raised suspicions due to its scale and the bakery’s typical focus on occasion cakes and cookies rather than large cupcake orders.
Despite these concerns, Stern followed the conventional steps of verifying the check with her bank. The funds appeared to clear, leading her to purchase the necessary ingredients and begin preparing the order. However, the situation took a turn when the customer requested a reduction in the order and a 50% refund. Stern, having already committed to the purchase and preparation of the ingredients, declined the refund request.
The following day, Stern discovered that the check was counterfeit, and the funds had been withdrawn from her account. This revelation came after she was informed by the bank that the check was cited as fraudulent. The scam, involving stolen checkbooks used to write fraudulent checks to various vendors, had already affected several other businesses that day.
This incident is part of a troubling trend; the US Treasury reports a staggering 385% increase in check fraud since the onset of the COVID-19 pandemic. Counterfeit checks are becoming more sophisticated, often deceiving even trained bank personnel. The scam’s mechanics typically involve sending counterfeit checks to victims, who are then tricked into withdrawing and returning part of the funds.
For Stern, the financial impact was significant. The bakery faced a loss of approximately $2,000, with some cupcakes eventually being sold and the remainder donated. The incident not only strained the business’s finances but also had a severe emotional toll on Stern and her team. The disruption caused by the scam affected team morale and operational efficiency, further compounding the bakery’s difficulties.
In response, Stern advised other business owners to thoroughly verify customer information and establish contracts that limit refunds or changes to orders. This advice, while practical, highlights the need for increased awareness and preventative measures against fraud. Stern’s experience serves as a cautionary tale for other small business owners, emphasizing the importance of vigilance and adherence to fraud prevention guidelines.
As businesses continue to face increasing threats from financial scams, it is crucial to stay informed and adopt best practices for verifying transactions. Stern’s case not only illustrates the immediate financial and emotional impact of such fraud but also underscores the broader issue of escalating check fraud.
