Credit card fraud. Designers pick up the tab

$400 Logo design contest. 6 entries. 4 designers.

On January 20, 99designs comments saying

"We're currently investigating this contest, the contest holder, and the other six contests which were launched at the same time." On January 26, 99designs comments further, "We've had no reply from the contest holder, so we are assuming that this contest is fraudulent. Sorry to everybody who already made an effort before we caught this - it's a shame that there's people who just want to make life harder for everybody!"

http://99designs.com/contests/16558

Contest holder also ran these contests (no further information)

http://99designs.com/contests/16560 $420 logo design contest. 8 entries. 6 designers

http://99designs.com/contests/16548 $300 logo design contest. 5 entries. 5 designers

http://99designs.com/contests/16551 $3000 web design contest. 0 entries.

http://99designs.com/contests/14540 $200 logo design contest. 50 entries. 32 designers. Listed as being won.

According to the contest holder profile http://99designs.com/users/278642 this user held 10 contests but only awarded 1. Total amount of prizes that were originally offered - $13,378.

This is a credit card fraud that's becoming more prevalent on 'Crowdsourcing' and 'Design Contest' sites.

Here's how it works:

Someone with a stolen credit card starts a contest (or contests).

If the site escrows the money, an accomplice (or themselves operating under another user account) submit a few designs. One of these designs is selected as the winner, and the payout (if applicable) is made. Once the credit card fraud is reversed, the contest site takes the hit, while the credit card thieves have essentially laundered the money.

If the winning designer is paid directly by the contest holder, they don't get paid anything.