Recent events have made it very evident that both PayPal and GoDaddy support and protect internet scamming, identity theft, and fraudulent account activities. PayPal and GoDaddy are giants in their respective market segments and domainers have been using both for years. Domainers trusted their domain sales and transfers in the hands of these two corporations, but I do not think that trend will continue much longer.
Recently there have been a lot of scammers going on to forums and initiating sales and purchases of LLLL.com (4 letter .com domain names.) What happens is the scammer either creates a new username at a forum or he somehow hacks into a preexisting username and emulates another user. The scammer then sends out private messages (PM) to users that have posted their domains for sale and offers to buy them. Once negotiations have ended and a price has been established by both the seller and scammer, the scammer sends payment. Currently these scammers only pay via PayPal and only buy names that are registered at GoDaddy; of course, there is a reason for that.
The scammer sends payment via a STOLEN or HACKED PayPal account, assuming the identity of that person. Once the seller receives/confirms payment via PayPal he or she transfers the domains registered at GoDaddy to the Scammer. In order to complete the transfer of the domain the buyer (scammer) must provide the following information: Name, Complete Address, Country, Phone, and Email corresponding to the GoDaddy account where the domains will be transferred to. Usually, the account information is manipulated to match the identical information as the stolen PayPal account, preventing suspicion. Now the seller transfers the domains to the scammers GoDaddy account. Once the domains have been transferred a confirmation PM is sent and the scammer of course says everything is perfect. The seller goes to sleep happy and the scammer is grinning ear to ear because within minutes the scammer initiates a Chargeback on the stolen PayPal account. A chargeback occurs when fraudulent activity or unauthorized purchases have occurred and PayPal immediately reclaims the funds, without question. After the chargeback is completed the funds in the sellers PayPal account are $0.00. At this point the Scammer has the seller’s domains and the seller has neither the money for the domains nor the domains themselves.