In sports cards, as in many things in life, big money can mean big problems.

In June, accusations of a nearly half-million-dollar sports card deal gone bad became public.

The salient issue for collectors is how to avoid being scammed when dealing with a private transaction outside of a reputable auction house, where both buyer and seller have protection. That goes for six-figure transactions, but every day there are many private deals done via social media platforms for far less money where the seller doesn’t want to pay fees to a third-party marketplace and payment is conditioned on proof of receipt of the item.

The Athletic spoke to one of the biggest collectors in the hobby and also one of the country’s top criminal defense lawyers, New York-based Jeffrey Lichtman, on how to navigate these issues so that you’re less likely to get scammed.

First let’s describe the nightmare scenario of an alleged $478,000 loss, according to the parties involved. The card in question was the one-of-a-kind 2012 Panini Prizm Tom Brady Black Finite, one of the hobby’s most coveted cards. The buyer, Steve Pocklington, in an appearance on a four-hour episode of Sports Cards Live, said he paid the seller, who was supposedly based in Mexico and may or may not actually exist, after a third-party broker vouched for the transaction. The broker also appeared on the show and said he had done hundreds of thousands of dollars worth of transactions with Pocklington before the Brady card deal, but when Pocklington sent the seller the massive sum for the card, the broker forwarded a FedEx box that had no Brady card in it. The broker claimed he had held the card, but the box was packed by the seller and he just added a label.

The broker added that the deal happened over a year ago now and that FedEx denied the insurance claim on the package. Pocklington said he’s still working with law enforcement to try to recover his money, but the broker said he’s never been contacted by law enforcement.

How could this alleged transaction have been managed better to mitigate this monumental risk? How do buyers protect themselves when not using an auction house or public marketplace as an intermediary? Lichtman says, the best way is using an auction house as a broker.

“Let’s say you are buying a million-dollar card or even a $100,000 card privately. The seller wants to avoid 20 percent fees from the auction house. But with a transaction of this size, they can contact an auction house and negotiate away the fee. What people don’t realize is that in a lot of big-dollar sales, the auction house gives back most and sometimes all of that buyer’s fee to the seller. Lichtman says sellers can negotiate that away because the auction house gets the publicity of selling the card.

The Tom Brady card that Steve Pocklington thought he was buying for almost $500,000. (Photo courtesy of Panini)

Auction house as a broker

Lichtman says the auction house will probably agree to serve as the broker in the transaction — in other words, receiving the payment before forwarding that to the seller and sending the buyer the card — for a nominal fee of something like five percent. Think of how much better off the Brady Black Prizm buyer would have been if the parties arranged to have an auction house serve as an intermediary. The broker on Sports Cards Live said his fee for the transaction was $5,000 (1 percent), money he claimed to have never received.

What if the transaction isn’t big enough or unique enough to interest an auction house to serve as an intermediary? Lichtman advises finding an escrow agent, typically used in real-estate transactions where their fee for a $500,000 house could be as high as $2,000. An escrow agent is a neutral third party who holds money or property in trust until all transaction terms are met.

If neither of those work, Lichtman says to just pack a bag and fly to the card. “If I’m paying six figures for a card in a private transaction, I’m flying to the card or just telling the person we can complete the transaction at The National (card show).”

That brings a whole other set of problems. Lichtman warns that carrying that much cash on a flight is very dangerous. Not just because of the threat of having it stolen, but also the probability of having it seized by the government as evidence of drug dealing. (One of Lichtman’s most famous clients was Joaquin “El Chapo” Guzman.)

“I’ve had cases where I represented people where they flew on a plane on a one-way ticket with $150,000 in cash and they (had all of it) seized,” Lichtman says.

He advises doing the deal at a bank and only after filling out all the proper forms so that the transaction doesn’t trigger a loss or suspension of banking privileges. He says he always tells the buyer, who may not want a record of the transaction, that he’s documenting the purchase or the sale when he’s the person selling the card.

A three-percent tax for peace of mind

With more “normal” transactions of hundreds or thousands of dollars, private sellers sometimes balk at paying the fee for business transactions, which protects the buyer against the card not being received. A common method for completing these private transactions is PayPal, which charges the seller a fee that’s typically three percent, but that protects the buyer in the event the item is not received for any reason. Litchtman advises that the buyer should just offer to pay the fee and view it as the cost of peace of mind. If you don’t get the card, even due to no fault of the seller, you are financially protected. Cards can get lost and have been stolen by people in the delivery process who have their eye out for packages likely to contain a card.

Lichtman says he had an issue with a relatively low-cost Cooper Flagg transaction where tracking wasn’t provided and the cards were never received. The seller balked at refunding the money, assuming the cards were delivered. Lichtman says he went to the post office and asked about it and it turned out the package was being held for insufficient postage, which he paid for the seller. So insist on tracking for your purchase, too.

Much of the hobby operates on the vouch system. But what’s the value of having a third party vouch for a seller when the buyer and broker in the Brady Black Prizm transaction had a relationship involving previous high-value deals? For $100 a vouch may be sufficient. For $500,000, it seems to be worthless.

Litchtman says the measure for using these various methods to protect yourself should be what the impact on your life would be if you lost the money. If it would be significant, protect yourself.

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