Bankruptcy Liquidation Sale Scam in Colorado
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Bankruptcy Liquidation Sale Scam in Colorado

January 13, 2011

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The Denver area ABC News affiliate, TheDenverChannel.com, reports that misleading ads lured customers into what claimed to be a bankruptcy liquidation sale, but was, in fact, an ordinary flea market. Apparently, several vendors rented a former Circuit City location and set up booths at which they sold merchandise for a discount.

Ads for the market indicated that the event was part of a bankruptcy liquidation sale, and that the vendor had to get rid of merchandise in order to repay creditors. But consumers quickly began complaining, reports note, when they were charged a five-dollar admission fee as well as a five-dollar “membership” fee in order to shop at the venue.

An investigation into the matter suggests that advertisements for the event falsely claimed that the sale was related to a Chapter 7 bankruptcy (the type sometimes referred to as “liquidation bankruptcy”) filing.

If the sale were connected to a Chapter 7 bankruptcy case, the seller would be a single vendor and new merchandise would not arrive each week (as it is scheduled to do at the Denver location). It is also doubtful that the sale would take place in a location different from the primary business locale of these retail sellers and that the vendors would be permitted to charge an entrance and membership fee to those interested in purchasing merchandise.

In normal bankruptcy liquidations, companies going through the bankruptcy process are required to unload their existing merchandise (and, sometimes, equipment) in order to raise money to repay creditors. Borders booksellers recently (and famously) concluded liquidation sales at many of its locations. Shoppers saw that, as the liquidation sales progressed, the company’s supplies diminished and were not replenished.

It seems that the individuals responsible for advertising the event likely mislabeled it to entice customers to come out in hopes of getting bargains from sellers eager to unload their goods.

Whether or not the advertisers behind the misleading commercials will be penalized, or the flea market forced to shut down or refund customers’ entrance fees, remains to be seen.


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