INTERVIEW ON THE PRICE OF BUSINESS SHOW, MEDIA PARTNER OF THIS SITE.
Recently Kevin Price, Host of the nationally syndicated Price of Business Show, interviewed Alexander Paykin.
The Alexander Paykin Commentaries
In nearly every industry where large transactions occur, real estate, surrogacy, private adoption, entertainment, or specialized medical services, clients are routinely asked to place substantial sums of money into an escrow account before services are rendered or obligations are fulfilled. The very word “escrow” tends to reassure people that their money is safe, protected by law, and held under strict fiduciary standards. Yet the reality is that not all entities that call themselves escrow providers are regulated, supervised, or even financially stable. In fact, in several rapidly expanding industries, escrow arrangements are entirely outside any statutory framework, leaving consumers dangerously exposed.
The most common misconception is that any business offering escrow services must be operating under rules similar to those governing attorneys’ trust accounts or licensed escrow agents. In many situations, that assumption is flatly untrue. Unregulated escrow companies may hold millions of dollars in client deposits while having no meaningful oversight, no bonding, no insurance, no audit requirements, and no statutory obligations to segregate funds. When these businesses collapse or misuse funds, victims often learn for the first time that the “escrow account” they trusted was little more than a general operating account with a different label.
The distinction between attorneys and unregulated escrow companies is profound. Attorneys who hold client funds are subject to strict fiduciary duties, mandatory audits, disciplinary rules, and criminal penalties for misuse. These safeguards exist precisely because attorneys routinely handle large sums of money on behalf of clients and must maintain absolute financial integrity. Unregulated escrow operators, by contrast, may owe no fiduciary obligations beyond simple contract language. When money disappears, the legal protections available to victims are far weaker than most people ever imagine.
A recurring problem in these failures is undercapitalization. Many small escrow companies present themselves as secure financial intermediaries even while operating on razor-thin margins and maintaining no reserves of their own. When an entity holding client money lacks meaningful assets, even minor financial pressures can cause a cascade of misconduct. Commingling of client funds with business accounts becomes commonplace. Internal financial shortfalls tempt operators to “borrow” from deposits to cover debts or unrelated expenses. Rapid growth in a booming industry, such as surrogacy or fertility services, can strain administrative systems and create an environment in which financial mismanagement goes undetected until millions of dollars have vanished.
Once the money is gone, the legal avenues available to victims are often limited. Civil lawsuits may result in favorable judgments, but a judgment is uncollectible when the defendant is insolvent or has already dissipated the funds. Bankruptcy offers little relief because victims become unsecured creditors with no priority over other claimants. Criminal prosecutions may lead to convictions, but restitution depends entirely on the wrongdoer’s ability to pay. In many cases, victims receive nothing. The assumption that the law will “make them whole” turns out to be misplaced.
The lack of regulation in certain industries exacerbates the problem. Some states have no licensing requirements at all for escrow providers operating outside real estate. Others require only nominal registrations that impose no bonding or insurance obligations. Many surrogacy, fertility, and specialized service escrow companies operate without any meaningful governmental scrutiny. Clients often never hear the term “undercapitalized” until their funds have vanished, and by then it is too late.
Consumers and businesses must therefore adopt a far more cautious approach. The safest option is always to use a licensed attorney or a regulated escrow agent whose trust obligations are backed by statutory enforcement mechanisms. When funds are held by an entity subject to professional discipline, mandatory audits, or bonding requirements, the likelihood of catastrophic loss diminishes dramatically. In contrast, trusting an unregulated provider based solely on marketing materials or assurances of safety creates an enormous and often invisible financial risk.
The lesson from recent cases is clear: escrow is only as safe as the person holding the money. In industries where escrow providers are unregulated, underinsured, or financially unstable, even the most diligent families, businesses, or individuals can suffer devastating losses. Despite the intimate, emotional, or highly personal contexts in which escrow arrangements often arise, financial safeguards cannot be assumed. Entrusting funds to anyone other than an attorney or a properly licensed and bonded escrow agent introduces a level of danger that few clients fully appreciate until it is too late.
