Any business that has a long delay between collecting revenue and delivering product is vulnerable to this - it's one of the reasons, for instance, that life insurance is so highly regulated. Grey-market auto sales (eg of high-end sports cars that need to be imported & converted), real estate development (Galt's Gulch in Chile), and sales of silencers or other highly regulated firearms stuff (lots of paperwork to wait for) are other examples. Hell, even Kickstarters are notorious for this.
One problem is that it's really difficult to distinguish business incompetence from never intending to follow through, so often the guy pulling the scam won't be prosecuted and pops back up pulling the same scheme in a different market. It's totally legal to solicit orders and only then try to fulfil them, and depending on the market sometimes there is an issue actually getting the product.
I thought there was a law against taking money selling a product, and then spending it on something else and having no money left to fill the order. Is that true?
One problem is that it's really difficult to distinguish business incompetence from never intending to follow through, so often the guy pulling the scam won't be prosecuted and pops back up pulling the same scheme in a different market. It's totally legal to solicit orders and only then try to fulfil them, and depending on the market sometimes there is an issue actually getting the product.