Ok so there are many ways contractors can get scammed on oDesk or any other freelance site for that matter.
By following the rules below you can easily minimize the risk.
1) Avoid working for Jews. Jewish clients (from Israel) will pay pennies and will work you like slaves. This is true in real life as well as online. SO avoid Jews!
2) Avoid working for Indians, Pakistanis, Bangladeshis, Muslims, Chinese, Asians- basically all Muslims and yellow people. They not only ugly but ALL of them are looking for FREE work in my experience. Especially INDIANS- AVOID INDIANS AT ALL COSTS! Sometimes Indians come pretending to be from US or Europe but they still are Indians. If they have even remotely an Indian sounding name (such as RAMA, SING, SIKH etc) avoid them at ALL COSTS.
3) Apply for jobs from Mostly white regions like the US, Europe and Australia. Even in the US try to avoid clients from latin areas like Miami etc. And in Europe avoid eastern European countries for best effect.
4) Since oDesk has a double blind feedback system you never know what some unscrupulous client might leave you to force you to refund. So to avoid this ALWAYS leave 1 star feedback for new unknown clients. If by chance the client has left you 5 star feedback you can always contact customer support and quickly change the 1 star feedback you left for the client.
5) When applying to jobs from new clients with no prior feedback, make sure their payment is verified, and NEVER start work without a verified payment method.
6) When apply for jobs from new clients- if its a fixed priced job ALWAYS make sure to get an advance- preferably 50%- before staring work, and always remember to get milestone payments as the work progresses. If client refuses to pay a milestone that you feel you deserve, STOP work immediately.
7) When doing graphics design work on a fixed price job ALWAYS watermark the samples before sending to client- Only remove watermark and send when client has paid you in FULL. Also make sure the samples are small low quality JPEGs, with a gradient background.
For hourly jobs this is not a concern as all payments are guaranteed.
8) When writing articles on a fixed priced job ALWAYS send the preview sample to client as an IMAGE FILE so that client can read what you wrote but cannot copy and paste without them paying you fully and getting the word document.
So that my sad friends is how to best avoid getting scammed on oDesk- the largest freelancing platform on the net. 😦