Internet Auction Fraud

Guide to Auction Fraud

About Auction Fraud | Fraud Warning Signs | After you have been scammed

ATTEMPTED FRAUD ACCOUNT

I received an email (through eBay's interface) from someone offering to sell me a Garmin Streetpilot Deluxe with the Americas basemap for $350.00. Since these units usually sell on eBay for at least $750.00 or more, this seemed like an awfully good deal! I have previously been approached by such "illegal" inquiries (eBay does not allow unsolicited email and does not allow offering of products outside of eBay) and have gotten some great deals so I pursued this email inquiry. He had an excellent eBay feedback rating.

I agreed to purchase a single unit and if the product was what he claimed it to be, I would buy many more (he had 30 of them). He then informed me that he had a retail store in Romania, looked forward to having an outlet for his units, and that I needed to pay him through Western Union. He would pay all shipping charges if I paid for the Western Union fee and taxes.

Fraud Hint #1: Garmin does not allow European versions of the Streetpilot to be sold in the US, how could he have US versions in Romania? He claimed it was a special deal. I was willing to accept this, but my suspicions were alerted.

Fraud Hint #2: Romania. Listed in the top 10 of Internet fraud countries, #1 for auction fraud. You can have your PayPal account terminated for even paying someone from Romania!

Fraud Hint #3: Western Union. This is a cash transaction, with no verification, and no recourse if something goes wrong.

We went back and forth because I refused to pay by Western Union. He explained that it was his companies policy to only use Western Union on small sales under $2000 because of the taxes and tariffs imposed on other payment methods. He could not sell the item at that price ($350) if I went with another payment method. Securing funds was available only for larger sales.

So, I called his bluff. Offered to buy 10 units at a total price of $3,500.00 but only through an escrow service. He said fine, "lets do it". So, I signed up with an escrow service (http://www.escrow.com/), defined the terms, and awaited for his acceptance. He never accepted.

I have since checked up on his feedbacks and they are not his. A common fraud - using someone else's feedback to give yourself credibility. How this is done is explained under Possible Fraud Warnings.

Read about similar scam (this time successful) on Ubid

On-line auction fraud is big business and is occurring with increasing frequency - 87 percent of all Internet fraud reports relate to auctions (Read More). The Internet Fraud Complaint Center receives approximately 1,000 complaints per day related to Internet fraud. Despite these staggering figures, auction fraud represents less than 1% of all auctions - eBay reports that only 1 in 40,000 ends with a confirmed case of fraud. Although the actual number of fraud cases is small in relation to overall auction numbers (less than one-hundreds of 1%), because of the number of auctions (about 50 million registered eBay users alone) involved, fraud is a serious problem.

Assuming an auction fraud rate of 1 in 40,000 (as claimed by eBay), with 1.3 million transactions occurring daily, that means that approximately 32 people per day are being ripped off or approximately 120,000 successful scams per year!

eBay is fighting back and doing what it can to prevent and stop auction fraud. New fraud detection software, increased security measures, and increased personnel. Yet despite all these efforts, professional scammers are difficult to detect (before it is too late) and have sophisticated methods to entrap buyers and sellers.

Since eBay does not have an auction fraud section or offer sound advise specifically related to fraud (it is there but really hard to find), I have elected to provide some information on auction fraud and how to protect yourself. Comments from others are welcome.

First, I have been selling and buying on eBay for over 2 years now and have NEVER previously been involved or approached by a scam. In other words, I consider eBay to be a VERY SAFE buying-selling environment. All of my sales and purchases have gone smoothly and eBay is my favorite "shopping mall". I just think eBay should have a fraud alert section and provide some specific advice on how to spot them. Additionally, my experience suggests that fraud has greatly increased in recent times, approaching the scale of an "eBay industry".

EBay defines fraud as:

Paying for an item and never receiving it
Receiving an item that is less than what is described

In addition to the obvious fraud as defined by eBay, Internet auction fraud may arise in various shapes, sizes, and colors including:

Most disturbing are the organized "professional" scams and deliberate fraud sales that occur behind the scenes of eBay and other auctions (see side bar). Despite these lurking predators, eBay and other auctions are great shopping places as long as you use common sense and know how to spot and be alerted to potential fraud.

The main thing to realize is that if you get scammed or otherwise are involved in a fraudulent transaction, you are unlikely to recover any of your money. It will simply be an expensive lesson learned. The key is to be able to spot suspicious sellers and avoid being scammed in the first place. That is your only defense, cause realistically, you have no recourse after the fact.

WARNING SIGNS OF FRAUD and other useful tips

Fraud usually involves items selling for $500.00 or more, but this is not always the situation. In the fraud attempt described in the side bar, the amount was $350.00 and was actually reduced to $175.00 when I tentatively agreed that I might consider sending half the money. Whether it is $50 or $5,000, you should be aware of the obvious signs of fraud and how to spot them.

Know what you are bidding on, read the descriptions and conditions carefully, and then do a comparison price check. Often times when you add the cost of the item, shipping and handling, etc., it is costing you more than buying it at a local store or some other site. Example: I purchased a DVD player for $89.00 at Circuit City. After 3-months, I decided I didn't like it and went out and bought a different one. Rather than throw it away, I listed it on eBay. It was in excellent condition and I listed it at a starting bid of $9.99 with $15.00 postage. The retail list price was $159.99. The ending price was $83.00. Did this buyer really get a good deal? This buyer paid $98.00 for a used DVD player that they could have purchased at Circuit City (with warranty) for $89.00. Do a little price checking!

Before I consider bidding on any item, I cut the description from the auction heading and paste it in my Internet search box (not eBay's). Find out what the item really costs!

Deal is too good to be true. There are many, many good deals on eBay, but if the deal seems too good to be true, trust your instincts and proceed with caution. Read the description carefully, is it really what you think it is? May be a good deal, but your suspicions should be raised.

Payment Methods. No payment method is ideal - they all have complications. As some sellers are scammers, so are some buyers and hence, there are limitations in all of them.

There are many auctions on eBay that accept only cashier's checks, money orders, and/or personal checks as payment methods. Most of these, if not all, are legitamate sellers, but I personally am leery and will not buy from these sellers (unless I am willing to lose the amount I am paying). Cash sales have NO recourse and it is the ONLY way that fraudulent sellers operate. NEVER USE WESTERN UNION. The eBay Safe Harbor Investigative Team suggests that buyers "decline sending payment" if that is the only method available. Despite that advice (recognizing that eBay will encourage payment methods that they profit from), I will engage in cash sales, but knowlingly at risk and only when I am willing to loose that money in thre gamble.

With credit cards, it is very difficult to rip you off because you can always challenge or dispute the charge, causing an automatic cancellation until the matter is resolved. Yes, you can stop payment on a money order, but not after it has been cashed. Using a credit card however, has the disadvantage that if the transaction is a scam, they have your name and credit card information! PayPal is very good and provides maximum security as well as insurance, but there are also limitations. Most scammers and auction frauds do not use credit cards and/or PayPal. Be leery of those requiring cash, either money orders, cashiers checks, personal checks, and especially Western Union.

PayPal

maybe

MUST

User Agreement

The Buyer Protection Policy does not replace or reduce any other consumer rights Users may have, including reversal rights that may be granted by a User's credit card issuer. PayPal is the merchant of record with respect to all credit card transactions made through the PayPal service to purchase goods or services. As such, we afford customers the rights and privileges expected of a credit card transaction. You acknowledge that PayPal does not control the outcome of any reversal decision initiated through a User's credit card issuer.

Your credit card should have Internet fraud protection. If you are not sure, call your credit card company.
You must FIRST file a claim with PayPal. Even if your 30-day limit has passed, file the claim anyway (your credit card company will request this).
File your complaint with your Credit Card under their Internet Fraud Protection policy

Using a credit card through PayPal IS your safest bet

You are approached outside of an auction. People often look at the bidding history or use automated programs (like auction booster) to send emails to people bidding on items they sell or have for sale outside of eBay. While eBay strongly opposes this activity and it is considered "illegal", you can get some good buys this way. After all, the seller is saving 3% by not paying eBay their commission on the sale. However, this is also the route taken by the scammers! See side bar as an example - offering to sell me a $750 item for $350.

I have made some good deals and established good contacts this way. For instance, I was approached with the option to buy an item that usually sells on eBay for around $400, which I was paying $370.00 for wholesale, at $300.00 a piece. Sounded too good to be true - alarms. But, in the end, I felt confident in the transaction, and it went through. Been buying from him ever since.

Generally speaking though, you should be VERY CAUTIOUS about people that approach you unsolicited and offer you great deals outside of the eBay environment. Unless you really know what you are doing, DON'T DO IT!

Know your Seller. eBay makes every effort to insure the accuracy of information provided, but there really is no way to be sure. Here are a few things you can do to check on a seller:

Feedback.Check a persons feedback. But sometimes take it with a grain of salt. It generally takes a long time to build up feedback as most people don't leave any, particularly buyers. I would have to say that maybe 20% of my buyers give me any feedback so to get over 50 takes a long time. Consider anyone with a feedback rating over 20 to have been around awhile and generally a safe dealer. BUT, that does not mean to ignore those with less! I frequently buy from (0) feedback sellers. Yes, I consider it a risk and never with high priced items. Because many people are afraid of being ripped-off by a (0) seller, you can get some really good deals! Whenever I bid with a (0) bidder, I simply plan on loosing my money. But, 2 years later and many, many purchases from (0) sellers, I have never lost a dime and have always been satisfied. Recently there has been a surge of New (0) feedback sellers (identified by the

symbol) offering products for sale. While clearly many of these are just new sellers, many of them are scams. Be careful, evaluate their payment methods, location, etc and use good judgement.

Recent encounter with New Seller

As I said earlier, New and (0) feedback sellers can offer some really good deals. I saw such a possible deal but had some questions about the product so I sent the seller an email. She replied with an answer and an offer to sell me another one outside of eBay for $220.00, postage included. As a seller, I know what this item is worth and this deal would be too good to be true (Warning #1: something isn't right). I said "fine", what type of payment do you accept. She replied that she only accepts money orders, that they should be made out to "xxx xxx", and sent to this address, Philadelphia, PA.(Warning #2: Cash transaction). Now here it gets interesting. Looking up the payee's name in the white pages turned up a valid address and the name at that address corresponded to the name of the payee. I could almost consider this a legitamate sale, but warnings #1 & #2 required one more check to verify legitimacy. From the white pages, I picked up the phone and called.

Sure enough, I had the correct address and he knew who "xxx" was - it was his daughter, but she was not home. He was unaware that she was selling things on eBay and was quite certain that she didn't have any of the items she was offering for sale. I informed him that Internet Auction Fraud was a felony and, if I paid her with a USPS money order, it would constitute another felony (Mail Fraud), and that as the owner of the home, he was an accomplice. Needless to say, I do not think this girl or her friend (the seller) would be selling on eBay anymore.

While I probably could have gotten my money back in the long run, the money invested in a phone call was certainly worth avoiding all the aggravation.

Feedback rating is not a blind guide on its own. Look at the relevant feedback, not just whether it is good or bad. If the individual is a seller, look at the seller feedback [noted by the ("S" symbol), not the buyer ("B") feedback]. If you are buying a high priced item, check to see if the seller has sold similar items in the past and check the feedback of those buyers (check for fake seller feedback: are all feedbacks recent and from 0-feedback buyers?).

Importantly, check for Feedback Theft. Never trust feedback that someone sends you or tells you to look up. Make sure it ALWAYS is viewed from the actual auction link. In the fraud attempt described in the side bar, he not only provided me his user name but also gave me a link to his feedback. Because this was feedback theft and I do not want to incriminate the innocent eBay user, I will use the user name "XXX". The seller told me his eBay user name was xxx and his email to me was from xxx@secureroot.com (even the headers identified the email was from xxx@secureroot.com). Seemed legit. BUT, when I went to the feedback profile and clicked on the contact link, I sent the user an email asking if he was "ghita porcu" or "Serban Costas Adrian". I soon found out he was NOT and I thus informed him of the feedback theft.

Feedback Theft is really quite easy. Most people use the first part of their email address as their eBay user name. That is the default when you sign up. Lets say your email is BobbyB@aol.com and you select your user name as BobbyB. All I need to do is sign up with eBay under any name, get a free email address from a non-verifying source (see below) such as secureroot.com and select the email address BobbyB@secureroot.com. I can now tell you that my eBay username is BobbyB and I can be reached at my email address BobbyB@secureroot.com - feedback theft!

So, if there is any question, particularly if you were contacted outside of eBay, check on the true identity of the person you are dealing with. Go through the eBay system and send them a quick note to make sure the person you are dealing with is REALLY associated with that Feedback profile. Don't be fooled by feedback theft!

Account-Identity Highjacking

highjacking

COMPLETE

ONLY

Email Address. Unfortunately, eBay won't let you see the persons email address unless you are involved in a transaction with them. This has to do with privacy, but it is not as clear cut as eBay implies. Want a sellers true email address? Just ask them a question, if they reply, you have their email address. It's that simple. If you are at all worried or any alarms are going off about the sale, contact the seller. Ask him anything. Get their email address!

Is the seller communicating to you through an email address from a bona fide ISP or is it from some free untraceable account? Ebay has some guards against this by requiring users of hotmail or yahoo mail accounts to verify their identity (note that the FBI defines the profile of a typical auction fraud of having a hotmail.com, yahoo.com or aol.com email address), but there are tons of other sources of email that eBay cannot trace or verify. In the fraud example described in the side bar, he used an email address at secureroot.com. If you look at that site, we see it is for sale, but offers a link to Web Mail where the site is described as an Underground service. This should be a warning. This email is untraceable, probably created with false information. Avoid dealing with sellers using unverified free email accounts. Ask them for their private ISP email account.

Payment Method. Are the payment methods available offer any recourse in the event of a problem or is it a "cash" sale that would require you to try to pry the money out of them. Western Union should always be a NO-NO as it is the #1 choice of scammers. You might as well just send cash - at least that way you will save being ripped off of the Western Union fee. As I said earlier, although it is safely done everyday on eBay, I do not send cash, money orders, or cashiers checks. I only pay through PayPal.

It is a slightly different situation if you want to send a check or money order. I deal with buyers all the time that pay me with checks. BUT, that is their choice, I as the seller am not insisting on it. Just remember one thing, the Internet Fraud Complaint Center operated by the FBI states that money orders and personal checks were the payment method in 80% of all fraud reports made to the center. Why not be safe? PayPal is free for a personal account and it is not that difficult to get verified.

Residence. This is really unfair, but where the seller is located is a major factor in your security. If you and the seller are in the United States, you have a variety of actions you can take if you get scammed. But when it involves overseas transactions, you are largely on your own with no recourse available. There are certain countries that have been particularly active in the auction fraud business including Romania, Indonesia, Nigeria, Hong Kong and Russia. This is not to say that there are not legitamate sellers from these countries, but their location should send out warning flags. In all fairness, realize that individuals from Romania, Nigeria, etc have all been scammed and have filled claims with the Internet Fraud Complaint Center. Afterall, most auction fraud cases actually involve sellers from the United States!

Preferably, stick with transactions in your own country. Unless it is an exceptional buy (and these rarely exist), by the time you add shipping costs, it probably won't be such a great deal. Keep your deal in a country that you may be able to take some action if you are scammed. Uncontrolled countries like Nigeria, Romania, etc should be warning signs.

Demand an address. Most cases of auction fraud involve delivery of payment to a P.O. Box. These can often be setup with false information and be untraceable (particularly if in Colorado, Texas, California, New York, and Texas). If you are going to send payment in the form of cash, check, money order, etc., only send it to an actual street address. No verifiable street address - No money! Cross-check the address and phone number through the Yellow or White Pages and make sure you are dealing with a valid and physical address. Check BOTH ways: Lookup their phone number and do a reverse lookup with their phone number.

I recently refused to complete my end of an auction (I was the winning bidder) because the seller refused to provide a physical address. I will not send cash (cashier's check/money order) to a P.O. Box. Besides the point that the seller did not appear in the white pages of the Town in which the P. O. Box was located, I simply demand a true physical and verifyable address. It was within my rights to break the contract under those conditions. Of note is that this seller is no longer selling on eBay (under that particular user name), indicating that it most likely was a fraud.

Business vs Individual. Are you better off dealing with an individual or a business? Generally speaking, a business is a far safer transaction. By business, I mean a real business, not just an eBay Store. I say this not because I have a real retail business and license, but because the FBI reports that 84% of all auction fraud occurs through individuals and only 16% from businesses.

whois database

I investigated and knew the seller

Insure your purchase if you have concerns. Although eBay does offer insurance protection, it has a maximum of $200 ($400 if paid to a verified Paypal account) and there is a $25 fee. There are a host of other insurance companies that offer insurance, but my advise if that if you feel the need to buy insurance, DON'T BUY THE ITEM! Is it still a good deal after the item cost, shipping & handling, and insurance fees? Probably not.

Use an Escrow service if you have lingering alarms. I will do business with almost anyone as long as I feel I have some recourse or control in the event of a problem. Once you cross the boundaries of your own country, you are very limited in what you can do. On high priced items that you are purchasing overseas, use an escrow service. But BEWARE, there are tons of fake escrow services out there, many operating in conjunction with the scammers. A list of all the known bogus escrow services (they just take your money) can be found HERE. The only escrow service you should ever use is Escrow.com. But again, if you feel the need to use an escrow service, maybe you should rethink purchasing the item.

You have been Scammed! - What can you do?

Realistically, usually nothing. If you got yourself involved in any sort of organized scam, these people are long gone and so is your money. They would not have allowed you to do anything that would allow the transaction to be traced back to them. On the other hand, if you were simply involved in an honest transaction that went sour and because your money was not returned or something the transaction became fraudulent, you may have some hope of recovery.

If you followed the advice provided in this guide and still got scammed, odds are it was not a deliberate scam and your hopes of recovery are improved.

If you sent cash (cashier's check, money order, check, Western Union) to someone in Nigeria, Romania, Indonesia, or anyplace else for that matter including in the United States, just kick yourself and realize what a stupid thing you have done. Consider the money spent as an educational investment and move on. There is nothing you can do about it. You can add youself to the statistics by reporting the incident to the Internet Fraud Complaint Center. Do not expect any sort of resolution. You have been scammed - live with it and learn from it.

If you paid with a credit card, immediately call your credit card company and

Report your card as stolen and request an immediate change of number
File a dispute of the charges related to the fraudent item. Swallow your pride and explain to the company how you got scammed
File a complaint with eBay
File a complaint with the Internet Fraud Complaint Center

If you paid through PayPal (preferably with a credit card), immediately:

File a complaint with PayPal and eBay. If you have been scammed, you have probably been lead around for at least 30-days, which will be past your claim period. Inform PayPal that you are seeking to have the charges reversed on your credit card - that will get their attention even if you are past the 30 days. Regardless of how long it has been, still report it to PayPal first.

Call your credit card company and file a dispute to the charge

File a complaint with the Internet Fraud Complaint Center

If you have verified information on the seller, most importantly a verified address where the money was sent (in the U.S.), in addition to any of the above that apply:

Contact the local police where payment was sent. You will need to file your complaint in writting, but speak with them first by phone to verify the procedures and inform them that a complaint has already been filed with the FBI through the Internet Fraud Complaint Center
If a business, file a complaint with the Better Business Bureau for the region where payment was made.

And unfortunately, that is really all you can do. Do not expect any type of resolution. Odds are that cash was involved and it was sent to a foreign country, a P. O. Box, or other location that cannot be realistically traced. You also probably did not get scammed out of enough money to make it worth anyones effort to actively pursue. With over 1,000 complaints rolling into the Internet Fraud Complaint Center each day, unless your case involves thousands of dollars, they do not have the resources to help you out. Sorry to say, you have been scammed - be more careful next time!

Please send your comments about this guide to sales@baystateservices.com