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Web auction scams are up a hundredfold in two years. The sites won't offer bulletproof protection, so here's how to defend yourself--or your business--against con artists and cheats.
Edwin Stoddard, a computer systems analyst in McKenney, Virginia, loves bidding at online auction supersite eBay, successfully buying computer components and software. So when he was looking for a digital camera, he went directly to eBay, where he found a seller auctioning off 15 Sony digital cameras with a beginning bid of $400. He placed a bid of $542.
When the auction closed, Stoddard got an e-mail from the seller, a man named Robert Guest, who notified him that he was one of the successful bidders and instructed him to send $557 (including shipping) via a postal money order. Guest gave him a post office box address and said to expect the camera in three days.
"I waited. And I waited," says Stoddard. "I started to get a funny feeling about it." Two weeks later, he got an e-mail from someone else who had successfully bid on one of Guest's 15 cameras. "He hadn't received anything and wondered if I had," remembers Stoddard. Then he got another, similar e-mail from another bidder, and then another. Over the next three weeks he heard from ten other buyers.
The group discovered that Guest had held prior auctions for watches and jewelry, and his eBay feedback ratings contained glowing reviews. But this impressive résumé turned out to be a front for a big-time scam. Over 30 people had sent him money without receiving a thing, and the comments in his feedback page were from people who never bought his wares.
Altogether, Guest's scam netted him $37,000. But after two months of swindling, he got caught by federal and local government officials. Guest, a former pizza delivery manager from Blue Jay, California, said he used the stolen funds to feed his addiction to video poker. He's serving 14 months in prison for fraud and has been ordered to pay over $100,000 in restitution to his victims.
Scams on the Rise
As Guest's case illustrates, online auction fraud is booming. It ranks as the most common type of Web scam and accounts for more than half of all consumer complaints on the Internet, according to the Federal Trade Commission. In fact, the number of complaints rose from 100 or so in 1997 to 10,700 in 1999. "Anytime there's rapid growth in an industry, you also see rapid growth in fraud," says FTC Assistant Director Paul Luehr.
Most reported scams involve person-to-person auction sites, but fraudulent activities are becoming more sophisticated and are spreading to business-to-business auction sites, as well. B2B auctions--which can involve large-scale sales of raw materials and office equipment--provide opportunities for increasingly large frauds. In one recent case, i-Escrow, a Web-based escrow service, stopped a six-figure sale of satellite equipment to a buyer who tried to pass off a forged check. I-Escrow noticed discrepancies after the buyer's own information raised suspicions.
"B2B fraud is really coming to life," says Vince Gottman, senior director of customer support at i-Escrow. "Three years ago, most online auction purchases averaged about $20. Today, it's not unusual for [i-Escrow] to handle $100,000 to $200,000 deals."
Most of the major auction sites, such as Amazon Auctions, Auctions.com, eBay, and Yahoo, are taking steps to prevent fraud--albeit fewer than they could and should take. Government agencies are entering the fray as well, but they lack the finances and the personnel to chase every con artist. As a result, some victims have begun resorting to online vigilantism: warning potential victims and following scammers' digital tracks as the crooks change e-mail identities or acquire extra ones (see "Site Guardians").
For the unscrupulous, the anonymity of the Web makes perpetrating fraud at an auction site alluring, and this anonymity will attract more-sophisticated con artists, too. You take risks whether you're the seller or the buyer. Should you stop using auction sites altogether? Not necessarily. You can protect yourself by being a smart shopper, by reading the transaction terms, and by knowing how to negotiate an auction sale (see "Auction Tips").
Site Guardians: Consumers Fight Back on Their Own
Recalling real posses of the Old West, some Netizens are building virtual posses to track scam artists and warn shoppers of a con in progress.
Robert Denton of Michigan collects watches. He spends at least an hour and a half nightly on eBay monitoring watch auctions and spotting clues to fakes in photos. "I've seen listings for Cartiers, Guccis, and Rolexes that normally sell for $1000 and above, but on the site, the seller offers them for $10," says Denton.
He's written eBay over 50 times to inform the company of a fraud. He always gets a canned e-mail response, thanking him and saying the auction will be investigated. But the fraudulent auctions remain posted. Frustrated, Denton has taken to e-mailing the high bidder of a fraudulent watch auction, telling the buyer that he or she is buying a fake.
"I get letters of thanks all the time," Denton says. But he's also received death threats from sellers who want him to mind his own business. Denton does not take those threats too seriously, but eBay has warned him that he's interfering with auctions and must stop.
Why does he bother to get involved? "I feel an obligation to inform the buyer," he says. EBay passes along all fraud claims to the FTC and, to protect shoppers, insures purchases up to $200.
Auction Tips: Sniffing Out Scams a Mile Away
As you shop around for your next PC or an autographed copy of Dr. Ruth's Sex for Dummies, be aware of scammers' tactics. Here's what you can do to protect yourself:
DO YOUR HOMEWORK. Know what you're bidding on, its value and warranty, and the seller's return policy and shipping charges. Insist that the shipment be insured.
CHECK THE FEEDBACK RATINGS. If the seller has bad or little feedback, don't bid.
CHECK THE SELLER'S BACKGROUND. Get a seller's physical address and other identifying information, such as a phone number.
AVOID SHILLS (sellers or their cohorts bidding on an item to boost its price). See if the seller's and the shill's e-mail addresses have the same Internet service provider domain name. If they do, withdraw.
EVALUATE YOUR PAYMENT OPTIONS. If possible, use a credit card or an escrow service (see "Money Middlemen: How to Use an Escrow Service").
READ THE TERMS OF YOUR CREDIT CARD. The National Consumers League reports that some auction sites bill charges to credit cards as cash advances, not as standard purchases, and these may not be fully covered by the cards' dispute rights.
DON'T BID if you still feel uncomfortable about a listed item for any reason. A similar one will likely be available from a reputable seller.
FILL OUT A COMPLAINT FORM on the National Consumer League's site if you've been defrauded, and talk to an NCL counselor about how you can avoid the same problems in the future. The site will also help you file a fraud report that goes to the FTC and your state's attorney general. Report the scam to the U.S. Department of Justice and to the FBI's Internet Fraud Complaint Center.
READ THE FTC'S Internet Auctions: A Guide for Buyers and Sellers, downloadable from the FTC's Web site. The NCL also offers Be E-Wise: How to Shop Safely Online at its Web site. If you are in doubt about a transaction, contact an NCL counselor at 800/876-7060 or at the organization's Web site for advice.
Con Artists at Work
Hundreds of con artists are prowling Web auctions for their next victim. It's all too easy. Swindlers can easily set up fake identities by signing up for free e-mail accounts using false information. And to keep their identities concealed, deceptive sellers demand payment in the form of cash or a money order, since these are hard to trace. You should pay with a credit card, if possible, so you have a record of the transaction; in most cases, you can
Web auction scams are up a hundredfold in two years. The sites won't offer bulletproof protection, so here's how to defend yourself--or your business--against con artists and cheats.
Edwin Stoddard, a computer systems analyst in McKenney, Virginia, loves bidding at online auction supersite eBay, successfully buying computer components and software. So when he was looking for a digital camera, he went directly to eBay, where he found a seller auctioning off 15 Sony digital cameras with a beginning bid of $400. He placed a bid of $542.
When the auction closed, Stoddard got an e-mail from the seller, a man named Robert Guest, who notified him that he was one of the successful bidders and instructed him to send $557 (including shipping) via a postal money order. Guest gave him a post office box address and said to expect the camera in three days.
"I waited. And I waited," says Stoddard. "I started to get a funny feeling about it." Two weeks later, he got an e-mail from someone else who had successfully bid on one of Guest's 15 cameras. "He hadn't received anything and wondered if I had," remembers Stoddard. Then he got another, similar e-mail from another bidder, and then another. Over the next three weeks he heard from ten other buyers.
The group discovered that Guest had held prior auctions for watches and jewelry, and his eBay feedback ratings contained glowing reviews. But this impressive résumé turned out to be a front for a big-time scam. Over 30 people had sent him money without receiving a thing, and the comments in his feedback page were from people who never bought his wares.
Altogether, Guest's scam netted him $37,000. But after two months of swindling, he got caught by federal and local government officials. Guest, a former pizza delivery manager from Blue Jay, California, said he used the stolen funds to feed his addiction to video poker. He's serving 14 months in prison for fraud and has been ordered to pay over $100,000 in restitution to his victims.
Scams on the Rise
As Guest's case illustrates, online auction fraud is booming. It ranks as the most common type of Web scam and accounts for more than half of all consumer complaints on the Internet, according to the Federal Trade Commission. In fact, the number of complaints rose from 100 or so in 1997 to 10,700 in 1999. "Anytime there's rapid growth in an industry, you also see rapid growth in fraud," says FTC Assistant Director Paul Luehr.
Most reported scams involve person-to-person auction sites, but fraudulent activities are becoming more sophisticated and are spreading to business-to-business auction sites, as well. B2B auctions--which can involve large-scale sales of raw materials and office equipment--provide opportunities for increasingly large frauds. In one recent case, i-Escrow, a Web-based escrow service, stopped a six-figure sale of satellite equipment to a buyer who tried to pass off a forged check. I-Escrow noticed discrepancies after the buyer's own information raised suspicions.
"B2B fraud is really coming to life," says Vince Gottman, senior director of customer support at i-Escrow. "Three years ago, most online auction purchases averaged about $20. Today, it's not unusual for [i-Escrow] to handle $100,000 to $200,000 deals."
Most of the major auction sites, such as Amazon Auctions, Auctions.com, eBay, and Yahoo, are taking steps to prevent fraud--albeit fewer than they could and should take. Government agencies are entering the fray as well, but they lack the finances and the personnel to chase every con artist. As a result, some victims have begun resorting to online vigilantism: warning potential victims and following scammers' digital tracks as the crooks change e-mail identities or acquire extra ones (see "Site Guardians").
For the unscrupulous, the anonymity of the Web makes perpetrating fraud at an auction site alluring, and this anonymity will attract more-sophisticated con artists, too. You take risks whether you're the seller or the buyer. Should you stop using auction sites altogether? Not necessarily. You can protect yourself by being a smart shopper, by reading the transaction terms, and by knowing how to negotiate an auction sale (see "Auction Tips").
Site Guardians: Consumers Fight Back on Their Own
Recalling real posses of the Old West, some Netizens are building virtual posses to track scam artists and warn shoppers of a con in progress.
Robert Denton of Michigan collects watches. He spends at least an hour and a half nightly on eBay monitoring watch auctions and spotting clues to fakes in photos. "I've seen listings for Cartiers, Guccis, and Rolexes that normally sell for $1000 and above, but on the site, the seller offers them for $10," says Denton.
He's written eBay over 50 times to inform the company of a fraud. He always gets a canned e-mail response, thanking him and saying the auction will be investigated. But the fraudulent auctions remain posted. Frustrated, Denton has taken to e-mailing the high bidder of a fraudulent watch auction, telling the buyer that he or she is buying a fake.
"I get letters of thanks all the time," Denton says. But he's also received death threats from sellers who want him to mind his own business. Denton does not take those threats too seriously, but eBay has warned him that he's interfering with auctions and must stop.
Why does he bother to get involved? "I feel an obligation to inform the buyer," he says. EBay passes along all fraud claims to the FTC and, to protect shoppers, insures purchases up to $200.
Auction Tips: Sniffing Out Scams a Mile Away
As you shop around for your next PC or an autographed copy of Dr. Ruth's Sex for Dummies, be aware of scammers' tactics. Here's what you can do to protect yourself:
DO YOUR HOMEWORK. Know what you're bidding on, its value and warranty, and the seller's return policy and shipping charges. Insist that the shipment be insured.
CHECK THE FEEDBACK RATINGS. If the seller has bad or little feedback, don't bid.
CHECK THE SELLER'S BACKGROUND. Get a seller's physical address and other identifying information, such as a phone number.
AVOID SHILLS (sellers or their cohorts bidding on an item to boost its price). See if the seller's and the shill's e-mail addresses have the same Internet service provider domain name. If they do, withdraw.
EVALUATE YOUR PAYMENT OPTIONS. If possible, use a credit card or an escrow service (see "Money Middlemen: How to Use an Escrow Service").
READ THE TERMS OF YOUR CREDIT CARD. The National Consumers League reports that some auction sites bill charges to credit cards as cash advances, not as standard purchases, and these may not be fully covered by the cards' dispute rights.
DON'T BID if you still feel uncomfortable about a listed item for any reason. A similar one will likely be available from a reputable seller.
FILL OUT A COMPLAINT FORM on the National Consumer League's site if you've been defrauded, and talk to an NCL counselor about how you can avoid the same problems in the future. The site will also help you file a fraud report that goes to the FTC and your state's attorney general. Report the scam to the U.S. Department of Justice and to the FBI's Internet Fraud Complaint Center.
READ THE FTC'S Internet Auctions: A Guide for Buyers and Sellers, downloadable from the FTC's Web site. The NCL also offers Be E-Wise: How to Shop Safely Online at its Web site. If you are in doubt about a transaction, contact an NCL counselor at 800/876-7060 or at the organization's Web site for advice.
Con Artists at Work
Hundreds of con artists are prowling Web auctions for their next victim. It's all too easy. Swindlers can easily set up fake identities by signing up for free e-mail accounts using false information. And to keep their identities concealed, deceptive sellers demand payment in the form of cash or a money order, since these are hard to trace. You should pay with a credit card, if possible, so you have a record of the transaction; in most cases, you can
P
peter
Guest
ALL of that and you forgot to add a few things like, I will not buy anything expensive say $300, $500 unless the seller lives close to me and i can pick it up face to face.
And ONLY if i cannot find something within a 100 miles of here, then i will buy something expensive.
OR if its a special item I like buying Stewart Stereo power amplifiers,( 300- 400 watts per channel high power and only 16 lbs. very light weight very expensive over $1100 new!) but ive never seen anyone around NYC sell one always the west coast... but then most of the people are DJ's or recording studios, so you have a good chance it is well mauintained so sending $700 800 is ok.
Ive seen TONS of pawn shops advertise, they at least start with $1. and it is advertised as is. so its your own fault for paying too much.
Feedback can be rigged, but its harder when you have to include the item #, also be wary if someone has 20 30 50 feedback, but hasnt bought or sold anything in the last 6 months.
I havent really got ripped off , i did recieve the item but it was not as described.
nyhting else to add?
And ONLY if i cannot find something within a 100 miles of here, then i will buy something expensive.
OR if its a special item I like buying Stewart Stereo power amplifiers,( 300- 400 watts per channel high power and only 16 lbs. very light weight very expensive over $1100 new!) but ive never seen anyone around NYC sell one always the west coast... but then most of the people are DJ's or recording studios, so you have a good chance it is well mauintained so sending $700 800 is ok.
Ive seen TONS of pawn shops advertise, they at least start with $1. and it is advertised as is. so its your own fault for paying too much.
Feedback can be rigged, but its harder when you have to include the item #, also be wary if someone has 20 30 50 feedback, but hasnt bought or sold anything in the last 6 months.
I havent really got ripped off , i did recieve the item but it was not as described.
nyhting else to add?
P
peter
Guest
AND THE #1 MOST IMPORTANT SAFEGAURD...
DO NOT BUY ANTHING EXPENSIVE FROM SOMONE WITH A ZERO RATING, OR A HOTMAIL MAIL, FREE MAIL SERVICE.
you are really asking for it.....wassa matter you cant afford $20 a month and a credit card to sign up with a real ISP?
DO NOT BUY ANTHING EXPENSIVE FROM SOMONE WITH A ZERO RATING, OR A HOTMAIL MAIL, FREE MAIL SERVICE.
you are really asking for it.....wassa matter you cant afford $20 a month and a credit card to sign up with a real ISP?
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