eBay Fraud
By Noah Davis
Caveat emptor – “Let the buyer beware” – has been a watchword since ancient times. In a perfect world, the warning would be unnecessary because sellers would have the buyers’ best interest at heart. But humans are far from perfect, so buyers must be cautious and know what they are getting. In the Internet age this has become increasingly difficult, especially with online auctions sites such as eBay. With millions of items sold every month, the administrators cannot monitor every sale and the nature of the transaction makes it impossible for buyers to inspect the items they are purchasing.
Fraud is a constant threat. A person will bid for an item and win the auction. Then they will send a Western Union money order to the seller, and wait for the purchase to arrive. It never does. Non-delivery fraud is the oldest trick in the book, yet people routinely fall for it.
Even if the goods do arrive, buyers may still have been swindled without realizing it. In Fake: Forgery, Lies & eBay, Kenneth Walton details his methods as an Internet fraudster. In 1999, the former lawyer began purchasing paintings at clearance sales and auctioning them on eBay. Walton’s main tactic was “shill bidding”, whereby he or his partner Kenneth Fetterman would anonymously bid for their own goods, forcing legitimate buyers to up their bids. His other trick was to forge artists’ signatures on pictures, while professing to know nothing about the work’s provenance – which fooled buyers into thinking that they were outwitting a novice seller, when really, Walton was manipulating them.
Walton was only caught because the New York Times began investigating one of his auctions, where the price of the painting skyrocketed to $135,805, due to speculation that it was by the artist Richard Diebenkon – which Walton secretly encouraged, while playing dumb. Exposed and charged with fraud, he pleaded guilty, plea bargained and escaped a prison sentence. Writing Fake served as a “cathartic process” after the whole affair.
While the publicity surrounding Walton’s arrest alerted users to “shill bidding” and other types of eBay fraud, a controversial new policy is actually making it easier. Recently, eBay stopped showing the username of anyone who bids over $200 on an item. The reasoning behind this was to stop fake second-chance offers. Under eBay rules, if the winner of an auction refuses to pay or cannot pay, the seller can go to the second-highest bidder. However, fraudsters posing as buyers had been emailing bidders and convincing them they were the second-chance winner. The victim would send money and never receive anything, so eBay enacted the policy to stop this.
However, Ina Steiner, owner of AuctionBytes.com, a site dedicated to helping those who participate in online auctions, explains that she’s “skeptical that it’s going to fix the problem of fake second chance offers,” as “it’s never a good thing when they take away transparency.” Hackers are still able to get information about second-chance winners, and now buyers are unable to track who is bidding because names are hidden.
Rosalinda Baldwin, who runs the Auction Guild website (www.theauctionguild.com), states that “The current policy is absolutely horrendous and should be retracted.” She reckons that eBay benefits from auctions that have higher prices and is not doing enough to stop “shilling.” EBay “are constantly doing things and manipulating the site at the cost of buyers and sellers…they have just given the gold seal of approval to ‘shill’ bidders,” she says.
To some extent, Walton concurs. “EBay shuns publicity about ‘shill bidding’…They only talk about it if they have to. People I talk to say they don’t know about it, but I’m sure it happens all the time.” He does, however, stop short of accusing eBay of secretly encouraging “shilling,” remarking: “I’m sure they take steps [to police it], but I don’t know if they can stop all of it.”
Conversely, Steiner believes that “the move [to hide account names] is well-intentioned. I don’t think that eBay wants fraud or ‘shill bidding’ on its site. They make plenty of money without it upping the prices.”
All three agree that it’s up to the buyer to beware. Both Steiner and Baldwin maintain that they can quickly tell if an auction is being “shilled”. “You just have to follow the Yellow Brick Road,” says Baldwin; “If I can go it, anyone can.” Education is the key, and through their sites and others like them, any potential bidder can protect themselves from fraud. One giveaway is if the seller requests a Western Union money order, since once the money is in the system it can be picked up anywhere in the world, with no chance of tracing or recovering it. So a seller could claim they are in Connecticut, and actually be in Kazakhstan. And because international law is so complicated, taking any legal action becomes much more difficult.
Carnegie Mellon professor Christos Faloutsos and his colleagues are taking a different approach. Non-delivery fraudsters usually have a network of associates who post good feedback on their accounts, to convince bidders that they are trustworthy. To combat this, Faloutsos and his associate Polo Chau developed a system called NetProbe, to track the records of buyers and sellers. “You can plot the transactions like a social network – every node [sale] is tracked – and if it’s a fraud, the algorithm can spot it,” says Faloutsos.
A prototype has been tested on 60,000 users and successfully identified ten with criminal backgrounds. The next step is to test it within a larger, closed community and, if all goes well, to apply NetProbe to the entire auction community. Hopefully, potential bidders may soon be able to check sellers’ records and prevent themselves from being defrauded.
Yet however much people try to stop it, eBay fraud will never entirely disappear. All that potential buyers and sellers can do is get educated and be cautious. Technology may have changed but caveat emptor still holds true.
