Bitten bidders
Online auction fraud turns complex--and expensive
Last month, Michael Snyder, an artistic director at a record label in San Francisco, spotted an incredible deal on eBay for a laptop computer--50 percent below retail. A savvy shopper, Snyder reasoned that failing dot coms all over the Bay Area were liquidating their equipment at bargain prices. He reviewed the seller's "feedback," a record of comments from other customers, and checked the product's specifications and warranty. "It was certainly a glamorous offer, A+ across the board," he recalls.
The seller said he was on assignment in Spain, but Snyder was hungry to get the deal. So he arranged to wire money to a Spanish friend who could buy the computer in person, as a precaution. But the seller insisted on having the wire transfer tracking number. Hours later, the seller arrived in a Western Union office with the number, posing as Snyder's friend. "I've taken your money," he later E-mailed Snyder. And he attached this after-the-fact warning: "You should be more careful buying things on the Internet."
Indeed, he should. According to the Federal Trade Commission, auction scams are now the most prevalent type of Internet fraud. In 2002, the agency received 51,000 online auction complaints, up from roughly 20,000 the previous year. Authorities say even these figures fail to capture the enormity of the problem. Not only is the occurrence of auction fraud greater than the number of cases reported, but the types of fraud committed have grown increasingly complicated.
Convoluted. "While we used to see stories about people who would not send an item as described, send broken items, or not deliver at all, frauds are just getting much more sophisticated than that," says Ina Steiner, editor of AuctionBytes.com, an online resource for Internet auction buyers and sellers. Con artists have turned to online auction sites as a hunting ground for new victims, luring people off the sites, posting illegitimate ads, or sending spoof E-mails to trick them. They have even used identity theft to avoid detection.
The vast majority of online auction fraud occurs on eBay, simply because it is the biggest auction site, says Shawn Hutton, research associate at the National White Collar Crime Center. EBay, based in San Jose, Calif., boasted roughly 69 million registered users worldwide through March 31 this year and $1.2 billion of net revenue in 2002. Nearly 8 million bids are placed every day. Spokesperson Kevin Pursglove says that fraud is minimal but concedes it is hard to track.
Still, officials say the dollar amounts of the scams are growing in tandem with their complexity. In April, the U.S. attorney in Massachusetts announced the sentencing of Teresa Smith, 25, the perpetrator of the largest Internet auction scheme ever prosecuted: Approximately 300 bidders were defrauded of $857,776 in computer equipment purchases. "I still get a sick feeling in my stomach every time I think about the money I lost to her," says Dave Curry, a Doylestown, Pa., schoolteacher who lost $2,335. Curry was luckier than some. Earlier this year, Robert Jaramillo and Alexander Sajid Hipkins, posing as BMW sellers, lured bidders to New Mexico. The two were indicted for conspiring to take the money by force once the victim arrived. They have entered plea agreements and one has already been sentenced.
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