Computer Crime Problems Research Center

David H. Freedman

What eBay Isn't Telling You

Jeff Hamm, a slender 30-year-old partial to all-black outfits, spends much of his time pretending to be a young girl or boy. It's his duty, he's good at it, and he carries it out in a long, cramped room whose helter-skelter layout is dominated by the muted glow of websites displayed on several monitors. This is the headquarters of the Oakland County, Mich., computer crime unit. It could pass for a scrappy dotcom, if it weren't for the photographic portraits arrayed on one section of wall, which are unmistakably of the arrest-booking ilk. Most, it turns out, are of convicted "preferential child offenders" -- cop-speak for pedophiles -- whose sordid march toward justice began when they encountered one of Hamm's personae in a chat room.

But on Jan. 22, Hamm's mind wasn't on trolling for perverts. He was staring at the latest e-mail from the Internet Fraud Complaint Center (IFCC), a federal agency that acts as a clearinghouse for online scams. Five reports came in that morning from the IFCC, all involving the same alleged perpetrator: one Stewart Richardson, who operated a small shop just down the road from Hamm's office in White Lake Township. From there, Richardson ran a business selling collectible figurines -- glass, porcelain, and ceramic angels and elves from Hummel and other makers.

Each report described how a buyer had won an online auction on eBay (EBAY), sent money to Richardson, and received nothing in return. The size of the claims quickly caught Hamm's eye: Whereas the typical online auction victim complained of losing $200 or so, these customers were claiming losses of anywhere from $1,000 to $20,000.

Hamm was mulling over the information when his boss, Sgt. Joe Duke, told him that Lt. Ed Harris of the White Lake Police was on the phone. Harris, it turned out, had already received a dozen or so phone calls from enraged Richardson customers around the country. Duke also learned that just five days earlier, Richardson's wife had reported that her husband had left for lunch, cleaned out their bank accounts, and never returned.

The emerging details left Hamm, Duke, and FBI agents pondering the same question: How could so many people have turned over so much money to a man they knew only through an online auction, without any proof that they'd receive merchandise in return -- or even that the merchandise existed?

The answer points to a glaring hole in the eBay user-evaluation system -- in which buyers and sellers post ratings and comments about each other. The feedback system is designed to protect against unscrupulous buyers and sellers. But it also can fail to alert people to fraud -- and can even be used as a central element of the scam itself. It's a situation that might give pause to anyone thinking of purchasing high-value items on eBay, given that eBay itself holds up the rating system as the main, and in some cases only, line of defense against fraud.


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