Computer Crime Research Center


CONSUMER WATCH: Internet auctions top fraud list

Date: January 30, 2005
By: Iris Taylor

How's this for gall?

A West Virginia man auctioned an airplane on eBay's site and found a buyer willing to pay $16,200 for it. The prospective buyer sent a $2,000 deposit, but didn't hear a peep from the man afterward.

When the man finally responded to the buyer's e-mails, the seller accused the buyer of harassment and said he was going to keep the deposit and not deliver the plane. He then re-listed it on eBay and sold it to another person.

That's a true story, told by the victim to the Internet Crime Complaint Center (IC3) of West Virginia (, which operates offices in Richmond.

Last week, the IC3 issued its 2004 Internet Fraud Crime Report. The principal finding was that Internet auctions topped the list of fraud complaints in 2004.

Consumers swamped the IC3 with 103,959 complaints about all kinds of Internet frauds, including auction fraud. They lodged 40,643 more complaints than in 2003, a 64 percent increase.

But those complaints were only part of the picture. Total complaints filed, fraud and non-fraud, rose nearly 67 percent to 207,449 in 2004.

The IC3 passes along the complaints to appropriate law enforcement agencies nationwide, which go after the perpetrators and try to get back the victims' money. The FBI is IC3's contractual partner and funder.

Auctions led the Internet fraud pack by far (71.2 percent), followed by non-delivery of ordered merchandise or non-payment (15.8 percent); credit and debit card fraud (5.4 percent); check fraud (1.3 percent); investment fraud (0.6 percent); confidence fraud (0.4 percent); identity theft (0.3 percent); computer fraud (0.2 percent); Nigerian letter scam (0.2 percent); and financial institutions fraud (0.1 percent).

Regarding identity theft, the Better Business Administration co-hosted a teleconference on Wednesday announcing results of a study of 4,000 consumers which found that identity theft is more prevalent offline than on line. The most frequently reported source of information used to commit fraud was not an online transaction, but a lost or stolen wallet or checkbook, said BBB and its research partner, Javelin Strategy &Research of California, in their identity theft report. Computer crimes, they said, "accounted for just 11.6 percent of all known-cause identity fraud in 2004."

The lesson, said Tom Gallagher, president of the Better Business Bureau of Central Virginia in Richmond, is, "all the protection that we do for ourselves online does not eliminate the need to protect our personal information in our back pockets or purse."

Does that 11.6 percent figure, and IC3's 0.3 percent, mean there's only a minimal danger of ID theft online?

Not at all. Identity theft "is a real problem online," said John Kane, IC3's manager for research.

It is "a significant threat on the Internet as consumers continue to turn to the Internet for purchasing goods and services," he said.

Furthermore, as more people expose their personal information online, the chances of identity theft goes up, he said.

Then, why was the percentage of identity theft complaints so low? In part, because of the way IC3 classifies complaints, said Kane. Many types of Internet fraud contain elements of identity theft.

For example, if an identity thief steals a person's personal information and runs up thousands of dollars on that person's credit card, IC3 classifies that as credit-card fraud not identity theft. But, if they use the information to find a job, it's classified as ID theft.

"They are only classified as ID theft if there's no other category by which the offense could realistically fall into," he said.

Identity theft is a much bigger problem than the percentages make it appear, he said.

"Despite the way we classify it, it's a significant problem both in the real world and the online world. People really need to exercise diligence in protecting their information whenever they can," he said.

Are you wondering why complaints about Internet auctions soared in 2004?

Partly it's because eBay and other Internet companies cooperated with IC3 and the FBI and provided customers a link to IC3's Web site. They could simply click and complain, which they did.

Victims of Internet fraud lost a bundle in 2004, about $68 million, according to the IC3. One person got taken for $560,000. But most victims (75 percent) got conned out of less than $1,000.

Although Web auctions was the hot spot, those victims lost the least money, about $200 each, compared with about $3,600 for check-fraud victims, the report said.

Virginians were among those swindled. The IC3 said 2.8 percent of the victims live in the state. They were among the swindlers, too, though the state harbored only 1.9 percent of the perpetrators.

The biggest percentage of Internet crooks live in California (14.9 percent), New York (9.5), Florida (9.2), Texas (7.0) and Illinois (4.8).

California is on top partly because it is a populous state, Kane said. And, like Virginia, it attracts technology companies and has Internet-savvy residents. Virginia ranked 15th among the 50 states and the District of Columbia in number of perpetrators.

Nearly 75 percent, or the most, of the con artists, the IC3 reported, were men. Most of the victims were men, too, at 67 percent.

The youngest victim was 10 and the oldest was 100.

"A sizable portion of our demographics are 50 and over," said Kane.

As seniors increasingly become more comfortable using the Internet, the number of elderly victims will likely increase, he said. They tend to be trusting and if they're new to the Internet, they and other new users haven't a clue what to expect.

It's why tired old e-mail come-ons that experienced users think are ludicrous, find so many new victims each year.

E-mail is what crooks most often used to ensnare their victims in 2004 followed by Web sites.

Read the full IC3 study, get safety tips or complain about a Web crime at

Is the study an accurate indicator of what's happening Internet-wide? No, said Kane.

"We think the number of people who complain probably is just the tip of an iceberg."

See details of the BBB study at Careful, though. This study was paid for by three for-profit companies that offer online services.

So, what happened with the West Virginia man who auctioned his airplane on eBay and ripped off a potential buyer? He led police on a wild 100 mph motorcycle chase that ended at a roadblock, reported IC3.

He was arrested and charged with computer fraud, and charges related to the chase. Last June, he plead guilty to a lesser charge of obtaining money under false pretenses. He was sentenced to six months in jail, fined $250 plus court costs and ordered to pay restitution to his victim within six months of release.

Impressed? Don't be. The man's jail sentence was suspended pending payment of victim restitution.

Think the victim will ever get back his $2,000?

Consumer Watch appears weekly except for the first Sunday of the month, when The Times-Dispatch publishes the Small Business column. If you have consumer concerns, call Iris Taylor at (804) 649-6349 or write to her c/o Richmond Times-Dispatch Business News Department, P.O. Box 85333, Richmond, VA 23293. Her e-mail address is

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