Internet auction fraud occurs in several ways, but the most common is the failure to deliver the purchased item. Internet auction fraud involves non-delivery, misrepresentation, triangulation, fee stacking, black-market goods, multiple bidding, and shill bidding:
Non-delivery involves the seller placing an item up for bid, but the item is never delivered to the buyer after he/she makes the purchases. Additionally, if the buyer pays by credit card, the seller obtains their name and credit card number.
Misrepresentation occurs when the seller's purpose is to deceive the buyer as to the true value of an item. This can be as simple as listing false information about the item that is up for bid. It can involve sellers using pictures that are not the actual picture of the item up for bid. Also, the seller might alter the picture after it is taken to make the item appear in better condition than it really is.
Triangulation involves three parties: the scam operator, a consumer, and an online merchant. The operator buys merchandise from an online merchant using stolen identities and credit card numbers. Then, the operator sells the merchandise at online auction sites to unsuspecting bidders (buyers). Next, the scam operator has the buyer wire transfer the money and then sends the merchandise to the buyer. The unsuspecting buyer becomes the target of a stolen goods investigation. Law enforcement steps in and collects the stolen merchandise to keep for evidence. The buyer and merchant end up the victims.
Fee stacking involves the seller adding hidden charges to the item after the auction is over to obtain more money. Instead of a flat rate for postage and handling, the seller adds separate charges for postage, handling, and the shipping container. As a result, the buyer has now paid a lot more for the item than what he/she had anticipated.
Black-market/Counterfeit goods are also offered for sale on Internet auction sites. These goods include copied software, music CDs, videos, replica name brand items, etc. The goods are delivered without a box, warranty, or instructions.
Multiple bidding is used to buy an item at a lower price. This occurs when a buyer places multiple bids (some high and some low) on the same item using different aliases. The multiple high bids by the same buyer cause the price to escalate, which scares off other potential buyers from bidding. Then, in the last few minutes of the auction, the same buyer withdraws their high bids, only to purchase the item with their much lower bid.
Finally, shill bidding is intentional fake bidding by the seller to drive up the price of his/her own item that is up for bid. This is accomplished by the sellers themselves making bids on their own items, and/or someone who is associated with the seller making bids to purposely drive up the price of the seller's item.
Auction fraud is the most prevalent of Internet crimes associated with eastern European countries. The subjects have saturated the Internet auctions and offer almost every in-demand product. The subjects have also become more flexible, allowing victims to send half the funds now, and the other half when the item arrives.
The money is usually transferred via wire transfer. In order to receive funds via wire transfer, the receiver must provide the complete information of the sender and the receiver’s full name and address. The funds can be picked up anywhere in the country using this information. There is no need to provide the money transfer control number (MTCN) or the answer to any secret question, as many subjects have purported to the victims. Money sent via wire transfer leaves little recourse for the victim.
The most recent trend is a large increase in bank-to-bank wire transfers. Most significantly, these wire transfers go through large United States banks and are then routed to Europe.