With the surge in popularity of online auctions there has also been a rise in auction fraud scams. The anonymity offered by the internet provides a perfect environment for online auction scams. There are several varieties of auction fraud scams, which can range from very simple and primitive to very complex and sophisticated. The common denominator: somebody does not get what they paid for.
The most primitive auction scams involve sellers who sell fake or stolen goods, or sellers who simply take money and never send any goods. One sign of this type of scam is when a seller asks a buyer to wire money through a company like Western Union rather than accept PayPal or a credit card. Western Union is typically used because once money is transferred via Western Union, there is little that can be done to get the money back. PayPal and credit cards, on the other hand, have mechanisms that allow transactions to be reversed if the item is not sent.
Another type of online auction scam is known as “shill bidding” or “second-chance schemes.” These scams involve the seller using a “shill” to bid up an item, and then offering the item to the legitimate buyer that comes in second place in the auction at that bidder’s highest place. This scam permits the seller to artificially inflate the bidding on an item.
One of the most complex and sophisticated online auction scams is the “overpayment scam.” What makes an “overpayment scam” unique is that it is usually the seller of an item that is the target. A buyer bids on a high-end item and wins the auction. The buyer then sends the seller a counterfeit check for an amount greater than the value of the item. When the seller contacts the buyer to tell him that the check was for a greater amount, the buyer asks the seller to deposit the check and to refund the overpayment to the seller. Using this method, a buyer is able to get cash for a counterfeit check without having to take the risk of passing the check himself.
In February of 2011, Adrian Ghighina of Romania, pled guilty in the United States District Court for the Northern District of Illinois for his involvement in an online auction scam that purportedly netted $2.7 million. In court documents, prosecutors alleged that individuals located in Romania offered items for sale on internet sites such as eBay, craigslist and AutoTrader. When bidders won items, bidders were urged to wire transfer funds via Western Union. However, in order to avoid the suspicion that would be raised if the funds were being wired to Romania, the alleged conspirators purportedly used individuals in the United States, including Ghighina, to receive the money in the United States. The US-based conspirators allegedly used a variety of aliases and locations to hide their identities when receiving the funds. The sellers purportedly never actually sent any items to the winning bidders.
Ghighina pled guilty to acting as “a money mule” who would pick up the money at various Western Union locations and forward the money to alleged co-conspirators in Romania. In his plea agreement, Ghighina admitted to obtaining several fraudulent identifications for various aliases. Ghighina would receive payment information from co-conspirators in Romania by text message that would allow him to go to a Western Union location in the United States and obtain funds. Ghighina would then give the funds (minus a percentage that he collected as his fee) to individuals who would transfer them to Romania. Ghighina pled guilty to one count of wire fraud under an indictment issued in Chicago and one count of conspiracy to commit wire fraud under an indictment out of Washington, D.C. Ghighina was sentenced to 27 months in federal prison.
This article was written by New Jersey criminal defense lawyer Nace Naumoski.
