Warning: Retail Arbitrage Credit Card Fraud

[valueaddedresource]

*This Is A Posting ID*

We are a large, multi-channel business that sells on eBay, Amazon and direct websites.  Our direct sites have seen a huge increase in credit card chargebacks in the last month and a half.  While investigating this situation, we have discovered a fraud ring operating on eBay that appears to be massive in its scope and sophistication.

This fraud ring lists items for sale on eBay, then when they make a sale, they place the order on one of our direct sites to ship to their buyer.  It’s pretty basic retail arbitrage, but they are using stolen credit cards to do it.  We have identified more than 800 orders, totaling over $40k in sales that we believe are part of this fraud.

So far, we have discovered 17 selling accounts engaging in this fraud.  All of them have been reported to eBay.  After two weeks of back and forth with eBay support via email, they have finally shut down 13 of the 17 accounts.  Of the 4 accounts that are still operating, one even has a neutral feedback that says ‘Sent with someone else’s CC # at double the price I paid. Said “No worry”’ . We brought that feedback to eBay’s attention in the report, but they still have not shut that account down yet.

We wanted to bring this to the attention of other sellers, both to see if anyone else has experienced this and to warn others to keep an eye out for this kind of suspicious activity. We don’t want to give out too many details publicly at this time, but a few things to look out for are:

Single item orders – On our direct sites we usually have some kind of free shipping or free gift over $X promotion running, so people typically buy multiple items to get to that minimum.  We do get single item orders that are legitimate, but 20-30+ orders for the same single item in a short amount of time is not typical for us and would be a possible red flag. 

Different bill to and ship to addresses – Again, we do get legitimate orders that have different bill to and ship to addresses, so different addresses doesn’t automatically mean they are fraud,  but we are seeing far more than usual in the last month or so.  The fraudsters seem to have the correct billing info because it does match the address and CVV checks.  Once they verify that a card will go through, they use that same card repeatedly, so look out for same billing name/address being used repeatedly with different ship to addresses.

I would guess the fraudsters probably target larger multichannel sellers like us because they know at the volume at which we operate, order processing and fulfillment is more likely to be automated and fraud is less likely to be noticed than a mom and pop where only 1 or 2 people manually handle all aspects of every single order.

If you suspect this fraud is happening to you, here are a few things we have found in common among the fraud sellers.

Low Price – They don’t care if the price on our site is higher than what they sell it for because they aren’t paying for it.  All they care about is getting a high volume in sales, so typically they will undercut the average price by at least a few dollars, sometimes as much as half the regular retail price.

Title & Description – Titles, descriptions and just general style of the listings across all of these sellers have a lot in common.

Handling Time – So far they have all had extended handling times. 

Returns – So far they have all had “seller does not accept returns” 

Items currently for sale and past items sold – they typically have less than 10 active listings at any one time that they cycle through.  Their feedback history shows a pattern of listing products in one category for a while and then, presumably when someone catches on and starts canceling their orders, they shift to a different category. They are not focused on just one category or type of product, they are just looking for hot sellers, so every category is a possible target.  We are definitely not their only victim.

 Sold History– if the suspected fraud listing for that item has sales within 24 hours of you receiving orders for that item, it’s possible they are using you to fulfill those sales. 

Unfortunately, feedback isn’t very helpful in IDing them.  Most of them are 98% or above with very few negatives.  Either they get negatives removed, or just as likely is that the eBay buyer simply has no reason to complain.  They order an item at a great price and most of the time that correct item shows up on their doorstep in a few days.  They may not even look at the company name on the invoice or even if they do, they may not care or realize what is going on.  They got what they ordered and are none the wiser as far as the fraud aspect of this is concerned. 

[jerzee908]

And eBay wants our SSN and bank information for "Managed Payments"? Ha!

[mvls1]

acc756

Thank you very much for your postings. All this information helps with seller awareness. It reminds sellers to be sure to check everything you can on suspected problem buyers before accepting offers or shipping product and ALWAYS report  fraud/scams.

[valueaddedresource]

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@picknparley wrote:

Have you submitted anything to the attorney general? I just think the more departments that know about this the better the chance that something will be done. 

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@picknparley  - not yet, but they are on my list now, thanks! We submitted the IC3 at eBay's direction, but I agree that the more departments we can get looking into it, the better.

[picknparley]

I really wish you great success. I hope you'll message me and let me know how it goes.  I'm most interested in the responses you get from officials.  I know there's a way to get the attention of the right department, but I'm not sure what that is other than to keep making noise.  

[ittybitnot]

I would guess the fraudsters probably target larger multichannel sellers like us because they know at the volume at which we operate, order processing and fulfillment is more likely to be automated and fraud is less likely to be noticed than a mom and pop where only 1 or 2 people manually handle all aspects of every single order.

It seems to me what you are describing is a variation of the age old "triangulation" scam. In its simple form it worked like this:  eBay 'seller' places something for sale,  when it sells they buy it on Amazon (with a stolen card) and have it shipped directly to the buyer.   Though it may raise some suspicion with the buyer when they get a parcel with an invoice/packing slip from someone else,  they did get what they ordered, and nobody is going to try and take the merchandise back. 

In your case, you can simply remove the "Amazon" factor and insert your own sales channel /website name, which indeed could be Amazon as well.   It really doesn't matter if you are accepting money via a marketplace or via your own merchant account.  When either payment processor discovers the "funny money" they are going to want it back from YOU the vendor in this situation.  

Sometime the use of a "hacked" ebay account is used. This is of the sort where you will see odd items in the list of a seller as you mentioned.   An example would be a case of a seller who typically sells used children's clothing suddenly having high demand expensive electronics mixed in.  In these instances both the original  seller AND the hacker have access to the account and can likely direct the buyer payment money elsewhere for a while until the ruse is discovered.  

I am sure there are more 'variations' of the same.  Thanks so much for posting about yours.  I am going to be launching a new small  website soon, and will indeed give more thought to the payment settings as a result of you sharing this information. 

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@ittybitnot wrote:

I am sure there are more 'variations' of the same.  Thanks so much for posting about yours.  I am going to be launching a new small  website soon, and will indeed give more thought to the payment settings as a result of you sharing this information. 

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@ittybitnot  - you are exactly right about the triangulation scheme.  I was aware that scheme has been around for a long time, but I've never seen anything like the scope and size of this in the almost 15 years I've been involved in e-commerce.  The depth of it is mind boggling honestly.

As far as payment settings go, it's a tough balance between security and trying to make sure you aren't losing legitimate sales, and I think the fraudsters know it.

For our business, we have a lot of legitimate customers who purchase our items as gifts for someone else. We also have a segment of our customer base who are professionals that use our products and a lot of them will have the order shipped to their business location but the credit card bill may go to their house. We'd be shooting ourselves in the foot if we just made a blanket policy to automatically reject every order with a different bill to and ship to address.

We have put some extra things in place in our operation now to try to catch most of these orders and cancel them before they ship, but it is difficult and there is still the risk we could possibly be canceling legitimate orders.  We're hoping that having the orders canceled disrupts the fraud enough that they decide we aren't worth messing with any more, but based on what I have seen they would likely just move on to a different product/seller and I'm not satisfied with that.  We will definitely be pursuing it to the fullest extent we are able to and trying to get them shut down for good.

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@ittybitnot wrote:

I am sure there are more 'variations' of the same.  Thanks so much for posting about yours.  I am going to be launching a new small  website soon, and will indeed give more thought to the payment settings as a result of you sharing this information. 

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You are exactly right about the triangulation scheme.  I knew it has been around a long time but I've never personally seen anything of this scope or magnitude in the 15 years I've been in e-commerce.  The depth of this is mind boggling honestly.

As far as payment settings, it's a tough balance between security and not losing legitimate sales and I think the fraudsters know that and exploit it.

For our business, we have a lot of customers who send our products to others as gifts.  We also have a segment of our customer base who are professionals that use our products in their businesses and often times they will have the product shipped to the business address but the billing address is their home.  We would be shooting ourselves in the foot if we just had a blanket policy of automatically rejecting every order where the bill to and ship to is different.

We've put some things in place now to try to catch most of these orders before they ship and it seems to be working, but there's still the risk we are canceling legitimate orders.  We're hopping that cancelling them disrupts the fraud enough to where they decide we aren't worth messing with, but we also know that if we stopped there they would just move on to someone else and that's not acceptable.  Our primary goal is to protect our business of course, but we're going to pursue this to the greatest extent we can and try to get it shut down for good.

[earlyant-77]

This is why people should set their card alerts up to receive them for 'card not present' transactions. Yes, you get extra emails, but it's worth it.

[valueaddedresource]

Found and reported another fraud account this morning.

[lkjaowi-0]

So let me get this straight...

A buyer purchases an item from a supposed "fraud" seller on ebay, that seller then proceeds to order the item from you (at a website of yours and not ebay) with a stolen credit card, long story short you're out of the money... Correct?

First off that's pretty far fetched, that a seller would fill listings on ebay to then "dropship" with a stolen credit card is one thing but for them to hijack legitimate accounts and populate stores with a few items among all the legitimate listings... Uhm, no. Also unfortunately the stolen credit card transaction isn't happening on ebay.  I can appreciate you believe you should bring this to our attention since (obviously) the dropshipped item's sale originally transpired here but ultimately the fraud is occuring at your website and not on ebay. Because of that bringing this to our attention can only cause fear and panic for no good reason. Or perhaps that is the reason, either way I have 18 orders today and I intend to fulfill them, I don't see what you want ebay to do about this.

I am not even going to check if the payment method is legitimate, I also see no "alien" orders have been placed, I am pretty sure they can't use my account to sell legitimate items that misteriously disappear from my records and are visible to only the buyer and the fraudster seller. No, I don't need to peruse all my listings one by one to see if something is out of order, I simply look at my total number of listings and I see that number is right where it should be... I had an exact number of listings populating my store yesterday, that same number is there today.

Last but not least I find it hard to believe this fraud you speak of is so rampant yet nobody else has noticed... I have not experienced any chargebacks for credit card fraud and if you're not selling on ebay why bring it here? This community is specifically for ebay buyers and sellers, not for third party contracts who feel a crime on their third party website has used ebay as an unwilling participant. Sad as that may be, if a seller sells me an item and they then steal that item from you the crime occured at your location, there is no need to involve third party merchants.

I suggest you go to the police, perhaps stop implying that ebay is somehow at fault here.  If a fraudster is using a stolen credit card on YOUR website to dropship an item then the fraud is happening at your end, it doesn't matter where the dropship sale happened, pulling those listings one by one is not the way to solve this supposed crime.

More to the crux of the matter, perhaps you need some rest. Perhaps stop sales on your end until you've had a chance to clear your head, maybe this whole virus epidemic has got you into a panic where conspiracy theories of all sorts are spawning but I assure you ebay has nothing to do with it. Yes, fake accounts are created here every day, all day. Trying to pull these one by one is an exercise in frustration control, trying to pull those account's listings one by one is even worse... That would be like trying to move beach sand a grain at a time, further you are probably having ebay pull legitimate listings, too.

Time to do some relaxation and thinking, maybe you've been cooped up too long.

Isolation isn't good for the mind, I know you can't just go out there and be social but clear your head somehow, maybe watch a good movie, grab a phone and talk to some friends, I don't know but get out a bit.

Prayer could work wonders as well.

Good luck to you

[valueaddedresource]

Wow, all I can say is I think it is you who may need the rest and relaxation.  You read a whole lot into my posts that isn't there and missed a whole lot that is.

First, we do sell on eBay in addition to other marketplaces and our direct sites.  You seem to have missed the part where I said this is a large company.  We've been selling online for over 20 years, have about 50 employees, and ship thousands of orders a week.  This isn't our first rodeo and we aren't just making up crazy conspiracy theories.

Second, there are many sellers on eBay who also sell on other channels as well and yes I think it is extremely relevant to post this information here to warn others.  Not trying to scare anyone, just trying to get the information out there.

I'm not going to debate with anyone whether or not this is really happening.  It has been verified multiple times by speaking to the actual receivers of the products who confirmed the accounts they purchased from on eBay.  Also verified by feedback left for at least one of those sellers 6 months ago on an item that has nothing to do with us.  You can believe me or not, doesn't matter to me.  I am posting this information as a public service, take it or leave it.

If you don't believe they would hijack accounts and change just a few listings, I would suggest that you do some research on the massive fraud experienced on eBay UK last year where they did pretty much exactly that to funnel off payments to alternate PayPal accounts.

As far as what eBay has to do with it? For starters, all of these sellers are violating eBay's drop ship and item location misrepresentation policies, so even if eBay has nothing to do with the credit card fraud aspect, they should be aware of and shut these accounts down for those violations if nothing else.

The fact that eBay has shut down 13 of the now 18 accounts we have reported lends credibility to the fact that eBay found something suspicious or in violation of policy.  We aren't forcing eBay to take anyone's listings down - we have simply reported the facts that we have to eBay and they have taken action from there.

There's also the fact that eBay buyers who receive items "drop shipped" in this manner are likely to be disappointed and/or confused and may even stop buying on eBay all together, which affects all of us who sell here.  Go look on the buyer's board to see the daily complaints about this.

Bigger picture, there could be security concerns with eBay accounts possibly being compromised and used in this fraud, so yes this issue should concern both eBay and eBay users.

If you don't find it credible or don't believe it is worth worrying about for your particular business, that's fine.  Please move on.

[valueaddedresource]

2 more accounts found and reported to eBay just now.

[valueaddedresource]

I have submitted reports to our state attorney general's office and the FTC regarding this issue and will update here with any further progress in pursuing this with the authorities.

[picknparley]

Wow, have you been living in a hole?   To question the authenticity or validity of the OP's comments is an incredibly uninformed bunch of garble. 

[datemike1]

@lkjaowi-0 Seriously?  Did you even bother reading the thread?  Maybe don't post on the eBay forums  or perhaps stop sales on your end until you've had a chance to clear your head, maybe this whole virus epidemic has got you into a panic where conspiracy theories of all sorts are spawning.  

Reading your post was the laugh I needed today, thank you for that.  

@valueaddedresource thank you for your detailed posts and information.   I'm far from a large enough seller to really have to worry about this but it's good that i'm aware of it and I thank you for alerting us to this scam.  As for the guy telling you you're a conspiracy theorist, he's probably one of the scammers upset they got caught, or he's just really bored but either way, just ignore him, it's clear this whole virus epidemic has got him into a panic...  Also, don't bother replying or justifying yourself to them, it's a waste of time and those of us who have had plenty of time to clear our heads appreciate and trust what you're saying.