eBay’s invisible thieves
(Compliments of Jason Houston)
If you want to see what makes the giant, rotten underbelly of eBay breathe, read Kenneth Walton’s excellent biography, “Fake: Forgery, Lies & eBay”.
This tell-all story of how online frauds, fakes and shill bidding are successfully accomplished (while eBay looks the other way) will shock you right out of your shoes. Shill bidding is a sophisticated version of the old ‘pea-in-the-nutshell’ game: List a $100 item at, say $3, then let the ‘shills’ place non-existent bids. When the bid price comes close to the actual value, the shills back off and let legitimate bidders take over.
In the Walton matter, federal prosecutors found the case of forged art works interesting enough to pursue because it differed substantially from their usual drudgery of cases.
In 1999, Walton was a newly-minted California attorney who got caught up in the runaway success of eBay. With two cohorts, they contrived a now all-too-familiar scenario of placing shill bids to drive up the final selling price of counterfeit art objects they auctioned on eBay’s website.
Walton, along with co-conspirators John Fetterman and Scott Beach, set up several dozen bogus eBay accounts under fictitious names, and then bid on each other’s listings.
With Fetterman as their mentor, Walton and Beach learned how to buy pieces of cheap art at thrift stores, junk shops and yard sales for a few dollars, add a few details like the signature of a famous artist whose work the cheap piece resembled, and then list them for sale on eBay—all the while bidding each others’ stuff up. Like all shill bidding on eBay, things went fine—so long as the final bid prices weren’t astonishing enough to draw media attention.
But when an unexpected bidding frenzy on a forged painting whipped up to over $105,000, the carefully-orchestrated house of cards quickly came crashing down—with heavy repercussions that would cost the three crooks years of freedom, their financial resources, livelihoods and reputations.
So by this account, it should come as a major shock to anyone who has ever used eBay to buy toy cars, to discover that shill bidding (a dubious auction habit dating back centuries) was not only ignored, but is today actively endorsed by eBay.
As early as 1999, Carey Wilson of Oklahoma City created several bogus eBay User IDs to shill bid his model cars. When he was caught he blamed the phony accounts on non-existent children whom, he claimed, ‘thought they were doing Daddy a favour’. eBay suspended the shill accounts but not Carey’s main account. No bidders got their overpayments refunded.
In 2003, Paul Nix and Derek Anthony of Los Angeles engaged in an elaborate shill bidding scheme for each others’ cars they listed. After several weeks knowledgeable hobbyists began seeing above-normal prices for cars the two were selling. An exhaustive scrutiny of their public feedback records eventually uncovered the fraud. Only after several non-participating bidders complained, did eBay gave each seller a two-week suspension. Their ‘shilled’ victims were never reimbursed. The windfall amounted to thousands of dollars for Nix, Anthony and eBay.
Wally Warchol of Chicago is even bolder. He creates forged Banthrico cars by using current $8.95 reproductions, then changes the wheels and paints them to look like expensive originals that run in the hundreds of dollars. He uses a shill bidder in Arizona to heat up his bids, who then backs off when the price approaches what a real original would sell for.
Another stroke of genius practiced by both Walton and Warchol today is the subterfuge of writing a clever description without actually making a false statement. Instead, they pull off the deception by showing pictures that induce bidders to assume facts about the item not stated in the listing, but which substantially influence the final bid price.
Jay Szaras of Pompano Beach, Florida is another accomplished forger of expensive promotional car models. A used-car dealer in real life who is always bragging about his phony integrity, he runs several eBay auctions for legitimate toy cars, then slips in a few fakes just to keep it looking sanitary. One trick he uses is to replace the body on a warped original with the body from a modern, inexpensive reproduction. He creates clever desk sets by having a trophy shop engrave a plaque, attributing the car to some famous CEO of the auto manufacturer, then mounts the car on an ordinary wood base with the fake plaque attached. In other instances he whites out the factory stamped colour name on the car’s box end and, with a surgeon’s precision, pencils in a rarer, more desirable colour.
Bob Story in Glenville, Pa. couldn’t resist the temptation to commit fraud with F&F Post cereal cars. In 2009 he made a counterfeit Ford Sunliner out of black resin, then auctioned it on eBay as an original plastic version made in 1954. The auction closed at $600 for what would have been an ordinary $25 car. The scheme was uncovered when experts weren’t convinced that Storey, an expert himself on F&F cars, could ever be so naïve as to sell what would have been a $3,000 car for $600.
Like California attorney Ken Walton, Rob Cerame of Clearwater, Florida, uses the naïve seller mantra, ‘I found this in a closet at my office and don’t know anything about it.’ The listing starts out cheap, but he has strategically placed a salient detail or two in his descriptions to suggest something unique about the piece that would send the price into the upper stratosphere.
In the beginning, researching shill bidding on eBay was time-consuming, but it was possible: one only needed to look up each bidder in the bid history to determine how often he bid with the same seller, whether he actually won anything, and how many other sellers, if any, he placed bids with.
That was until 2008 when eBay masked all bidders’ identities, thus ending any way of publicly documenting who is placing shill bids. Now the floodgates were officially opened for Come-One-Come-All shill bidding—a grand way to pump nose-diving profits and stock values back up, since eBay’s greatest profit source is the healthy commissions they take from the final bid price.
And while eBay still insists they don’t encourage shill bidding, astute observers among the thousands of various disciplines found on eBay, are convinced the dramatic rise in select sellers’ final bid prices—especially in a desperately troubled economy—is only the direct result of shill bidding.
In the meantime, eBay publicly pretends to disapprove of the Walton swindles. eBay’s attorneys, in their familiar don’t-blame-us spin, simply dismiss the fraud as little more than an “incident” and a “most embarrassing moment”.
In the end Fetterman, after two years on the run, was sentenced to four years in federal prison for wire fraud and money laundering. Beach and Walton received minimum probation for their complicity in the frauds. Meanwhile, Walton eventually made restitution to victims who had been duped by all three defendants.
