eBay, authorities probe fraud allegations

eBay is closing some member accounts and calling in federal officials after receiving more than 150 complaints about fraudulent auctions, CNET News.com has learned.

The alleged scam artists built up their reputations over time at the site, where buyers and sellers rank each others' reliability, eBay and those involved in the case said. Then they defrauded buyers on several electronic equipment auctions all at once earlier this month, according to the complaints.

eBay said it has contacted the U.S. Postal Service, which investigates mail fraud, and the Los Angeles Police Department in Van Nuys, Calif., where the alleged perpetrators are believed to have based their operations. Los Angeles police confirmed that they are investigating.

Some eBay buyers who lodged complaints said they paid for items but either didn't get anything or received something other than what they had ordered.

Meng Yang said he paid $931 for a laptop computer around March 11 but never got it despite paying for second-day shipping from Federal Express. Jennifer Williams said she received a Macintosh game controller from the same seller instead of the Palm IIIc she thought she had bought for $390.

"When things like this happen, you don't know what to do," said Williams, of Fresno, Calif. "You feel so helpless."

The case is the latest in a string of fraud-related complaints to shake the leading auction site.

Late last year, a Southern California man was sentenced to 14 months in prison for defrauding eBay users of more than $36,000. Also last year, eBay suffered a rash of spoof or illegal auctions, including 500 pounds of marijuana, a human liver and an unborn baby.

Last spring, eBay reached a settlement with New York City's consumer protection agency, which was investigating complaints about fake sports collectors' items on the site. As part of the settlement, eBay agreed to put in place a series of anti-fraud measures, including attempting to verify the identities of frequent sellers on eBay and offering third-party mediation to sort out disputes between buyers and sellers.

Yang, of Portland, Ore., said he contacted other eBay members who had bid on auctions offered by the same seller. He added that many said they didn't get the items they bought.

eBay's fraud protection includes a feedback system that allows buyers and sellers to praise or criticize how they handled their transactions. But eBay spokesman Kevin Pursglove confirmed that some of the positive feedback seemed to be fraudulent in this case.

"There were a couple cases of shill feedback," he said. "That's cause for immediate suspension from eBay."

Yang said he reported the problems to eBay, the FBI and the Los Angeles Police Department.

eBay members can file an insurance claim for up to $175 with the auction giant, which is backed by Lloyd's of London.

As online auctions have grown in popularity and sales, so too have allegations of auction fraud. Consumers filed some 11,000 complaints about Internet auctions with the Federal Trade Commission last year, up from 107 in 1997.