Scott Budman explains how to avoid being scammed online in a joint KNTV-MSNBC.com report.
By Bob Sullivan Technology correspondent
msnbc.com

He contacted me to brag, this e-mailer named Kenneth. Said he had seen a story I’d done called “True confessions of an eBay criminal,” about a 15-year old who managed to steal a few thousand dollars online. And Kenneth was offended. “He’s an insult to each and every one of us scam artists,” Kenneth wrote. “I could tell you stories.” And so he did. Kenneth claims he’s spent the past two years as one of eBay’s most notorious scammers. Here’s how he does it.

Many of Kenneth's claims cannot be verified — such as his claim that he and his four friends have bilked about $2 million from eBay members in the past two years. But some of his story checks out, and we decided to publish it as an educational tool for eBay users.

EBay spokesman Kevin Pursglove confirmed that “Kenneth” — not his real name — is suspected of hijacking many eBay member accounts, and that law enforcement authorities have been contacted to investigate him.

To prove his skill, Kenneth opened up one of his e-mail accounts to me, an account called “BestbuyPlasma.” In there were dozens of responses from eBay members who had been lured out of a normal auction for a plasma television. Victims contacted by MSNBC.com confirmed that the e-mails were authentic.

Two years ago, when he was 20, Kenneth picked up the trade by watching a friend cheat a few eBay users. Since then, he and his associates have perfected the techniques. They have coffee together every morning to discuss their take from the night before, he said.

Kenneth calls his victims “my customers,” and the scam they fall for is relatively straightforward. It starts with a “phisher” e-mail to perhaps 1,000 eBay users, telling them their accounts will be closed unless they supply their user name and password. Sometimes, as many as 200 people reply, he said.

Armed with access to these eBay accounts, Kenneth impersonates a long-time eBay user with ample positive feedback, and he approaches other eBay users actively engaged in an auction. Via e-mail, he tells them he can offer a better deal. When they bite, he slowly lures them down a path which eventually leads to a fake escrow Web page. Under the false security of an escrow service, victims wire money to Kenneth, and he disappears with their cash.

The tactics are simple, but they do work. The FBI and the Federal Trade Commission this summer held a joint press conference warning consumers about the prevalence of phisher e-mails, which can look exactly like a legitimate note from eBay.

And fake escrow sites are taking such a bite out of consumers that legitimate site Escrow.com has has issued warnings about them; earlier this year, the Federal Trade Commission did, too, when it announced a sweep of auction scam arrests.

EASY TO GET SSN

Kenneth, however, operates far beyond the arm of the Federal Trade Commission. His e-mails appear to come from the Czech Republic, but he denies he’s located there. Instead, he said, that’s just the location of the middlemen through whom his money flows — co-conspirators he refers to as “arrows.”

Actually getting the funds without leaving a trace is the hardest part, of course. Kenneth wouldn’t share many details about that. But in his e-mail was a $60 order placed with a backgrounding company on a victim in Massachusetts. I asked Kenneth what it was for.

“I had almost everything on him, but still missed the SSN,” he wrote to me in chat room.

“Did you get it?” I asked

“Of course.”

“What’s it for?”

“A new acount on a new payment method. A kind of a bank. But if I were to tell you and it would get out. ... I would be out of business.”

“Why him? Who is he?”

“I don’t know exactly.”

“So you know everything about him except who he is. Strange world.”

Kenneth wouldn’t say what firm helped him obtain the Social Security number.

PRIMARY LESSON: DON’T APOLOGIZE

The work is erratic. One day last summer, Kenneth said he scored about $4,000 from victims. Other days he gets nothing.

The most obvious lesson to be learned from reading Kenneth’s e-mail is how tentative and embarrassed people feel when they challenge a seller’s legitimacy. Consumers looking to send $2,000 to a complete stranger they will never see in person are dramatically apologetic when questioning the seller’s credentials, an attitude easily manipulated by a con artist.

“Forgive me for being very cautious. I don’t for one minute doubt you are a very honest person,” wrote one. Another even was so taken in by Kenneth that she felt the urge to look out for him. When he recommended an escrow service, she said, “Beware. There are many fake Escrow companies. Prior to using any Escrow site you should check it out.”

Convincing an eBay buyer to wire money to a fake escrow site might sound far-fetched to some, but Kenneth is crafty at leading consumers down a primrose path. His initial approach invokes fear of getting scammed himself, which disarms some naive buyers, buying Kenneth a sense of kinship with them.

“I prefer not to list my product on Ebay because lately, I have lost a certain amount of money by listing them on this site due to the NPB (non-paying-bidders) and Indonesian buyers,” he writes on first approach.

ID THEFT IS KEY

But the real key to the scam is the stolen identity of an eBay seller. In the scam he shared with us, Kenneth stole the identity of an eBay member with 233 positive feedbacks and no negatives — a sterling report card which conjures up an image of instant credibility and trust. And he immediately uses that when he gets a bite.

“I deal with people all the time and I have not received a negative feedback from anybody,” he wrote to one potential buyer. He goes on to play the emotional card, too. “This is legit! I don’t scam people for a living, as I make a decent living now and must take care of my family (2-year-old daughter and gorgeous wife).Would you scam a person in my case and risk everything you have for any amount of money???”

When a prospective buyer expresses interest but caution about paying, and smartly insists on using an escrow service like Escrow.com, Kenneth is ready with an answer.

“I will use an escrow service, but the www.escrow.com does not work yet in the Czech Rep., therefore I will search one here,” he wrote. On another occasion, he said the same about PayPal, insisting only local escrow services, wire transfers, or travelers checks can be used to close a deal.

MANY RED FLAGS

There are many warning signs in Kenneth’s behavior which should send out red flags to consumers, according to eBay. The primary one: a desire to take the transaction out of the eBay system, company spokesman Pursglove said. When anyone approaches an auction bidder and recommends a private sale, promising cheaper prices that circumvent eBay fees, eBay uses should be wary, he said.

And of course, deals that appear to be too good to be true almost always are just that. Sean Bryant, one potential victim based in the Kent, U.K., said he was suspicious from the start, and bizarre sales tactics tipped him off that Kenneth was certainly a scammer.

“I quickly became uneasy about the transaction when he suddenly lopped another £500 off the asking price, just like that,” Bryant, a police officer in Kent, said. He immediately cut off contact.

But the over-eager sales tactics really do work, Kenneth insists.

“Every day it’s new morons, but the same questions,” he said. “Every moron says, ‘Hey, that’s a pretty good business you have there. How can I send you the money?”

In fact, the plasma TV scam works so well that criminals are apparently fighting over potential victims. Todd Semm, 26, who lost $2,400 in a plasma TV scam last summer, realized in retrospect that scammers were competing with each other for his business.

“I attempted to buy one of these lovely TVs through an EBay auction using none other than Western Union as the payment method. I even had two different sellers trying to outbid each other to receive my purchase. I chose one and sent my money,” Semm, a computer programmer from Irvine Calif., said. It is not clear if Kenneth or one of his associates scammed Semm — Kenneth said he didn’t remember if Semm was one of his “customers.”

But Kenneth is clearly conflicted about what he does. One minute, he offered the popular, post-Enron, everyone’s a criminal defense — ”(I am) Robin Good. I take from the rich and give to myself.” But moments later, he expressed distaste at himself. He said he tried to quit scamming once before, about six months ago, but couldn’t resist the easy money. He still hopes to quit some day — when he accumulates about a million dollars.

“You got to know that this ain’t easy ... I have a nervous breakdown every week and start yelling at everybody,” he said. The tension has given him too strong a taste for Captain Morgan’s with Sprite and lime, sucked down in discotheques into the early hours, he said. “I’m becoming an alcoholic. This stuff puts me down.”

In fact, he regularly corresponds with victims after he’s taken their money. As he talks, he slides freely between insulting them and feeling sorry for them. Many times, after the scam, he tells victims a sob story about needing the money for his sister’s expensive medical care or the like; that eases the anger of some.

“Actually I care about some of my customers,” he said. “This guy who just lost $4,000, I told him my story, and he feels better now.”

On the other hand, those who are onto Kenneth’s game and report him to authorities can expect a not-so-veiled, digital-age threat.

“WOW! did you figure that out all by yourself? You must be related to Einstein,” he wrote one customer who eventually turned Kenneth in to eBay. “I have over 4,000 users and passwords from eBay and I could have yours as well.”

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