The Federal Trade Commission last year received a record number of complaints, some 166,000, related to Internet fraud linked to losses of nearly $200 million. Half of the cases involved online auctions.
Those crimes are no longer limited to someone getting a bum deal on a lamp or Beanie Baby. A group of amateur motorcycle thieves from Austin filched nine bikes and sold them for $15,000 to a man who took them apart and auctioned off the spare parts online. A wife-and-husband team from Atlanta removed the bar codes from low-cost items and put them on expensive rugs that they purchased from Home Depot and Lowe's stores. They then returned the items, accepting gift cards for the real price of the merchandise, often hundreds of dollars more than they paid. They then would sell the gift cards on eBay. Prosecutors say the pair made at least $150,000 from the crime.
EBay spokesman Hani Durzy said that most auctions proceed without problems but that the company estimates a minuscule number -- 0.01 percent -- are fraudulent. There is no way to know exactly how many sales involve stolen goods.
"It would be impossible for us to be able to pinpoint a stolen good before it gets reported to us," Durzy said. "We don't own it. We don't ship it. We never handle it."
But with 30 million auctions happening on any given day, even 0.01 percent means at least 3,000 could involve some sort of crime. Durzy said eBay over the years has increased its security team to 1,000 people -- or 13 percent of its total employees -- to help combat the problem. It introduced a computer analysis system to flag suspicious auctions, and it is actively cooperating with government investigators around the world.
Karbunara, who was living in Woburn, Mass., began shoplifting in January 2002, authorities said. He paid a group of women from $50 to $200 a day to help him. As part of one scam, one woman would shoplift some merchandise and another would purchase identical items. Karbunara would scan the receipt into a computer, print counterfeits and then the women would return to the stores to get credit on their credit cards, prosecutors claimed.
In March 2003, Karbunara moved his operation online. He would return shoplifted items for gift cards and sell them on eBay. Under the name "apolonia1trading," he posted offers for cards worth as much as $1,200.
A suspicious retailer tipped the attorney general's office to the fact that a gift card from her store issued from stolen merchandise was being auctioned on eBay. By tracing Karbunara based on information from eBay's logs, law enforcement officials began secretly following him. They saw that he would wait in the parking lot as the women took brown paper bags into stores and then returned with stolen merchandise. They would then change their clothes and wigs and go to another store, working their way around the mall. On one occasion, law enforcement officials followed him and his accomplices as they hopped from shopping center to shopping center from Boston all the way to southern Maine.
"It took a lot of work by state police and store security to figure out what the entire scheme was," Grossman said.
Karbunara's ads on eBay were simple postings, Grossman said, with the picture of the store logo, the dollar amount of the card and an offer to sell it at a discount. With the sale of gift cards exploding in recent years, there was nothing suspicious except for maybe the number of cards he was selling. He often had dozens of cards for sale at one time, for a total of 600 cards over the time he was running the scheme.
For the most part, the people who purchased the cards paid for them using PayPal, an online payment system that shields credit card numbers and bank account information from sellers. However, buyers did have to supply their names and mailing addresses to receive the cards.
Gift card fraud is one of the fastest-growing problems for merchants, according to Richard C. Hollinger, a professor of criminology at the University of Florida. The National Retail Federation, an industry group based in the District, said one of its member companies recently tracked 42 gift cards it found online and found that 22 had been stolen or purchased with stolen credit cards.
Hollinger said the number of cards that people such as Karbunara post should tip off eBay to the scam quickly.
"The only people that deal in those kinds of quantities are professional criminals," Hollinger said.
In response to concerns by retailers, eBay recently restricted the sale of gift cards to one per seller per week with a maximum value of $500. But there's little eBay can do about another part of its system that Karbunara exploited -- the ratings customers use to evaluate one another. To the average customer, Karbunara appeared to be an honest and reliable eBay seller. As soon as he received payment for the stolen gift cards, he promptly mailed out the credits to unsuspecting customers who until the day his account was deactivated gave him their highest recommendation to other potential buyers.