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Auction fraud

Auction fraud definition

Online auction fraud is any type of fraud that takes place on online marketplaces or auction sites. It can be anything from misrepresenting items to fraudulent bidding to increase an item’s price. Auction fraud has existed in various forms for thousands of years. However, fraud techniques have evolved with the rise of the internet and online auction platforms.

See also: scam, social engineering, wire transfer fraud, anti-fraud system

History of auction fraud

  • Pre-modern auctions. In ancient times, auctions were used to sell spoils of war, estate sales, and even to arrange marriages. Deceptive practices included collusion between buyers to keep prices low or the auctioneer accepting bribes.
  • 19th and early 20th century. As auctions became more popular in the commercial context (art, collectibles, real estate), fraud took the form of misrepresenting the product, selling stolen goods, and bid rigging.
  • Late 20th century. Telephone and fax scams related to auctions became more prevalent. Fraudsters started using fake bids and counterfeit cashier's checks.
  • Mid 1990s. The launch of platforms like eBay in the mid-1990s revolutionized the auction world. As these platforms grew in popularity, so did the scope and variety of fraud, such as shill bidding and phishing scams.
  • 21st century. With online auctions fully mainstream and better security measures in place, fraudsters have gotten more sophisticated. Now they may go as far as set up fake auction sites to lure unsuspecting buyers.

Auction fraud techniques

  • Shill bidding. Sellers or their accomplices bid on their items to artificially inflate prices.
  • Non-delivery. The seller gets the payment but never sends the item.
  • Counterfeit items. Items delivered are fake or of lesser quality than described.
  • Second-chance schemes. Losers of an auction are offered a second chance to buy, but it's a scam to get their money without giving them the item.
  • Phishing scams. Scammers mimic emails from legitimate auction sites to steal personal and financial information.
  • Fake payment services. Malicious buyers impersonate payment services to trick sellers into believing they've been paid.
  • Account takeovers. Fraudsters gain access to genuine user accounts and conduct illegal activities under their guise.
  • Fake online auction sites. Entire websites are designed to look like genuine auction platforms to scam users.