Anti-Fraud Team -- Help Wanted

[ATC777]

Today I became fully aware of the massive amount of charge-back fraud perpetrated against Bitcoin sellers who accept any type of reversible payment method (esp. Paypal). We are newcomers to the Bitcoin world, and we learned our lesson the hard way about this. A fraudulent buyer spent around $27 on Bitcoin and is trying to reverse the Paypal payment on us. This is a small amount of money, but now after talking to others about this and other merchants who have been the victim of charge-back fraud we are very scared and have completely halted all Bitcoin transactions through Paypal. The problem is so bad that you simply don't know who is going to hit you; scammers hijack legitimate accounts, purchase Bitcoin and slip away. On eBay they also create new accounts, buy lots of cheap "trinkets" (e.g., cellphone cases, keychains, etc) from high-volume sellers, get high feedback scores then attack.

To my knowledge, Paypal does nothing about it -- they might close the scammer's account but there are many more to replace it and the honest merchants can be forced to bear the cost. Totally uncool, Paypal... Some say it is against the Paypal ToS to make Bitcoin transactions, but I'm not sure this is necessarily true. After reading their merchant ToS again today I didn't see anything restricting transactions involving digital goods/media, intangibles or Bitcoin. However, there is an "unofficial" policy of giving the finger to Bitcoin merchants because Paypal sees Bitcoin as a threat to their monopoly over online payments. It depends on who you talk to and what division of Paypal they're in. They tend to let you get along fine selling Bitcoin, but when something goes wrong they abandon you. The bad part is that eBay and Paypal's system misleads sellers into thinking they're dealing with a legitimate buyer when they're really dealing with a crook.

The higher profits to be had from selling Bitcoin over eBay or through Paypal is NOT worth the risk -- in fact, it raises the risks for the seller!

A lot of people, especially those who've been in the Bitcoin community a while, say this is no news to them; they've been aware of this. But my warning here is to make the less-experienced and aspiring Bitcoin merchants aware of the danger. My advice is simply don't try. There's a reason why Mt Gox and many big Bitcoin companies won't accept Paypal or credit cards: everyone who has tried it got screwed. Though it's embarrassing, we unwittingly added ourselves to the list of people screwed by charge-back fraud. Fortunately we quit while we're only $30 down and there's not a huge amount of money at risk...  

Since this happened to us we've begun investigating the scammer and looking into every other transaction we've made through Paypal. I've reached out to other sellers engaging in Bitcoin trade through eBay and Paypal and I'm shocked at how bad this problem is. One girl I talked to today got screwed out of a lot of money and is having to sell all of her nice gold and silver jewelry to try to make up for it. She's a single mother with a very young daughter.

Now I am furious... I'm furious, of course, at the scammers who've done this to people... But I'm also very angry with Paypal and eBay for allowing scammers to attack their merchants and get away scott-free: the people they make their money from and rely on to survive. I'm also furious that they have a "screw you" attitude toward Bitcoin merchants. This isn't the fault of Bitcoin: anyone selling valuable items that are easy to get cash for can be a target (whether you're selling gold, Rolex watches or Gucci sunglasses).

Some of you may remember this post I made recently about community collaboration to fight fraud and unethical business practices. Now that I've been hit with my first small loss to a Bitcoin scammer and talked to real, ordinary people who have been screwed very badly by the scammers (and Paypal's handling of the situation) I am ready for action... ready to follow through with my own proposals to help fight fraud, as some of you suggested I do, personally. I've already launched a private investigation into this matter, working together with victims and merchants, and much of what I've found is startling. These scammers are making mistakes -- they're arrogant, probably young and dumb and think they can screw people and never be held accountable because Bitcoin is "anonymous"... WRONG! Bernie Maddoff was caught, and these clowns can be caught too.

We want to do everything we can to prevent more people losing money to scammers and trying to help people get their money back, whether that means catching the perpetrators to hold them accountable and/or pressuring eBay and Paypal to do the right thing and step up to protect their merchants. So we will be part investigator and part advocate. I am assembling a new "anti-fraud team" and I'd like to launch a new organization with a website, forums and advocacy group.

If anyone would like to help us make the Bitcoin world safer please say the word! You can join forces with us, do some nosing around on your own time, give suggestions/advice, help us fight for victims of fraud or donate. If you want to donate a little to help pay for a website and getting an anti-fraud/watchdog team going please send to this address:

Anti-fraud team donations:
1Cr3MTEQxruNimtdCBbUBvDtZFmcW7gHSs

We're serious and we're going to follow through and do everything we can. And you can scoff at me if you want but I'm going to do what I know is right and I will make a positive difference. I may be considered a n00b in Bitcoin-land, but I have a significant level of technical expertise, learn quickly and know what I need to do (already made some progress). I've also been scammed online in the past in non-Bitcoin transactions and managed to lead the authorities to the thieves, and have some other related experience. But most importantly, I will bring together other people who have a lot more skill and knowledge than I do and try to get some of the most brilliant minds in the Bitcoin world helping to fight fraud and protect honest people. A currency needs confidence or it's destined to fail, and we want Bitcoin to succeed and leave a positive impact on the world. But that can't happen until we start making Bitcoin unsafe for scammers, con artists and thieves. This isn't just about charge-back fraud or my negligible < $30 loss, it's about a great currency called Bitcoin and the good, honest people who use it.

We'll also be looking into things like the fraudulent "CPC Electronics" trying to sell fake mining equipment and any other type of fraud targeting the Bitcoin community. It's up to us to work together and protect each other and our entire "free market" currency system.

I'll post updates on our progress in this thread. As soon as we're able to launch a new website and forums and get the team organized I will provide links.

Thanks for your time,

--ATC--

P.S. -- Definitely going to get our company behind this and allocate some resources to the effort! And I hope other people will help the cause. If no one steps up to help I will be sad and disappointed but won't give up. Doing the right thing often means doing something very hard, and I'm prepared to accept the challenge... hope you are too, even if you can only do a little. Really hope we can bolster enough support to get an open, non-profit anti-fraud organization going sooner rather than later.

[TheButterZone]

This is the only way I see to sell BTC on eBay without getting defrauded: http://www.ebay.com/itm/230902604519

[dadj]

I'm with you on this, tip sent.

I got a chargeback through the bank and I ended up finding out the hackers ip address - so you're right they're not being very clever.

I haven't heard anything from the bank yet after asking them to inform me if they catch the person responsible. I don't think they care much at all about catching hackers, even when given their ip address!

I would like to be part of an anti-fraud lobby group that tries to bring scammers to justice. Will contact my bank again tomorrow to get an update.

[franky1]

good luck with the anti-fraud concept. just be sure that others wont just set up 2 account , cargeback to themselves and then show you evidence of a chargeback to then get some free bitcoins.

the best bet is not to set up a donations pot aiming at giving funds to people that lost out, as that will get abused. but to develop relationships with paypal, and get one long term employee of theirs to understand the blockchain and use the blockchain info as 'proof of delivery'. then all sellers can contact that informed paypal contact to review the transaction information to avoid chargebacks.

[dadj]

I'm with you on this, tip sent.

I got a chargeback through the bank and I ended up finding out the hackers ip address - so you're right they're not being very clever.

I haven't heard anything from the bank yet after asking them to inform me if they catch the person responsible. I don't think they care much at all about catching hackers, even when given their ip address!

I would like to be part of an anti-fraud lobby group that tries to bring scammers to justice. Will contact my bank again tomorrow to get an update.

The IP most likely belongs to a TOR exit node, VPN, proxy or a botnet slave.

I found out it wasn't a tor exit node - hence the comment that the hacker could be slipping up, although valid point that it might be a VPN, proxy or botnet slave. However, it being not a tor exit node greatly increases the chance of this hacker getting caught.

the best bet is not to set up a donations pot aiming at giving funds to people that lost out, as that will get abused. but to develop relationships with paypal, and get one long term employee of theirs to understand the blockchain and use the blockchain info as 'proof of delivery'. then all sellers can contact that informed paypal contact to review the transaction information to avoid chargebacks.

That doesn't prevent people from using hacked accounts to buy BTC. PayPal aren't going to give that money back to the account holder out of their own pocket, they're going to want it from the seller.

You're spot on. I understand from my experience that a lot of the chargebacks are genuine people who had their account hacked. The problem is a lot of people are unaware their computers are compromised. Maybe the anti-fraud group should campaign for better understanding of computer security, safe AV and Internet practices?

It's something that affects bank users and bitcoin users alike. I was thinking of something like for every chargeback that happens, we could lobby banks to ensure that they fix their customers computer rather than just change their password. I know that's a big ask, but maybe we could facilitate the fix through bitcoin payments and remote access? Thinking out aloud here but we have the tech know how and their customers have $.

EDIT:
I just realised the bank are probably not at all interested in helping their customers in this way - they might think they've solved the problem with One Time Password. I think a good strategy is to educate people who enter bitcoin and show them that our community supports them in ways their bank would rather not deal with.

[FreeMoney]

Victim relief has two huge problems.

It will be scammed unless you run it very conservatively. Which will mean asking victims tons of info and then still mistakenly rejecting some actual victims.

Then if it does somehow become an effective and meaningful remedy it will lower the incentive to avoid being scammed and (potential) victims behaviors are nearly the only thing that determines how much scamming happens.

[Herodes]

PayPal and bitcoin doesn't mix. Don't try it. It's a losing match.

You're asking for donations before you've created anything ?

Hm...

[FreeMoney]

There is an excellent thread buried somewhere by mndrix(?) about how he accomplished amazingly low fraud before PP shut him down (and froze his money for 6 months).

[Herodes]

There is an excellent thread buried somewhere by mndrix(?) about how he accomplished amazingly low fraud before PP shut him down (and froze his money for 6 months).

That about sums it up PayPal wise.

[creativex]

Sellers need to stop accepting paypal...eBay has never protected their sellers while extracting all their fees from this same group. Vote with your wallet people.

[dadj]

We should launch a boycott paypal campaign!

[franky1]

That doesn't prevent people from using hacked accounts to buy BTC. PayPal aren't going to give that money back to the account holder out of their own pocket, they're going to want it from the seller.

then paypal need to update its policy to say. "update your security. hacked accounts wont be insured." or atleast have paypal request a police report from a computer forensics lab along with a crime report. that will stop the scammers.

although an anti-fraud squad is a great idea. getting companies to prevent fraud should be the number one concern, not accepting donations for victims. the OP can legally define himself as the recipient of all donations, because he is a victim of scams in the past.

i dont mind donating time and brainpower to the cause. but i am not going to donate coins.

good luck to the OP in your progress to get change to occur with websites policies.

[DeathAndTaxes]

That doesn't prevent people from using hacked accounts to buy BTC. PayPal aren't going to give that money back to the account holder out of their own pocket, they're going to want it from the seller.

then paypal need to update its policy to say. "update your security. hacked accounts wont be insured." or atleast have paypal request a police report from a computer forensics lab along with a crime report. that will stop the scammers.

Why would PayPal do that.  Fraud doesn't cost them anything. The merchant pays.  Making PayPal easy has made it the number one processor on the internet.  PayPal gets all the benefits, merchants pay all the costs.

Now think about this logically if you are PayPal (and making tens of millions a dollars a year in profit for your shareholders) why the hell would you change anything?

[DeathAndTaxes]

Sellers need to stop accepting paypal...eBay has never protected their sellers while extracting all their fees from this same group. Vote with your wallet people.

Not true.  You can accept PayPal just understand the limits.  Don't accept PayPal from a buyer you don't know or trust.

[ATC777]

[...] unless you run it very conservatively.

I totally agree. But any charity can be defrauded (*cough* social security *cough*).  

You're asking for donations before you've created anything ?

Hm...

It costs money to buy a domain name, host a server, et cetera... and if I pay for everything out of my pocket and do it all myself there's no reason for anyone to get involved. This just goes to show how BAD scamming is in this community: you don't trust people who want to fight the scammers because you think they're the scammers (and everybody else is too)... I take that as a big confirmation that we need some change...  

[creativex]

Sellers need to stop accepting paypal...eBay has never protected their sellers while extracting all their fees from this same group. Vote with your wallet people.

Not true.  You can accept PayPal just understand the limits.  Don't accept PayPal from a buyer you don't know or trust.

Gotcha. No eBay then, no atomicavenue, or any other service that's paypal only.

IOW don't use paypal, already there.

[franky1]

It costs money to buy a domain name, host a server, et cetera... and if I pay for everything out of my pocket and do it all myself there's no reason for anyone to get involved. This just goes to show how BAD scamming is in this community: you don't trust people who want to fight the scammers because you think they're the scammers (and everybody else is too)... I take that as a big confirmation that we need some change...  

its more to do with the fact that in MANY countries have it so that charities cannot accept a donation until they are registered. businesses cannot trade until they are registered. and insurance companies cannot trade unless they are registered.

your business plan loosely fits into all three categories. yet you request funds upfront before showing proof of work.

i have invested in ESTABLISHED businesses and in businesses which show some actual assets like a website atleast and qualifications that their goals can be achieved.

knowing that one man cannot change paypals terms and conditions or stop domain sellers from selling domains to scammers to create phishing sites. the chances of funding upfront is low. people are more likely to donate as a thank you for a victorious change to a companies policies.

if you are unwilling to put your own money into the project, then why expect others to? a domain costs less then 2 hours of minimum wage labour.

this is much like the many charities which ask for donations to change the world and only 1% of donations actually achieve anything. check out the bitcoins for goats thread as an example..

[Phinnaeus Gage]

[...] unless you run it very conservatively.

I totally agree. But any charity can be defrauded (*cough* social security *cough*).  

You're asking for donations before you've created anything ?

Hm...

It costs money to buy a domain name, host a server, et cetera... and if I pay for everything out of my pocket and do it all myself there's no reason for anyone to get involved. This just goes to show how BAD scamming is in this community: you don't trust people who want to fight the scammers because you think they're the scammers (and everybody else is too)... I take that as a big confirmation that we need some change...  

I think you made a grave error by posting the above. What Herodes may have implied as to what you should do at the very least, you kicked to the curb, using the excuse of not wanting to outlay a little bit of money for the necessities, then thereafter went into the discussing-of-scammers mode, trying to cement the idea that your endeavor is not a scam. For the most part, seasoned bitcoiners see right through this.

Regarding the cost factor, we're only talking about the price of a domain name and monthly hosting. About $100 USD a year, whereupon you'll only have to shell out less than $10 for the domain name and host on HostGator for only a penny for the first month. Put in a little time to splash together a website, and then you would have had a few coins trickling in to pay for the next month's hosting fee.

You have a great command of the English language, and it seems like you were in the process of getting a following, but you may have hit a snag with this noble cause. Case in point, you only had about a dozen feedbacks on your eBay account, with the last one being a negative tick, yet you were able to generate sales of Bitcoin items regardless as to why you receive it--you had pneumonia.

Furthermore, it seems like there's a myriad of ATC Enterprises, Inc., entities throughout the nation, with you only recently filing papers to operate in Louisiana. ATC Enterprises, Inc. http://www.facebook.com/ATCEnterprisesInc/info

http://www.facebook.com/ATCEnterprisesInc

Today we submitted our filings to become a legally recognized and registered Type-S corporation based in the state of Louisiana. The process typically takes about 14-30 days to complete. We're very excited, and will soon be ready to "open the doors" and get started!

[Phinnaeus Gage]

It costs money to buy a domain name, host a server, et cetera... and if I pay for everything out of my pocket and do it all myself there's no reason for anyone to get involved. This just goes to show how BAD scamming is in this community: you don't trust people who want to fight the scammers because you think they're the scammers (and everybody else is too)... I take that as a big confirmation that we need some change...  

its more to do with the fact that in MANY countries have it so that charities cannot accept a donation until they are registered. businesses cannot trade until they are registered. and insurance companies cannot trade unless they are registered.

your business plan loosely fits into all three categories. yet you request funds upfront before showing proof of work.

i have invested in ESTABLISHED businesses and in businesses which show some actual assets like a website atleast and qualifications that their goals can be achieved.

knowing that one man cannot change paypals terms and conditions or stop domain sellers from selling domains to scammers to create phishing sites. the chances of funding upfront is low. people are more likely to donate as a thank you for a victorious change to a companies policies.

if you are unwilling to put your own money into the project, then why expect others to? a domain costs less then 2 hours of minimum wage labour.

this is much like the many charities which ask for donations to change the world and only 1% of donations actually achieve anything. check out the bitcoins for goats thread as an example..

Exactly! (I think we crossed posted)

[BCB]

bitcoin is made possible by  cryptography

cryptography was created to preserve secrecy and anonymity.

when we have a full bitcoin econony , WITH NO NEED TO CONVERT FIAT TO BITCOIN, this will be a beautiful thing.

At the present time secrecy and anonymity provide fertile grounds for  hackers and scammer activities.

And the point at which bitcoin and fiat meet are a real problem for us all.

DO NOT TRADE BITCOIN FOR ANY PAYMENT FROM THAT CAN BE REVERSED.

MONEYPAK
CREDIT CARDS
BANK TRANSFER
PAYPAL
SERVE
ETC

UNLESS YOU KNOW AND TRUST YOUR TRADING PARTNER.

While you can purse scammers after fact you'll have more luck and less trouble if you vet your trading partners or use some sort of trust system (bitcointalk.org, bitcoin-otc) IN ADVANCE.

Even banks and Paypal do not pursue scammers after the fact.  THEY ARE NOT PAYING FOR THE LOSS - YOU ARE.   They set aside hundreds of millions of dollars of fees paid by merchants that allow them to write off these lossess.  The only thing banks and paypal, etc are concerned with is preventing future fraud as they do have to pay for the present fraud.  That is passed on to the consumer.