An Open Letter to Amazon.com

[ebliever]

An Open Letter To Amazon.com

Regarding cancellation of gift cards I have purchased via Purse.io, and sold on Ebay, given as a gift to my mother, and retained on my Amazon account.

BACKGROUND

On June 2, 2014 I read with interest a news article announcing a service that enabled investors and miners in Bitcoin to purchase items on Amazon.com. (http://www.coindesk.com/purse-io-can-shave-25-bitcoin-buyers-amazon-bills/)

The service, Purse.io, allows users to create wishlists on Amazon which they published to Purse, providing bitcoins that Purse would hold in escrow. People seeking to buy bitcoins would then purchase the items on the Amazon wishlist, having them sent to the wishlist creator. Upon delivery the bitcoins would be released from escrow by Purse.

Many people want to obtain bitcoins but without their own mining rigs or the right know-how and bank accounts linked to bitcoin services after a verification process, they have only risky back-alley means to obtain them. So a service like Purse, which let anyone with a credit card purchase bitcoins from miners like myself at a market premium and with an escrow agent to oversee the transaction, made sense.

I tried the service and found it worked well as described. After several successful transactions I shared my positive experiences with the service on Bitcointalk (https://bitcointalk.org/index.php?topic=601676.msg7741028#msg7741028). Respondents raised the topic of fraud and concerns I could be liable for a bidder making an illicit purchase on my behalf, causing me to contact Purse.io. I posted the response I received from Purse.io on the thread on July 15:

...There are many reasons we chose to integrate with Amazon, and one of them is the fact that they have a state-of-the-art fraud detection system and a strong anti-chargeback process.

Sometimes, Amazon cancels even legitimate orders because it looks suspicious to them (i.e. $1,000 gift card order purchased from Brazil to a Spender in Alabama). People who Buy BTC through our site and try to chargeback Amazon will find their attempts fruitless. Amazon will provide evidence that they shipped and delivered the product and will require a return of the items before they issue a refund to the Buyer. They have great relationships issuing and merchant banks, and they do not outsource payments.

On Purse's side, our system ensures that Spenders aren't exposed to fraud. Spenders' BTC aren't at risk because they have to confirm delivery of the item. We are developing capabilities that detect changes in Amazon orders so that we minimize the wait time for Spenders.

I was reassured by this response, and by the fact that some of my orders on Purse had been delayed or canceled apparently because of Amazon's anti-fraud systems. This indicated to me that they were successfully weeding out potential illicit purchases. In the meantime I was able to purchase items as well as gift cards on Amazon.com via Purse, and use the gift cards without any hassle. I gave one gift card to my mother for her birthday, and even made a sizable purchase of bitcoin myself on Purse using Amazon gift cards when an arbitrage opportunity arose.

EBAY SALE OF GIFT CARDS

In early August I listed two gift cards for sale on Ebay, as by that point I had confidence that I had valid cards to sell and there was no sign of issues with Purse or Amazon. I researched Ebay's policies and followed them carefully, aware of the reports of scammers who would bid on cards, utilize them and then report to Ebay that they hadn't received the cards or they were invalid. Both cards sold and were shipped and received without issue and everything seemed to be fine.

On September 2 I received a message from Ebay informing me that the buyer of the first gift card had opened a dispute and requested a refund. The buyer reported:

Hello, I entered the gift certificate onto my amazon account. Then this morning I got this email from Amazon.com, containing the following: "The gift certificate you recently attempted to redeem is invalid. Please understand that we cannot reissue it or reimburse you for these funds. Any associated orders have been cancelled. We suggest that you contact the party who sold you the gift certificate to inquire further about their policies for dispute resolution."

(In follow-up contact with the buyer, whom I'll call AH, it turns out they were able to deposit the gift card funds to their Amazon account initially and things were fine for about ten days. They even made a small ($7.19) purchase with it, prior to Amazon cancelling the card. So the card was valid, but then Amazon cancelled it.)

MASS CANCELLATION OF GIFT CARDS

I looked up the serial number information I had retained on the gift card in question and logged into Amazon.com to contact Amazon support. That's when I noticed that Amazon had also cancelled all of my own gift card funds on my own account. This included three cards, all purchased (to the best of my recollection) by separate bidders on Purse.io. The cancellations occurred on August 27, with no email or other form of notification to me of the action being taken despite passage of almost a week.

After my initial contacts with Amazon customer service on Sept. 2, Amazon confirmed that the card I sent to AH was redeemed by an account matching the name to whom I shipped the card. They did not respond to my inquiries regarding my own canceled gift cards. On Sept. 3 I received updates from AH via the Ebay message system, as they were separately following up with Amazon:

Hi again, Here is what Amazon said in response. Could you take a look at this message and see if there's anything you can do to resolve it with amazon? Hello, I'm following up on your recent contact to our Customer Service department and I'm very sorry to hear about the trouble you've had trying to use your $200.00 gift card. I've checked our records, and the claim code you received from [REDACTED - call her CC] there appears to be a problem with the purchaser's account and the gift card is indeed not available for use. I regret that for security purposes I'm unable to provide you with any further information. Therefore, I recommend contacting the person who bought the gift card for more information. If they feel this is an error please have them contact us with directly with this matter. For your reference, please visit the following link for the gift certificate fine print: http://www.amazon.com/gc-legal.

I vaguely recalled the ""CC" in the quote above, because each item shipped from Amazon from a wishlist includes a slip of paper noting that it is a gift and gives the name of the person sending it.

From this information it is becoming apparent that something like the following has happened:
1. A "bad actor," either CC or a thief using her identity made the gift card purchase on Amazon, to receive BTC from Purse.
2. Amazon accepts the payment from CC; Amazon and perhaps credit card or other corporate payment systems anti-fraud detection fail.
3. I received the gift card and confirmed delivery to Purse, releasing my escrowed bitcoin.
4. Then I resold the gift card to AH on Ebay, receiving payment via Paypal.
5. Weeks after the purchase in step 1, Amazon identifies it as fraudulent and cancels the gift card. AH has a dead card they've paid for, and I'm caught in the middle having paid for it as well but with my reputation at Ebay on the line.

CLUES FROM PURSE

All this shed light on an exchange of emails I had with Amazon and Purse on August 22-25, after the Ebay sale of the gift cards.  On August 22 I had received a cryptic email from Amazon stating:

The gift certificate you recently attempted to redeem is invalid. Please understand that we cannot reissue it or reimburse you for these funds. Any associated orders have been cancelled.

That was odd because I hadn't attempted to redeem a gift card at that point, and my Amazon account showed nothing amiss with my previous gift cards. Nor had I heard anything from my Ebay buyers as I might expect if they were having problems. So my initial reaction was that someone must have bid on one of my Purse.io wishlists but sent the gift card to themselves. (I knew from my own experience that you can deliberately or accidentally ship a wishlist item to your own address quite easily.) I figured someone shipped themselves a gift card from my wishlist and tried to redeem it (perhaps with an ill-conceived idea of trying to wrest the escrowed bitcoin in Purse from me in a dispute.) So I contacted Purse.

In a response asking for more details, one of the operators of Purse made a remark that I shouldn't buy gift cards using Purse. I asked why (I had noticed a large proportion of Purse listings were for gift cards all summer) and another Purse rep explained that Amazon had a high rate of cancellations for gift card purchases, especially those of higher value. I was beginning to experience that myself at Purse, as multiple listings I had made for gift cards on Purse were seeing their orders canceled by Amazon. The last gift card I received via Purse arrived on August 19. For obvious reasons I've discontinued use of Purse for at least the time being. But Purse never mentioned the risk of gift cards being revoked after shipment or of any other issue to be concerned with in this case.

In any event, Purse did not confirm anything relating to the August 22 email from Amazon, leaving it unexplained. This morning AH provided a screenshot of their gift card account at Amazon, in Ebay's dispute resolution center. It shows that AH deposited the gift card I sold them to their account on August 22 without issue. They then made a purchase with the card's funds on August 28, and then the funds were canceled on Sept. 2. So it's still unclear whether Amazon's email to me on August 22 relates to AH's card or something else entirely. If AH's use of the gift card on Aug. 22 triggered the warning email to me, why was it accepted into AH's account such that they could use it?

CURRENT STATUS

I'm still awaiting a reply from Amazon as to the cancellation of gift cards in my own account. In my responses to AH I've reassured them that regardless of what Amazon does, I believe the right thing to do is to reimburse them myself as the cancellation of the gift card was no fault of their own and they should not held responsible for the actions of another bad actor. I am hopeful that the same logic will apply to myself.

SHOULD INNOCENT PARTIES BE MADE TO PAY FOR OTHERS CRIMES?

As I understand it (not being a lawyer), when a crime is committed, stolen property can be retrieved to be returned to the rightful owner.  To that extent I can understand and appreciate Amazon's actions that they are acting in good faith, perhaps on behalf of a credit card company that suffered a loss due to a stolen credit card.

However, (in this illustration) it was the credit card that was stolen, not the gift card or the bitcoins or the funds in Paypal. An organization like a pawnshop understands the risks of dealing with potential stolen property and builds that risk into their business model and profit margins. But suppose someone stole a credit card, bought a watch with it, pawned the watch, and then the pawnshop sold the watch to Buyer A, who then traded it for a cell phone with Buyer B.

Should the police confiscate the cell phone and give it to the original victim? Or the watch? As innocent parties it seems to me the police would be engaging in a shell game of trading the injustice around if they did that. It is the thief who should pay, not downstream parties.

Otherwise, consider that every dollar bill in our pocket or in our bank account may be (or likely is?) downstream of some illicit activity to which we are entirely innocent. To say law enforcement can confiscate those funds undermines the faith people have in that currency. Does Amazon appreciate how unilateral revokations of gift cards obtained legitimately, as in the case of AH and my mother and I and so on, will undermine the legitimacy of their gift cards?

DOING THE RIGHT THING

After some initial anguish, I decided that regardless how things pan out with Amazon, I would not "spread the injustice around" and stiff my Ebay buyers. If the gift cards remain revoked I will refund AH the amount that Amazon revoked from them myself. This despite the fact that Amazon initially accepted their card, which I believe would give me an excellent case in Ebay's dispute system to fend the case off without a refund. It would be hypocritical of me to do otherwise, as I believe Amazon should treat me and others in a similar situation likewise.

AMAZON CAN LEARN A LESSON FROM MINTPAL AND VERICOIN

One of the cryptocurrencies I am invested in besides bitcoin is Vericoin. On July 13, 2014 the cryptocurrency exchange Mintpal was hacked. 30% of all vericoin in existence were stolen from their vault, with a value at the time of around $2 million dollars. (http://www.coindesk.com/bitcoin-protected-vericoin-stolen-mintpal-wallet-breach/)

A cryptocurrency such as vericoin or bitcoin basically exists in the form of an accounting ledger distributed across the internet. The ledger is broken down into "blocks" containing all the transactions for a given chunk of time. The entire ledger is known as the blockchain, with new blocks being constantly added to record ongoing transaction activity. The fact that you "own" a bitcoin or vericoin is established by its being recorded in the blockchain.

In response to the theft the vericoin development team orchestrated a "rollback." This involved truncating the blockchain back to just prior to the point of theft and then restarting blockchain activity with new blocks lacking the theft transaction. It's as if a band of bank robbers were fleeing down the street with bags full of cash and then - POOF! - the cash magically teleports back into the bank vault, leaving them empty-handed.

Except that it isn't just the bank robbers who lose their haul. At the grocery store a lady walks out with her groceries, but the grocer sees the funds from the debit card she just used, vanish. Money taken from an ATM that morning vanishes from a church offering plate. A wire transfer from the bank to purchase stocks is revoked, leaving the stock broker in the lurch. Not good.

But in the case of vericoin, the original blockchain could still be used as a reference - it records ALL transaction activity. As a result, Mintpal worked with the vericoin team and announced:

We have committed to our customers and to all [other] exchanges that we will cover any losses faced as a result of the rollback.

Mintpal was able to reassure vericoin investors that no one but themselves would be defrauded by the rollback. They took on the burden of the theft themselves rather than trying to escape responsibility for inadequate security. Amazon, take note!

CONCLUSION

In conclusion I request that Amazon reinstate the gift cards I have purchased, including those provided to AH (not to mention my mother, etc.) We are not the guilty party and should not be defrauded, and Amazon is trying to close the barn door weeks after the horse has been stolen in this case. This concerns funds tallying around $950 in my case. Think I will ever touch Amazon.com with a 10-foot pole or speak well of it to others if the cards I bought are canceled?

I would also recommend that they cooperate pro-actively with Purse.io management to improve their anti-fraud methods without defrauding their customer base. For example, a delay could be introduced in the escrow system dependent on triggers from Amazon to confirm when funds used to make a purchase have truly cleared on their side.

I ask that Purse.io take the initiative in working with Amazon on this to protect their own customer base and defeat fraudulent activity, and that they provide some warning to users on their website as to the kinds of problems that users such as myself are encountering. Warning users of the risks will protect themselves in the long run.

POSTSCRYPT: THE BITCOIN ADVANTAGE

I must also point out that this entire situation would likely not exist if Amazon simply followed the lead of thousands of other companies like Dell, Overstock and DISH and began accepting bitcoin directly. Although bitcoin is the target of a good deal of fraudulent scams, the fact that bitcoin transactions are direct between buyers and merchants means the merchant is free of the entanglements and headaches that frauds with traditional 3rd party payment systems like credit cards involve.

Bitcoin frauds target the holder of the bitcoins themselves, so all Amazon would be concerned with is securing its own bitcoin accounts. There
are no issues with chargebacks, counterfeiting, bounced checks, and the like. There is no weeks of delay to confirm a transaction or learn that it was executed fraudulently. (Confirmations take 30-60 minutes with bitcoin, or near instantly using methodology such as is implemented at Bitstamp.) The result would be major cost savings and improved customer satisfaction as well as faster flow of funds to and from Amazon.

[ebliever]

RESERVED

UPDATE 4 Sept. 2014 12:17 PM CST - My mother confirms that she was able to utilize the gift card I gave her. That takes one issue off the table.  

https://bitcointalk.org/index.php?topic=307922.msg8514411#msg8514411  contains a response from another Purse user who has lost the gift card funds they purchased at Amazon.

UPDATE 15 Sept. 2014 - I had an email from Purse.io management on Friday (9/12) asking for a screenshot of my Amazon gift account which I provided this morning.

Following some false starts, I was able to reach Amazon's live customer service over the phone today and had what appears to be a very constructive phone call. I explained about the use of Purse.io and after a couple minutes on hold for a couple times while they researched things (Purse, the buyer's account, etc.), was able to provide my claim codes and serial numbers for the three cancelled cards in my own account. (I've had to message AH to ask for the claim # of their card, as I only had the serial # from it, and didn't have that available during the call. But Amazon said I could contact them again when I had the information on the 4th card.)

Taking the Amazon rep. at face value, he said that their gift card team would either be reinstating the cards or else provide me with a new claim code that I could use to replace the funds. He said I could expect to hear from them via email in 24-48 hours.

UPDATE 16 Sept. 2014 - Called Amazon back with the claim/serial numbers from AH for the ebay'd gift card. This rep. indicated that both the cards in my account and the ebay'd card were all "still under investigation." But he repeated the feedback from the first rep. that I should be contacted by Amazon soon (presumably tomorrow).

UPDATE 17 Sept. 2014 - Amazon sent an overnight email informing me that:
1. I had 10 revoked cards, not 4. (The funds from the rest had been previously spent). They go back to June 23 (date I entered them to my account). This includes every Purse.IO card I purchased apart from the ones I ebay'd. This is the first time they've bothered to tell me this.
2. They refused to provide any details regarding why the cards were revoked - a "just trust us" response.
3. They pointed me to contacting the original buyer of the cards for further resolution.

Of course I'm trying to work this thru Purse as well, but given the anonymity involved I'm not holding my breath. Amazon makes much of "being the most customer-centric company on earth" in their communications, but this is the exact opposite. They are covering their losses by shifting the losses to 3rd parties (not the thieves), while not informing us for up to 3 months, so that we could continue to make transactions for which we'd lose everything. Gee thanks Amazon. Could you do that any worse? I'll say it again - revoking cards after they've been delivered is like randomly spraying a street with gunfire upon notification that there has been a mugging. You might hit the mugger, but odds are they ducked first and now you're just hitting innocent bystanders.

I've sent the necessary funds back to my Paypal account to pay back AH and will be doing so as soon as they clear. At least I won't be party to Amazon's poor treatment of its customer base.

UPDATE 18 Sept. 2014 - I sent a refund to AH for the amount revoked on their gift card.

UPDATE 28 Oct. 2014 - Following up with Purse, they have reported back that they will be issuing me a refund of ~0.818 BTC; which as near as I can tell is a full refund allowing for the drop in value of BTC since August. So kudos to Purse, and I hope they are able to recoup any losses from fraudulent users.

[asdlolciterquit]

I don't even know that it's possible use BTC on amazon!!!

[murraypaul]

You knew that using Purse to get Amazon gift cards was risky, not least because several people, including myself, told you so.
You received a considerable premium for your Bitcoins sold that way. That premium includes the risk of losing your money.
Amazon did not voluntarily involve themselves in your trade, that was between you, your (fraudulent) trading partner, and Purse.

Respondents raised the topic of fraud and concerns I could be liable for a bidder making an illicit purchase on my behalf, causing me to contact Purse.io

You contacted Purse, not Amazon, and Purse reassured you, not Amazon.
Your grievance is firstly with your trading partner, and secondarily with Purse.
If you had gone to Amazon, explained the situation, and asked them if they would guarantee your gift cards in the event of fraud by your trading partner, what do you think they would have said?

Amazon had no part of that transaction, or any knowledge of it.
Amazon have cancelled the gift cards due to fraud by the person who actually bought them, which is your trading partner, not you, who most likely either used a stolen credit card or performinged a charge-back.
Amazon have now not been paid for the gift cards, why should they continue to redeem them?
They have no way of knowing that you are not working with the fraudulent trading partner, after all.

In conclusion I request that Amazon reinstate the gift cards I have purchased

You didn't purchase any gift cards from Amazon
Your fraudulent trading partner did.
You have no relationship with Amazon other than being the recipient of fraudulently purchased gift cards.

We are not the guilty party and should not be defrauded

Amazon are not the guilty party either, why should they be defrauded?

You should be directing your complains to Purse, not Amazon.
You chose to make a risky deal with an unknown purchaser for a considerable risk premium, Amazon did not.
Purse were involved in your original transaction, Amazon were not.
Purse reassured you about the risk of your transaction, Amazon did not.
Purse handled the escrowing of your funds, Amazon did not.

They took on the burden of the theft themselves rather than trying to escape responsibility for inadequate security. Amazon, take note!

Pot, kettle, black.
You knowingly chose to enter into a risky transaction, and ended up losing money,
Now you are trying to escape responsibility for that by expecting Amazon to pay for your loss.

An organization like a pawnshop understands the risks of dealing with potential stolen property and builds that risk into their business model and profit margins.

Exactly. You are the pawnshop here. You accepted goods from an unknown source, and they turned out to be fraudulently purchased. You should have built that risk into your business model.

[The00Dustin]

SHOULD INNOCENT PARTIES BE MADE TO PAY FOR OTHERS CRIMES?

As I understand it (not being a lawyer), when a crime is committed, stolen property can be retrieved to be returned to the rightful owner.  To that extent I can understand and appreciate Amazon's actions that they are acting in good faith, perhaps on behalf of a credit card company that suffered a loss due to a stolen credit card.

However, (in this illustration) it was the credit card that was stolen, not the gift card or the bitcoins or the funds in Paypal. An organization like a pawnshop understands the risks of dealing with potential stolen property and builds that risk into their business model and profit margins. But suppose someone stole a credit card, bought a watch with it, pawned the watch, and then the pawnshop sold the watch to Buyer A, who then traded it for a cell phone with Buyer B.

Should the police confiscate the cell phone and give it to the original victim? Or the watch? As innocent parties it seems to me the police would be engaging in a shell game of trading the injustice around if they did that. It is the thief who should pay, not downstream parties.

Otherwise, consider that every dollar bill in our pocket or in our bank account may be (or likely is?) downstream of some illicit activity to which we are entirely innocent. To say law enforcement can confiscate those funds undermines the faith people have in that currency. Does Amazon appreciate how unilateral revokations of gift cards obtained legitimately, as in the case of AH and my mother and I and so on, will undermine the legitimacy of their gift cards?

Unfortunately, law, at least in the US does not agree with your sentiment.  For instance, you will sometimes see a story in the news where a stolen car is returned to the owner who reported it stolen decades ago.  Maybe the car is fully restored now or maybe it is mostly destroyed, but the car is returned to the original owner, and the last owner is out the cost of the car and depending on how ambitious the prosecutor in their jurisdiction is, lucky if they aren't jailed for "receiving stolen property."  Usually these cars are caught by customs on the way out of the country, but since it's decades later, the vehicles have probably changed hands a few times.  I'm not sure how the stolen credit card analogy you use would play out, but unfortunately, it would almost certainly involve an innocent party being screwed over if the insurance company were able to track the goods and thought it worthwhile to attempt recovery.

[BitCoinDream]

An Open Letter To Amazon.com

Regarding cancellation of gift cards I have purchased via Purse.io, and sold on Ebay, given as a gift to my mother, and retained on my Amazon account.

BACKGROUND

On June 2, 2014 I read with interest a news article announcing a service that enabled investors and miners in Bitcoin to purchase items on Amazon.com. (http://www.coindesk.com/purse-io-can-shave-25-bitcoin-buyers-amazon-bills/)

The service, Purse.io, allows users to create wishlists on Amazon which they published to Purse, providing bitcoins that Purse would hold in escrow. People seeking to buy bitcoins would then purchase the items on the Amazon wishlist, having them sent to the wishlist creator. Upon delivery the bitcoins would be released from escrow by Purse.

Many people want to obtain bitcoins but without their own mining rigs or the right know-how and bank accounts linked to bitcoin services after a verification process, they have only risky back-alley means to obtain them. So a service like Purse, which let anyone with a credit card purchase bitcoins from miners like myself at a market premium and with an escrow agent to oversee the transaction, made sense.

I tried the service and found it worked well as described. After several successful transactions I shared my positive experiences with the service on Bitcointalk (https://bitcointalk.org/index.php?topic=601676.msg7741028#msg7741028). Respondents raised the topic of fraud and concerns I could be liable for a bidder making an illicit purchase on my behalf, causing me to contact Purse.io. I posted the response I received from Purse.io on the thread on July 15:

...There are many reasons we chose to integrate with Amazon, and one of them is the fact that they have a state-of-the-art fraud detection system and a strong anti-chargeback process.

Sometimes, Amazon cancels even legitimate orders because it looks suspicious to them (i.e. $1,000 gift card order purchased from Brazil to a Spender in Alabama). People who Buy BTC through our site and try to chargeback Amazon will find their attempts fruitless. Amazon will provide evidence that they shipped and delivered the product and will require a return of the items before they issue a refund to the Buyer. They have great relationships issuing and merchant banks, and they do not outsource payments.

On Purse's side, our system ensures that Spenders aren't exposed to fraud. Spenders' BTC aren't at risk because they have to confirm delivery of the item. We are developing capabilities that detect changes in Amazon orders so that we minimize the wait time for Spenders.

I was reassured by this response, and by the fact that some of my orders on Purse had been delayed or canceled apparently because of Amazon's anti-fraud systems. This indicated to me that they were successfully weeding out potential illicit purchases. In the meantime I was able to purchase items as well as gift cards on Amazon.com via Purse, and use the gift cards without any hassle. I gave one gift card to my mother for her birthday, and even made a sizable purchase of bitcoin myself on Purse using Amazon gift cards when an arbitrage opportunity arose.

EBAY SALE OF GIFT CARDS

In early August I listed two gift cards for sale on Ebay, as by that point I had confidence that I had valid cards to sell and there was no sign of issues with Purse or Amazon. I researched Ebay's policies and followed them carefully, aware of the reports of scammers who would bid on cards, utilize them and then report to Ebay that they hadn't received the cards or they were invalid. Both cards sold and were shipped and received without issue and everything seemed to be fine.

On September 2 I received a message from Ebay informing me that the buyer of the first gift card had opened a dispute and requested a refund. The buyer reported:

Hello, I entered the gift certificate onto my amazon account. Then this morning I got this email from Amazon.com, containing the following: "The gift certificate you recently attempted to redeem is invalid. Please understand that we cannot reissue it or reimburse you for these funds. Any associated orders have been cancelled. We suggest that you contact the party who sold you the gift certificate to inquire further about their policies for dispute resolution."

(In follow-up contact with the buyer, whom I'll call AH, it turns out they were able to deposit the gift card funds to their Amazon account initially and things were fine for about ten days. They even made a small ($7.19) purchase with it, prior to Amazon cancelling the card. So the card was valid, but then Amazon cancelled it.)

MASS CANCELLATION OF GIFT CARDS

I looked up the serial number information I had retained on the gift card in question and logged into Amazon.com to contact Amazon support. That's when I noticed that Amazon had also cancelled all of my own gift card funds on my own account. This included three cards, all purchased (to the best of my recollection) by separate bidders on Purse.io. The cancellations occurred on August 27, with no email or other form of notification to me of the action being taken despite passage of almost a week.

After my initial contacts with Amazon customer service on Sept. 2, Amazon confirmed that the card I sent to AH was redeemed by an account matching the name to whom I shipped the card. They did not respond to my inquiries regarding my own canceled gift cards. On Sept. 3 I received updates from AH via the Ebay message system, as they were separately following up with Amazon:

Hi again, Here is what Amazon said in response. Could you take a look at this message and see if there's anything you can do to resolve it with amazon? Hello, I'm following up on your recent contact to our Customer Service department and I'm very sorry to hear about the trouble you've had trying to use your $200.00 gift card. I've checked our records, and the claim code you received from [REDACTED - call her CC] there appears to be a problem with the purchaser's account and the gift card is indeed not available for use. I regret that for security purposes I'm unable to provide you with any further information. Therefore, I recommend contacting the person who bought the gift card for more information. If they feel this is an error please have them contact us with directly with this matter. For your reference, please visit the following link for the gift certificate fine print: http://www.amazon.com/gc-legal.

I vaguely recalled the ""CC" in the quote above, because each item shipped from Amazon from a wishlist includes a slip of paper noting that it is a gift and gives the name of the person sending it.

From this information it is becoming apparent that something like the following has happened:
1. A "bad actor," either CC or a thief using her identity made the gift card purchase on Amazon, to receive BTC from Purse.
2. Amazon accepts the payment from CC; Amazon and perhaps credit card or other corporate payment systems anti-fraud detection fail.
3. I received the gift card and confirmed delivery to Purse, releasing my escrowed bitcoin.
4. Then I resold the gift card to AH on Ebay, receiving payment via Paypal.
5. Weeks after the purchase in step 1, Amazon identifies it as fraudulent and cancels the gift card. AH has a dead card they've paid for, and I'm caught in the middle having paid for it as well but with my reputation at Ebay on the line.

CLUES FROM PURSE

All this shed light on an exchange of emails I had with Amazon and Purse on August 22-25, after the Ebay sale of the gift cards.  On August 22 I had received a cryptic email from Amazon stating:

The gift certificate you recently attempted to redeem is invalid. Please understand that we cannot reissue it or reimburse you for these funds. Any associated orders have been cancelled.

That was odd because I hadn't attempted to redeem a gift card at that point, and my Amazon account showed nothing amiss with my previous gift cards. Nor had I heard anything from my Ebay buyers as I might expect if they were having problems. So my initial reaction was that someone must have bid on one of my Purse.io wishlists but sent the gift card to themselves. (I knew from my own experience that you can deliberately or accidentally ship a wishlist item to your own address quite easily.) I figured someone shipped themselves a gift card from my wishlist and tried to redeem it (perhaps with an ill-conceived idea of trying to wrest the escrowed bitcoin in Purse from me in a dispute.) So I contacted Purse.

In a response asking for more details, one of the operators of Purse made a remark that I shouldn't buy gift cards using Purse. I asked why (I had noticed a large proportion of Purse listings were for gift cards all summer) and another Purse rep explained that Amazon had a high rate of cancellations for gift card purchases, especially those of higher value. I was beginning to experience that myself at Purse, as multiple listings I had made for gift cards on Purse were seeing their orders canceled by Amazon. The last gift card I received via Purse arrived on August 19. For obvious reasons I've discontinued use of Purse for at least the time being. But Purse never mentioned the risk of gift cards being revoked after shipment or of any other issue to be concerned with in this case.

In any event, Purse did not confirm anything relating to the August 22 email from Amazon, leaving it unexplained. This morning AH provided a screenshot of their gift card account at Amazon, in Ebay's dispute resolution center. It shows that AH deposited the gift card I sold them to their account on August 22 without issue. They then made a purchase with the card's funds on August 28, and then the funds were canceled on Sept. 2. So it's still unclear whether Amazon's email to me on August 22 relates to AH's card or something else entirely. If AH's use of the gift card on Aug. 22 triggered the warning email to me, why was it accepted into AH's account such that they could use it?

CURRENT STATUS

I'm still awaiting a reply from Amazon as to the cancellation of gift cards in my own account. In my responses to AH I've reassured them that regardless of what Amazon does, I believe the right thing to do is to reimburse them myself as the cancellation of the gift card was no fault of their own and they should not held responsible for the actions of another bad actor. I am hopeful that the same logic will apply to myself.

SHOULD INNOCENT PARTIES BE MADE TO PAY FOR OTHERS CRIMES?

As I understand it (not being a lawyer), when a crime is committed, stolen property can be retrieved to be returned to the rightful owner.  To that extent I can understand and appreciate Amazon's actions that they are acting in good faith, perhaps on behalf of a credit card company that suffered a loss due to a stolen credit card.

However, (in this illustration) it was the credit card that was stolen, not the gift card or the bitcoins or the funds in Paypal. An organization like a pawnshop understands the risks of dealing with potential stolen property and builds that risk into their business model and profit margins. But suppose someone stole a credit card, bought a watch with it, pawned the watch, and then the pawnshop sold the watch to Buyer A, who then traded it for a cell phone with Buyer B.

Should the police confiscate the cell phone and give it to the original victim? Or the watch? As innocent parties it seems to me the police would be engaging in a shell game of trading the injustice around if they did that. It is the thief who should pay, not downstream parties.

Otherwise, consider that every dollar bill in our pocket or in our bank account may be (or likely is?) downstream of some illicit activity to which we are entirely innocent. To say law enforcement can confiscate those funds undermines the faith people have in that currency. Does Amazon appreciate how unilateral revokations of gift cards obtained legitimately, as in the case of AH and my mother and I and so on, will undermine the legitimacy of their gift cards?

DOING THE RIGHT THING

After some initial anguish, I decided that regardless how things pan out with Amazon, I would not "spread the injustice around" and stiff my Ebay buyers. If the gift cards remain revoked I will refund AH the amount that Amazon revoked from them myself. This despite the fact that Amazon initially accepted their card, which I believe would give me an excellent case in Ebay's dispute system to fend the case off without a refund. It would be hypocritical of me to do otherwise, as I believe Amazon should treat me and others in a similar situation likewise.

AMAZON CAN LEARN A LESSON FROM MINTPAL AND VERICOIN

One of the cryptocurrencies I am invested in besides bitcoin is Vericoin. On July 13, 2014 the cryptocurrency exchange Mintpal was hacked. 30% of all vericoin in existence were stolen from their vault, with a value at the time of around $2 million dollars. (http://www.coindesk.com/bitcoin-protected-vericoin-stolen-mintpal-wallet-breach/)

A cryptocurrency such as vericoin or bitcoin basically exists in the form of an accounting ledger distributed across the internet. The ledger is broken down into "blocks" containing all the transactions for a given chunk of time. The entire ledger is known as the blockchain, with new blocks being constantly added to record ongoing transaction activity. The fact that you "own" a bitcoin or vericoin is established by its being recorded in the blockchain.

In response to the theft the vericoin development team orchestrated a "rollback." This involved truncating the blockchain back to just prior to the point of theft and then restarting blockchain activity with new blocks lacking the theft transaction. It's as if a band of bank robbers were fleeing down the street with bags full of cash and then - POOF! - the cash magically teleports back into the bank vault, leaving them empty-handed.

Except that it isn't just the bank robbers who lose their haul. At the grocery store a lady walks out with her groceries, but the grocer sees the funds from the debit card she just used, vanish. Money taken from an ATM that morning vanishes from a church offering plate. A wire transfer from the bank to purchase stocks is revoked, leaving the stock broker in the lurch. Not good.

But in the case of vericoin, the original blockchain could still be used as a reference - it records ALL transaction activity. As a result, Mintpal worked with the vericoin team and announced:

We have committed to our customers and to all [other] exchanges that we will cover any losses faced as a result of the rollback.

Mintpal was able to reassure vericoin investors that no one but themselves would be defrauded by the rollback. They took on the burden of the theft themselves rather than trying to escape responsibility for inadequate security. Amazon, take note!

CONCLUSION

In conclusion I request that Amazon reinstate the gift cards I have purchased, including those provided to AH (not to mention my mother, etc.) We are not the guilty party and should not be defrauded, and Amazon is trying to close the barn door weeks after the horse has been stolen in this case. This concerns funds tallying around $950 in my case. Think I will ever touch Amazon.com with a 10-foot pole or speak well of it to others if the cards I bought are canceled?

I would also recommend that they cooperate pro-actively with Purse.io management to improve their anti-fraud methods without defrauding their customer base. For example, a delay could be introduced in the escrow system dependent on triggers from Amazon to confirm when funds used to make a purchase have truly cleared on their side.

I ask that Purse.io take the initiative in working with Amazon on this to protect their own customer base and defeat fraudulent activity, and that they provide some warning to users on their website as to the kinds of problems that users such as myself are encountering. Warning users of the risks will protect themselves in the long run.

POSTSCRYPT: THE BITCOIN ADVANTAGE

I must also point out that this entire situation would likely not exist if Amazon simply followed the lead of thousands of other companies like Dell, Overstock and DISH and began accepting bitcoin directly. Although bitcoin is the target of a good deal of fraudulent scams, the fact that bitcoin transactions are direct between buyers and merchants means the merchant is free of the entanglements and headaches that frauds with traditional 3rd party payment systems like credit cards involve.

Bitcoin frauds target the holder of the bitcoins themselves, so all Amazon would be concerned with is securing its own bitcoin accounts. There
are no issues with chargebacks, counterfeiting, bounced checks, and the like. There is no weeks of delay to confirm a transaction or learn that it was executed fraudulently. (Confirmations take 30-60 minutes with bitcoin, or near instantly using methodology such as is implemented at Bitstamp.) The result would be major cost savings and improved customer satisfaction as well as faster flow of funds to and from Amazon.

@ebliever What is the point of writing a letter to Amazon in BitcoinTalk ? I think it was better to write it in Amazon forum. At least tweet the link of this post to Amazon's twitter handle.

[ebliever]

An organization like a pawnshop understands the risks of dealing with potential stolen property and builds that risk into their business model and profit margins.

Exactly. You are the pawnshop here. You accepted goods from an unknown source, and they turned out to be fraudulently purchased. You should have built that risk into your business model.

The goods were from Amazon itself , though I take your point. But when someone places a bid on Purse they have no way to vette the bidders or investigate them, as is true of any auction site (such as Ebay itself). Amazon (and potentially credit card companies, etc.) has its anti-fraud system, so they at least have a chance of stopping fraud in a way that those of us putting our BTC at risk cannot. So I think Amazon is more analogous to the pawnshop than myself in this sense.

I did of course make a rudimentary attempt to assess risk and allow for it. Key to my risk assessment was a strategy of slow growth and trials, and the notion that any frauds would happen one case at a time, with time to react before another transaction with the same scammer if I encountered one. This policy by Amazon eviscerated this strategy, because I was able to make multiple transactions in which everything seemed fine and then Amazon went and canceled the funds retroactively. Please note that they didn't even inform me, leaving me open to the risk of making additional transactions that they could have canceled in the same fashion. Amazon might like such a policy, but it's not very fair to users who think things are OK and keep going deeper until Amazon sucks their account dry. This is really my core complaint - cancelling a product after it has been delivered means they may be no longer hitting the thief but rather other innocent parties. I'm hoping it is just a matter of investigating on their end to confirm and recognize this when it happens.

I've made multiple queries to Amazon now about my canceled gift cards funds and received ZERO response on them. They didn't even have the decency to send an email when the funds were originally cancelled. I'm going to ask them again tonight to at least provide me with a status or roadmap or something if there is an ongoing investigation - I'd be fine with that kind of response, and understand their need to keep sensitive details under wraps. (One factor is that I want to reach closure with my Ebay buyer, AH, in a timely fashion. That is, I don't want to prematurely pay them and then wind up having their card restored, but I don't want to leave them hanging either.)

Still, I wish they'd be more forthcoming because too much does not make sense to me at this point. For example, if I'm right that there could be credit card fraud involved, doesn't that mean the credit card company would be the one that has lost funds, not Amazon? Perhaps someone in the know can explain this - if a credit card company suffered fraud and paid Amazon, would there be agreements between Amazon and the CC company to repay the CC company? Otherwise it looks like Amazon is getting paid in full but still cancelling the gift cards, coming out ahead. But the notion of such agreements strikes me as unlikely - it would mean Amazon would be the one suffering losses from credit card fraud every time physical products were shipped and then Amazon was forced to repay the CC company. Why should Amazon pay for credit card company losses? (They would then be in the same situation I'm protesting being in now, and I think it would be just as unfair for them to be bearing that burden.) So something isn't making sense.

[murraypaul]

An organization like a pawnshop understands the risks of dealing with potential stolen property and builds that risk into their business model and profit margins.

Exactly. You are the pawnshop here. You accepted goods from an unknown source, and they turned out to be fraudulently purchased. You should have built that risk into your business model.

The goods were from Amazon itself , though I take your point. But when someone places a bid on Purse they have no way to vette the bidders or investigate them, as is true of any auction site (such as Ebay itself). Amazon (and potentially credit card companies, etc.) has its anti-fraud system, so they at least have a chance of stopping fraud in a way that those of us putting our BTC at risk cannot. So I think Amazon is more analogous to the pawnshop than myself in this sense.

Amazon is selling goods at face value.
You are selling BTC at a 25-30% markup over face value.
I think it is clear who is taking a risk premium?
If Amazon should be accepting all the risk, why are you being paid 25% more than the value of what you are selling?
If something seems too good to be true, it usually is.

In the situation we are assuming, of credit card fraud, the credit card companies have reversed the charges, leaving Amazon out of funds. Amazon have therefore cancelled the gift cards bought with the withdrawn funds, to minimise their own losses.
With physical products, Amazon could not do this, but then with physical products they would also have a delivery address, and more chance to investigate the fraud.

[Vod]

Too long - didn't read.  And neither will Amazon.   

Keep your initial complaint letter short and summarize.  All the details can come out later.

More info on how to write a complaint letter:
http://www.infoplease.com/ipa/A0002121.html   

[alani123]

Too long - didn't read.  And neither will Amazon.  

Keep your initial complaint letter short and summarize.  All the details can come out later.

More info on how to write a complaint letter:
http://www.infoplease.com/ipa/A0002121.html  

Those guys get thousands emails a day, and I doubt that they even read them in their entirety. The guide Vod posted is really useful and will make the process easier for both parties.  

[runam0k]

I like the idea of purse.io, but ultimately what's to stop you being on all sides of the same transaction (i.e. using stolen cards to buy yourself stuff from Amazon and, of course, receiving the escrowed bitcoins to another address)?

purse.io should take the risk, but do you think they will?

[Mr Tea]

I don't even know that it's possible use BTC on amazon!!!

You can't directly. Purse.io is a site where you can get people to buy you things from Amazon in exchange for bitcoin, though obviously problems like this happen.

[ebliever]

Too long - didn't read.  And neither will Amazon.  

Keep your initial complaint letter short and summarize.  All the details can come out later.

More info on how to write a complaint letter:
http://www.infoplease.com/ipa/A0002121.html  

Those guys get thousands emails a day, and I doubt that they even read them in their entirety. The guide Vod posted is really useful and will make the process easier for both parties.  

I'm making repeated inquiries to Amazon using their system, and being concise about it. But you can only put so much detail into those miserable little comment boxes they use. So I tried assembling everything here for reference. Not everything can be explained in 25 words or less.

So this is partly a reference in case someone at Amazon does care to dig into it (because they are dealing with similar cases as well and have a bigger problem on their hands), and also because I thought it important to warn Purse users (and BTC investors who might be considering Purse) of what is happening. So far Purse is still not warning anyone at their site that anything is amiss. That's a problem too.

[Moneyunmaker]

Amazon will be forced to sooner or later, get on their knees and suck on the BTC god, reading this letter or not.

[Jamie_Boulder]

Too long - didn't read.  And neither will Amazon.   

Keep your initial complaint letter short and summarize.  All the details can come out later.

More info on how to write a complaint letter:
http://www.infoplease.com/ipa/A0002121.html   

Hence why it's an open letter, from the community to Amazon.

O/T: I don't think this needs to be done, they'll learn their mistakes themselves and probably suffer a decline in business growth as a result.

[Moneyunmaker]

I have writen to Amazon before about BTC and I got ignored, good luck with that tho.

[oceans]

Got to admit for a complaints letter that is pretty big and may just get pushed to the side by Amazon. I would have definitely kept it more short to be honest and to the point and then asked any further questions or put any further queries forward after that. If you do get a reply from Amazon that is great but I really do not see that happening.

[nothing2seeHere]

I like the idea of purse.io, but ultimately what's to stop you being on all sides of the same transaction (i.e. using stolen cards to buy yourself stuff from Amazon and, of course, receiving the escrowed bitcoins to another address)?

purse.io should take the risk, but do you think they will?

There is nothing to stop someone from doing this. This is the reason why amazon will not reimburse the OP for the stolen gift cards.

[ebliever]

Got to admit for a complaints letter that is pretty big and may just get pushed to the side by Amazon. I would have definitely kept it more short to be honest and to the point and then asked any further questions or put any further queries forward after that. If you do get a reply from Amazon that is great but I really do not see that happening.

I've explained this a couple times, but I have made 4-5 shorter inquiries to Amazon thus far using their customer service contact interface. Due to the complexity of this case and the need to warn others at risk I thought it best to document everything I knew publicly here. I don't expect a reply from Amazon on this forum directly; rather, I will provide any update from Amazon or Purse on this case myself.

Amazon boasts of 12 hour replies in their contacts page; 32 hours after my latest submission I received an odd automated email from them. It says something about not being a member of their Advantage program (?) and to resubmit using the standard Contact Us form, which is exactly the form I used. Once I dig up the physical cards I have I'm going to have to try calling them.

[ebliever]

I like the idea of purse.io, but ultimately what's to stop you being on all sides of the same transaction (i.e. using stolen cards to buy yourself stuff from Amazon and, of course, receiving the escrowed bitcoins to another address)?

purse.io should take the risk, but do you think they will?

There is nothing to stop someone from doing this. This is the reason why amazon will not reimburse the OP for the stolen gift cards.

That's true, and that's why I didn't expect Amazon to instantly reinstate the cards without an investigation. Posting the details as I know them (and being willing to answer any other questions that come up to the best of my ability, probably with assistance from Purse) was done precisely to help an investigation determine that I'm not playing both sides of the fence here.