Could buying that knock-off item fund the next terrorist attack?

While this story is from a British perspective, it reveals how the trade in counterfeit (knock-off) merchandise is funding some pretty nasty characters beyond the borders of the British Isles.

Richard Elias recently revealed in Scotland on Sunday:

The sale of fake CDs, DVDs, clothing and perfumes in Glasgow and other British cities is helping to raise money for one of the world's most-notorious terror outfits – the group held responsible for the slaughter of US journalist Daniel Pearl in 2002.

MI5 is now targeting British-based supporters of Jaish-e-Mohammed (JeM), a pro-Kashmiri group dedicated to gaining the disputed territory its independence. Its aims include the "destruction" of the United States and India.

This isn't the first time the words terrorist organization and counterfeit merchandise have been used in the same sentence. And in reality, the problem goes far beyond the borders of the United Kingdom.

A good video about the counterfeit problem by KRQE in New Mexico is posted on YouTube, which can be seen, here.

The video references a report by the IACC (Internation Anticounterfeiting Coalition). The IAAC stated in a white paper that:

Low risk of prosecution and enormous profit potential have made criminal counterfeiting an attractive enterprise for organized crime groups. Congress recognized organize crime’s increasing role in the theft of intellectual property when it made trademark counterfeiting and copyright piracy predicate acts under the federal RICO statute (see 18 U.S.C. § 1961). Recently, ties have been established between counterfeiting and terrorist organizations who use the sale of fake goods to raise and launder money.

Counterfeiting is becoming a worldwide problem that poses a threat to the economy and public safety. Unfortunately, a lot of people view it as a victimless crime and continue to support it by purchasing knock-off merchandise.

If you take the time to read the IAAC White Paper, it also reveals that a lot of countries that we do business with in the global economy are some of the biggest culprits.

And the biggest offender seems to be China!

This should be no surprise considering the amount of unsafe product being found at your local store coming from that country.

While there are obviously more players in all of this than terrorist organizations, supporting any of them with our business isn't in the public's best interests.

IAAC White Paper, here.

Scotland on Sunday story, here.

buySAFE takes on the issue of counterfeit (knock off) merchandise

buySAFE bonds sellers after verifying they are reputable and honest. They also contribute their time to protecting the average person in the sometimes murky waters of e-commerce. Recently, buySAFE has been taking on the (huge) issue of counterfeit merchandise.

Consumers are protected when they buy from a merchant bearing the buySAFE seal. Not a very bad deal for the consumer! Bonding isn't free, but many merchants experience higher sales volumes after being accepted by buySAFE. Trust can drive a lot of sales! buySAFE is also a viable means for a merchant to protect their assets.

The Association of Certified Fraud Examiners noted in their last report to the nation that small businesses suffer "disproportionate fraud losses," when they are victimized by fraud. Large merchants can afford experts to deal with their fraud problems, however the cost is hiring experts can be restrictive for smaller merchants.

Of the numerous fraud issues found on auction sites, complaints about counterfeit goods rank pretty high. People buy items believing they are the "real deal," only to discover the item is a (knock-off) counterfeit.

Companies, who sell respected and trusted brands, are impacted by a loss of sales and consumer trust in their products, also. Some of them have already filed civil litigation against eBay because of the amount of knock-off (counterfeit) merchandise being sold on the site.

Even though auction sites offer seller rating systems, these ratings are often compromised when seller accounts are hijacked (taken over). eBay and PayPal (by most accounts) are recognized as the two most phished brands out there.

The intent of most of these Phishing schemes is to obtain personal/financial information to steal money (and or) take over legitimate accounts.

This can also happen when malware (crimeware) is inserted into an unprotected system and personal/financial details are stolen, normally using key logging software. Sadly enough, the criminal element has found it pretty easy to remain anonymous on auction sites, and few of them seem to get caught.

Whenever the Anti Phishing Working Group (APWG) releases a new report, both of these activities seem to set a new record that surpasses the previous one.

Recently, eBay seems to be taking the fraud problem a lot more seriously, but someone using the name of "Vladuz" is intent on proving their systems are easily compromised. A good place to keep up on the Vladuz saga is firemeg.com.

Although a good information source, I'm not certain that bashing Meg is the solution to fraud on auction sites.

Being the largest auction site, eBay is targeted by fraud all the time because of their popularity.

Fraud has already migrated to other auction sites, but they will always target the most popular.

The reason for this is simple (and it's only business for them) - there are more victims to harvest in popular places.

The term "Vlad" was based on a Romanian historical figure, Vlad Tepes, who inspired the novel, Dracula. In recent times, the term has come to signify fraudsters from Romania, who are well established and organized in the world of auction fraud.

Besides, protecting merchants and consumers, buySAFE makes a lot of contributions to addressing fraud issues on auction sites. Most recently, Jeff Grass (buySAFE CEO) has posted a lot of educational information on his blog about the counterfeit problem, here.

Jeff also appeared on the Today show, when they did a piece on counterfeit goods.You can view a clip of the show, here.

And the Today show isn't the only place that considers buy Safe’s views on the counterfeit problem important. The French government recently included buySAFE as part of a U.S. delegation (including government experts) to discuss the problem of counterfeit goods.

The INTERNATION ANTICOUNTERFEITING COALITION (a non-profit) sums up the problem when they state:

Counterfeiting is big business.It is estimated that counterfeiting is a $600 billion a year problem. In fact, it's a problem that has grown over 10,000 percent in the past two decades, in part fueled by CONSUMER DEMAND.

The real truth is people who purchase counterfeit merchandise risk funding nefarious activities, contributing to unemployment, creating budget deficits and compromising the future of this country in the global economy.

IACC site, here.

Part of the reason the activity has grown 10,000 percent is probably due to the explosion in e-commerce, especially on auction sites.

buySAFE seems to be doing a little more than just selling a product. In fact, they seem to be exercising some corporate responsibility by educating the public on fraud trends in the rapidly growing world of e-commerce.

Consumers can become a member of their Smart Buyer's Club, which leads you to a lot of good deals (safe to buy), here. Club members accumulate points, which can be redeemed for goods, or services (listed on the site).

Anyone claiming to be a buySAFE merchant can be verified, which can be done on the site, also.

On eBay, the buyer better beware!

Despite a lot of publicity that eBay is going after fraud, the bottom line is that the buyer better BEWARE when they purchase something on eBay, or for that matter, any digital auction site.

This morning, I read a story from Wales, where a person just got caught selling laptops that didn't exist.

From the Evening Leader:

Christopher Malcolm Amos, from Green Lane, Shotton, admitted swindling customers of the online auction site out of thousands of pounds to fuel his gambling addiction.

Under the user name 'Whitefruit,' the 22-year-old accepted payments from 130 bidders wanting to buy laptop computers.

Some used eBay's PayPal facility, while others transferred the cash directly into Amos's bank account, but nobody ever received their orders.

Please note that at least some of the fraud victims used eBay's preferred method of payment, PayPal.

And Mr. Whitefruit, who I gather is a gambling addict, didn't get into very much trouble for swindling about 100 people. He was ordered to pay some restitution and got a 12 month suspended sentence.

I'm sure eBay fraudsters around the world are quivering in their boots!

I ran into another story in the ChronicleHerald (Halifax, Canada) describing a significantly larger operation involving selling neat "tech toys" that never existed:

Police said Wednesday several complaints about alleged electronic commerce crimes have come in during the past week to 10 days. Customers are from such countries as Australia, Sweden, Norway, the United States, Italy and Estonia. Const. Jeff Carr, a spokesman with Halifax Regional Police, said Canadian EBay users have allegedly been victimized as well, but there are no complaints from the Maritimes.

The person behind this, who hasn't been caught yet was selling laptops that didn't exist.

The story also indicates that PayPal was used on some of these transactions:

He said one complaint, from PayPal of San Jose, Calif., includes more than 100 alleged victims. PayPal, which was acquired by EBay in 2002, is an online money-sending service that provides users worldwide an opportunity to buy and sell goods without sharing personal financial information.

Even when you get the merchandise you paid for on an auction site, you are taking the chance that it is a cheap "knock off," or might be some of the stolen merchandise being fenced on some of these digital marketplaces.

Knock off merchandise can be dangerous when it doesn't work as well as the item it is passing itself off does. Buying stolen merchandise poses certain moral issues, also.

When buying something on an auction site, it is up to the buyer to make sure (beware) they are getting what they paid for. This can include using some good old "horse sense," and being able to realize when the deal you seem to be getting is a "little too good to be true."

Previous posts, I've written about fraud on eBay, can be seen, here.

Evening leader story, here.

I've also written about a company called buySAFE, who certifies sellers and guarantees what they sell. The seller pays for this -- and while I suppose the cost is included in their cost of goods sold -- this might be a good way to avoid fraud without having to do a lot of homework.

buySAFE's CEO, Steve Swoda does a blog, which I read from time to time can be seen by clicking, here.

Microsoft is NOT the Biggest Hacker in China!

Chinese surfers are crying foul at Microsoft's launch of the "Windows Genuine Advantage Program," which turns a screen black when it detects pirated software. It is believed up to 200 million computer users in China have counterfeit software on their machines.

China is well-known for being involved in the knock-off trade, as well as, selling dangerous and defective products in the global economy. The news has had a lot of stories about them censoring the Internet, violating user privacy and being involved in hacking on an industrial scale.

Ironically, Dhong Zengwhi, a Bejing lawyer, accused Microsoft of being the "biggest hacker in China with its intrusion into users' computer systems without their agreement or any judicial authority," according to the China Daily. His argument is that this will cause serious functional damage to users' computers and according to China's criminal law, Microsoft could be accused of breaching and hacking into computer systems. Zengwhi has filed a complaint with the Chinese government about this.

Does this mean Microsoft won't be able to out-source work to China?

I wonder if Mr. Zengwhi's opinion was when it was revealed that the Chinese were data-mining the communications of Tom-Skype users? Tom-Skype is the Chinese version of the popular Skype software, which allows people to communicate worldwide using the Internet.

Privacy violations in China aren't limited to Tom-Skype communications, either. During the recent Olympic games, the government openly monitored Internet communications, using the excuse of security to justify what many believe was censorship.

The allegation that Microsoft is the biggest hacker in China is questionable. Governments from all over the world have accused the Chinese of hacking into their systems and it isn't considered safe to carry a laptop, or even a smart-phone when visiting China. Recently, there was speculation that Commerce Secretary Carlos Gutierrez had his laptop hacked during a visit to China.

In fact, if you follow the news, the theft of intellectual property is often traced to the Chinese. The FBI has caught numerous Chinese agents stealing a lot of private and government information in the recent past.

Pirated software is a huge problem in the global economy. It is estimated that one third of all software being sold is counterfeit. A large percentage of the software sold on auction and even e-commerce sites is counterfeit, also. It isn't unknown for a consumer to think they are getting legitimate software when they are not.

Besides costing jobs and revenue to legitimate firms -- knock-off software can damage a machine, or even lead to information theft when malicious software is added to the mix.

I'm sorry that that certain people in China are outraged by Microsoft's solution to the theft of their property, but let's face it, they are hardly the biggest hacker in China.

eBay/Craigslist praised by Congressman for efforts to curb sales of stolen military equipment on their sites (?)

I've written a few things about scams and fencing stolen merchandise on auction sites. Recently, the GAO discovered that items stolen from the military are for sale on eBay and Craigslist.

Even more interesting were the results of narrowly focused hearings (my opinion) on this matter in Washington, which can be seen at the bottom of this post. The reason I believe they were "narrowly focused" is because there is no shortage of fraud, phishing and financial misdeeds on auction sites.

Of course, there is also no shortage of ordinary citizens and businesses that have been taken to the cleaners on an auction site. Stolen government items are only a small part of the overall problem.

From the GAO report:

GAO found numerous defense-related items for sale to the highest bidder on eBay and Craigslist. A review of policies and procedures for these Web sites determined that there are few safeguards to prevent the sale of sensitive and stolen defense-related items using the sites. During the period of investigation, GAO undercover investigators purchased a dozen sensitive items on eBay and Craigslist to demonstrate how easy it was to obtain them. Many of these items were stolen from the U.S. military. According to the Department of Defense (DOD), it considers the sensitive items GAO purchased to be on the U.S. Munitions List, meaning that there are restrictions on their overseas sales. However, if investigators had been members of the general public, there is a risk that they could have illegally resold these items to an international broker or transferred them overseas.

Apparently, body armor, MRE (meals ready to eat), uniforms, night vision goggles, NBC (Nuclear Biological Chemical) equipment and even F-14 components were some of the items purchased on eBay and Craiglist by undercover investigators.

The obvious concern would be terrorists, or other not very friendly people getting their hands on some of this stuff.

Given the organized effort on a lot of auction sites to fence stolen merchandise via some pretty sophisticated methods, it's not surprising that the GAO found military equipment for sale on the sites. Many have speculated that these sites are used as a means of fencing the proceeds of what is known as organized retail crime. Of course, less organized criminals obviously sell their goods on auction sites, also.

Organized retail crime obtains their goods by a variety of methods from common theft to using stolen financial instruments. A lot of stolen financial instruments are used to purchase items on auction sites and e-commerce sites. Of course, they are used in more traditional store settings for the same purpose, also.

On eBay, account credentials and payment accounts (PayPal) are phished all the time, enabling an additional layer of anonymity to the schemes. In fact, over the years, many experts have stated that eBay and PayPal are the two most phished brands out there.

One thing not mentioned in the report is that people don't always get what was advertised on these sites. It isn't inconceivable that a complete fighter jet might be put up for sale, paid for and in the end a toy, or "nothing at all" is received by the buyer.

Trust me, this wouldn't be the first time something like this has happened on an auction site.

A lot of counterfeit (knock-off) merchandise is sold on the sites, advertised as the "real thing," also.

Our leaders in Congress reacted by calling Jim Buckmaster (Craigslist) and Tod Cohen (eBay) in to speak with them on the matter.

Anne Broache (CNet) writes:

By calling Craigslist CEO Jim Buckmaster and eBay government relations chief Tod Cohen to Washington for the hearing, the subcommittee seemed to be preparing to place those executives in the hot seat. But the tone of that questioning was actually quite cordial. At the end of the panel, Tierney even praised the companies for "trying very hard" to keep sensitive military goods off their sites and acknowledged the rules of the road aren't the most clear.

Based on her article, which reports that Buckmaster and Cohen were treated with "kid gloves" during the session, my prediction is that little is going to be done to regulate the sale of stolen goods on auction sites as a result of this.

Meanwhile, everyone running for office is saying they will be the one doing something about the problem of special interests in Washington.

On a closing note, I want to commend the GAO for their efforts to expose a problem. I'm just saying it's a shame that no one listened to what they were saying, very carefully.

HTML version of the GAO report, here.

PDF version, here.

Oregon case reveals the tie between software piracy and identity theft!

(Photo courtesy of naveenium at Flickr)

Software Piracy is a multi-billion dollar issue. Whether it's hawked in a spam e-mail, a flea market or on a auction site -- it might not work as well as advertised -- and could even lead to identity theft.

You never know what might be installed in pirated software. The person selling it to you might add a little malicious software (containing a keylogger) and steal all your personal and financial information.

A recent case showing how pirated software leads to identity theft was announced by the Department of Justice:

An Oregon man pleaded guilty today to selling counterfeit computer software with a retail value of more than $1 million, in addition to aggravated identity theft and mail fraud, announced Assistant Attorney General of the Criminal Division Alice S. Fisher and Karin J. Immergut, U.S. Attorney for the District of Oregon. This case is part of the Justice Department’s initiative to combat online auction piracy.

Jeremiah Joseph Mondello, 23, of Eugene, Ore., pleaded guilty to one count each of criminal copyright infringement, aggravated identity theft and mail fraud before U.S. District Court Judge Ann L. Aiken in Eugene. Mondello faces up to 27 years in prison, a maximum fine of $500,000 and three years of supervised release. Sentencing has been set for July 23, 2008.

Although this only appears to be a small win in the overall problem, it illustrates the danger of installing unauthorized software on your system. You might get more than you bargained for:

Mondello admitted to stealing individuals’ identifying information to establish online payment accounts in their names. Mondello acquired victims’ names, bank account numbers and passwords by using a computer keystroke logger program to surreptitiously obtain this information. The keystroke logger program installed itself on the victim’s computer and then recorded the victim’s name and bank account information as the information was being typed. The program then electronically sent the information back to Mondello, and he used this stolen information to establish the online payment accounts.

In other words, the moral of the story is that the money you save buying knock-off software can easily be lost when the seller returns to clean out your financial assets.

Trust me, criminals are not honorable and they could care less, if you get left holding the bag.

Last, but not least, most victims of identity theft are able to get their financial institutions to write-off their losses. However, if they discover you used illegal software -- which happened to contain malicious capabilities -- my guess is they are going to deny your fraud claim.

DOJ credited the Software & Information Industry Association for their assistance in this conviction. This association represents the software industry and goes after software and content piracy. They provide a means to report instances of piracy and offer up to a million dollar reward for doing so.

Full press release on this matter, here.

Bills Introduced to Combat Organized Crime on Auction Sites

While stories of individual people getting scammed on auction sites are legendary, individuals aren't only ones victimized on these sites. Large retailers and brand owners are victimized when their stolen or counterfeit merchandise is sold on these sites, also.

In response to this, two bills are being introduced to combat this problem in the halls of Congress.

The reason this has become a growing issue is that criminals can net 70 percent of the value of stolen merchandise on an auction site versus the going 30 percent received on street corners, flea markets and pawn shops. So far as all the knock-off (counterfeit) goods being sold on auction sites, it's hard to put a dollar loss to it, but many believe it's substantial.

According to the International Anticounterfeting Coalition, counterfeiting costs U.S. businesses $200 to $250 billion a year. Counterfeiting and e-fencing pose safety risks to the public-at-large, also. Outdated or merchandise that isn't what it is advertised to be could potentially poison people, or cause bodily harm when it doesn't work like it's supposed to.

Simply stated auction sites, provide an anonymous marketing environment to sell both stolen and counterfeit goods.

“By hiding behind the anonymity of the Internet, they can make more money with less risk of getting caught than selling to a stranger on a street corner who might turn out to be a police officer. This bill would lift that cloak and help law enforcement put on-line criminals where they belong – behind bars,” according to Joe LaRocca, the National Retail Federations Vice President of Loss Prevention.

To address this problem, a federal bill (H.R. 6713, the E-Fencing Enforcement Act of 2008) is being introduced by Representative Bobby Scott, chairman of the House Judiciary Committee’s Subcommittee on Crime, Terrorism and Homeland Security.

The bill will require on-line auction operators to maintain information about high-volume sellers and provide the information to a person with "standing" once a police report is filed. The definition of a person of standing would be a law enforcement officer or a representative from a company, who has an interest in the merchandise being illegally sold on an auction site.

This is the second bill introduced recently to combat organized retail crime, which costs retailers anywhere from $15 to 30 billion a year. On July 15th, H.R. 6491, the Organized Retail Crime Act of 2008, was introduced by Representative Brad Ellsworth, a former county sheriff, along Representative Jim Jordan, as the lead co-sponsor. The bill establishes that unless auction site owners can show specific steps to prove goods being sold were not being obtained by theft or fraud, they could be viewed as "facilitating" the activity. This bill will also require site operators to cooperate with the police and organizations with a stake in stopping the activity. In certain instances, it will also allow merchants to initiate civil actions over stolen merchandise being sold on an auction site.

In the past, auction operators have been criticized for not effectively cooperating with companies and law enforcement when they made an inquiry into suspected criminal activity on their sites. It has also been established that smaller (individual) victims and merchants often receive little to no assistance after being victimized in an Internet auction deal.

E-fencing, phishing, counterfeit goods and the use of fraudulent financial instruments to buy merchandise from unsuspecting customers have all victimized countless people and organizations on auction sites.

Criminals often lure people to do their dirty work, also. Recruits are normally harvested off the Internet, sometimes from job sites, and offered work to reship stolen merchandise and or launder money from fraudulent transactions. Much of this activity involves sending money, or hot merchandise across an International border --making it extremely difficult to track.

A lot of criminal activity is facilitated on auction sites by what is known as phishing. Phishing is where an account owner is tricked into giving up their account details, either via social engineering, or more and more often, after downloading some malicious sofware. The stolen account details are then used to take-over the account and use it for illicit purposes.

In fact, eBay and PayPal accounts are frequently the most phished brands out there.

Phishing, normally facilitated by spam e-mails, is another ever-growing criminal activity on the Internet. Recent studies by the Anti Phishing Working Group show that it is becoming more automated and malicious software (crimeware) used to automatically steal information is becoming more prevalent.

There is little doubt that a lot of the criminal activity on auction sites is sophisticated and reeks of organized crime.

For anyone investigating fraud on an auction site, the only way to effectively do so, is to have access to information quickly and with as little red tape as possible. A lot of these crimes cross over borders quickly and by the time and investigator gets what they need, the trail is often pretty cold.

When auction site owners -- who suffer no financial liability and collect a lot of revenue in fees from this activity -- don't cooperate or move too slowly, it only ensures that criminals will be laughing all the way to the bank.

Even the government has had their stolen inventory sold on eBay and Craigslist. In April, the GAO issued a report that military items, including F-14 components, were being sold on auction sites. In August of last year, a U.S. Attorney was quoted as saying that stamps being stolen from self service vending machines with cloned payment cards were being sold on auction sites. At the time, I ran a simple search query and found some pretty good deals on stamps. As of today, these great deals still exist. Many of them are being sold below cost and the last I checked the Postal Service still offers credit. Why would someone sell stamps below cost?

In my opinion, both of the bills don't only serve the large merchants out there, but have the potential to protect everybody from fraud on auction sites. While both of these bills are being driven by the National Retail Federation, I see a lot of benefits to passing them for everyone concerned with fraud on auction sites.

I highly recommend that these other people, join in with the NRF and the Congressmen involved, and support getting these bills passed.

Spam Levels on the Rise, Again

With the shutdown of McColo by Internet Service Providers in November, global spam volumes dropped over 50 percent. Sadly, this appears to have been a short-term fix. According to a new Symantec report, the spammers have moved to new locations and the volumes are back up to 80 percent of pre-McColo levels.

While spam originates from a lot of places, the United States is still in the number one spot, with 27 percent of the spam observed originating from there. China and Brazil tied for second place with 7 percent of spam originating from these countries.

The report indicates that URLs in Canadian Pharmacy spam messages were noted as being top-level Chinese domains (.cn TLD). Could this mean that Chinese knock-off (counterfeit) prescriptions are trying to make it appear as if they are coming from Canada? Given the recent concerns of tainted and poisonous merchandise being exported from China, this might be a concern. Of course, I would think that buying prescription meds over the Internet should be a concern to most people, anyway.

In another variation of recently observed spam, a user is invited to join a social networking site. The link goes to a real group, which was created on the social networking site by the spammer. The group then links to a free blogging site, which redirects the victim to the ultimate destination URL. At the destination URL, personal information is requested, which is probably used to sell to marketing companies or used in other spam campaigns. Please note, although not mentioned in the report, that some of these campaigns might have malicious intent or be scams.

Also noted during the holiday season was a lot of e-Card spam. This spam sometimes comes with malware (malicious software) designed to steal personal and financial information or turn your machine in to a spam spewing zombie computer using your credentials.

A partcularly deceptive spam delivery method noted recently is spammers inserting their messages into legitimate newsletters. This method seems to get past spam filters pretty effectively. If the recipient clicks on the message, they are taken to a spammer site. Here again, it might be a site selling junk, but also could be a site with more malicious intent.

Another spam trend in vogue these days is to use the recession as a social engineering lure designed to get people to click on a spam link. Messages are being sent out in the millions touting easy bail-out money to be had and an assortment of the normal get-rich- quick schemes. If it's too good to be true and doesn't make sense, it's normally a scam, and I suspect that most of this type of spam is one.

Last but not least, the spammers are still using President-elect Barack Obama's name to market coin offers, a "Barackumentary DVD" and a free Visa card for helping the Obama clan pick their dog.

Shutting down McColo by reaching out to the ISPs — which was done largely through the work of Brian Krebs at Security Fix (Washington Post) -- showed that a significant impact can be made on spam when ISPs are held accountable. Given that Brian is one person and a journalist, this was an admirable piece of work. The fact that spam is approaching pre-McColo levels tells us that there are more ISPs that need to be held accountable. Maybe in the end, government and international agencies need to follow Brian's example and and make an impact on spam levels that will last a little longer.

Spam is a dangerous pain for everyone who uses e-mail. Most scams, questionable goods and services and cyber-attacks using malicious software start with a spam e-mail. Shutting down the spam operators can only make everyone's experience on the Internet a little more safe and sane.

Will One Spam King's Conviction and Another's Escape Mean Less E-Trash on the Internet?

Robert Soloway dubbed the "Spam King" was sentenced in Washington yesterday, according to an article in the Seattle Intelligencer.

For his misdeeds, Soloway was sentenced to just under four years. Notably, Soloway was the second person to be prosecuted under the Can-Spam Act. It should also be noted that the prosecutors asked for about twice the time in prison and with good behavior, Soloway will probably only serve about half of the sentence he received.

Like most of the many "Spam Kings" out there, Soloway allegedly used a botnet (army of zombie computers) to saturate the electronic universe with e-trash, including advertisements from commercial clients. To give everybody an idea of the scope of Soloway's activity, he allegedly sent out 90 million e-mails in a three-month period.

The made me wonder if anyone is looking at the commercial clients? Of course, everyone knows that "Spam Kings" send out a lot more than commercial advertisements, including a variety of scams designed to steal from unwary people. They also tout knock-off drugs, merchandise, software and porn.

Spam is also used to deliver malicious software, which can steal all your personal and financial information. Ironically, spam also delivers malware designed to turn a system (part of a botnet), which is then used to send out even more spam.

In fact, spam designed to send out even more spam best describes Soloway's operation. Using a company, Newport Internet Marketing Corporation (NIM), he offered a broadcast e-mail software product and broadcast e-mail services. His website promised a full refund if a customer wasn't satisfied, however in reality, if anyone ever complained they were threatened with financial charges and collection agencies.

According to the Department of Justice press release, one customer tried to complain about the amount of spam he was getting and Soloway's response was to send him even more spam.

The press release also mentions that he willfully failed to pay his taxes after earning more than $300,000 in 2005.

Interestingly, enough another "Spam King," Edward "Eddie" Davidson simply walked out of a minimum security facility in Colorado about the same time Soloway was sentenced. Davis allegedly made $3.5 million spamming for about 20 commercial clients. Like Soloway, he failed to pay any taxes on the proceeds of his misdeeds.

Unfortunately, Soloway's conviction or Davidson's escape is unlikely to make much of a dent in spam anytime in the near future. Earlier this month, Symantec reported blocking 3.5 million spam messages over the 4th of July holiday. Their monthly spam report reported that over 80 percent of all e-mail sent is spam. The 80 percent statistic (and greater) has been a sad fact for several months now.

Notable trends on the last report included using the China earthquake to spread viruses and the use of fake new flashes (like U.S.A. attacks Iran) to net Internet crime victims.

We probably shouldn't be too quick to celebrate Soloway's conviction. He is obviously just one of many "Spam Kings" operating out there. Hopefully, as time goes on, we will see more of these so-called spam superstars put behind bars. After all, just about anything that is distasteful or illegal on the Internet normally starts with a spam e-mail.

On a final note, both Soloway and Davidson seemed to be servicing a lot of commercial clients. Maybe if the legal emphasis shifted towards the people paying spammers, there would be less incentive (money) for spammers to pollute the Internet!

Update (7/25/08): In a horrifying twist to Eddie Davidson's escape, it has now been reported by the AFP that he killed himself after killing his wife and their three month old daughter. Davidson's seven month old son was left in the car unharmed and his sixteen year old daughter was shot in the neck before escaping.

Given these circumstances, I wonder if anyone is going to question why Davidson was locked up in a minumum security facility that he was able to walk away from?

Civil Actions are unlikely to stop fraudulent activity on eBay

I've written a thing, or two about fraud on eBay and auction sites in general.

Now we are seeing the retail industry go on the offensive for the large quantities of "knock-off" (counterfeit) goods available on the site. Tiffany's, Louis Vuitton and Dior Coutre have all filed lawsuits.

Microsoft took a different approach and is going directly after the sellers.

And counterfeit goods aren't the only fraud category on auction sites.

eBay has the distinction of being one of the most "phished" brands. And besides counterfeit goods, fencing operations are common on eBay. In fact, I was recently told that Target dedicated a full-time investigator to watch for their stolen goods on eBay.

Will this lead to additional civil actions?

Brian White (Blogging Stocks) hits the problem right on the head in a recent article:

Although eBay likes to let its buyers and sellers meddle with each other without oversight, this stance alone, combined with the unusually high numbers of Internet visitors eBay sites get, has made it a huge hotbed of forgery, fakes and fraud in every imaginable category. This should have been widely expected -- the formula for fraud contains a few things that the Internet promulgates -- larger visitorship, buyers ready with "cash" in hand and a low level of policing by the administration. Hmm, 2+2 definitely equals 4 here, yes?

Link, here.

From the criminal point of view, eBay has a business model that makes it easy to commit fraud. The Internet has made it much easier to commit crime and disappear in an "electronic mist." Coupled with a ever-growing identity theft crisis - it's very easy for the criminal element to use a legitimate person's identity and once it's compromised move on to another persons.

Another thing to consider is eBay - although considered the guru of the industry - isn't the only player in it. You can find "fraud, phishing and financial misdeeds" on any of the auction sites out there.

In the end -- although action is being taken -- it's unlikely that any of these lawsuits are going to do much good for the consumer, or hurt the criminal element operating on auction sites.

The sad truth is litigation costs a lot of money and expenses (including fraud) normally end up getting passed on to the consumer.

Perhaps the money being spent on litigation would be better spent on going after the people causing the problem?

Of course -- in order to do this -- all the corporate giants involved would have to work together and go after the core problem instead of attacking each other.

And there is a financial incentive for them to do so - consumer confidence is a key economic factor. If the rapid increase in fraud (driven by technology) continues, they are likely to lose the reason for their lucrative margins, or to put it (quite simply), their customers.

Mounties Lack Resources to Fight Organized Crime and Cite Ties to Terrorism

The Canadian Press is reporting:

The head of the RCMP says his agency is increasingly concerned about evidence that organized crime groups are helping to fund terrorist gangs.

Giuliano Zaccardelli's observations Monday may come as a shock to some, but not to those who monitor trends in law enforcement.

Almost every conceivable type of organized crime helps to finance terrorist groups whose chief goal is killing Westerners, said one expert in the field.

That can mean the proceeds from hashish baggies being peddled on street corners, cocaine trafficking, prostitution, pick-pocketing, knock-off designer items and credit card fraud.

Zaccardelli wasn't quite that specific during his appearance before a Senate committee Monday. But he said the evidence is clear, and continually mounting.

Here are some specific examples backing up this claim made by John Thompson of the Mackenzie Institute, which is a Toronto Think Group:

Almost all terrorist groups around the world use organized crime to pay for their operations.

Al-Qaeda and Osama bin Laden are no different.

The bombers who blew up Madrid's rail system in 2004, injuring 192 people and wounded 2,050, financed their operation by selling hashish.

Hashish from the Middle East, heroin from...Afghanistan and Pakistan, cocaine, it all at some point goes through the hands of terrorists on its way down to the street.

The basic training for al-Qaeda recruits includes at least four major components: handling firearms, making bombs, ideological reinforcement, and supporting yourself through credit-card fraud.

He points to ex-Montrealer Ahmed Ressam, who was convicted of trying to blow up Los Angeles airport on New Year's Eve 1999.

Ressam also planned to set up a side business to help fund his terrorist jihad.

"He was going to try and set up a shop so they could access people's credit cards and start counterfeiting them.''

Link to full story, here.

The saddest part of all this is that the RCMP, who are known for "getting their man" are admitting they only have the resources to address about one-third of this activity.

For another article by the National Post on current RCMP resources and their border problem, link here.

Perhaps, we in the United States should take notice - while we focus on the border to the South - here is another reason, "We Can No Longer Allow Criminals to Control Our Borders."

It seems the Canadians are coming to the same conclusion.

Here is a previous post, I did on this problem:

Do Financial Crimes and Internet Fraud Fund Terrorism

Better Business Bureau Tool to Track, Report and Educate the Common Person on Scams

The BBB Scam Tracker is a robust interactive tool to track fraudulent activity in throughout North America. The data I viewed from Mexico seems to be minimal at this point, although this might be because Mexico was added after the United States and Canada.

The site collects data from users, who were the victims of a scam, or from smart people who figured out someone was trying to scam them.

The tool enables the user to search potential fraudulent activity by keyword, type of scam, location, and time frame. Please note that scams are most successful when they hit a new geographical area because the "word is not out yet." Because of this, scammers frequently travel and even rotate the particular scam in order to catch innocent people/businesses off guard. Just because the particular scam is not showing up in your geographical area doesn't mean that it won't knock on your doorstep tomorrow.

The scam activities tracked include home repair, tree trimming, tax, advance fee, job, lottery, collection, counterfeit checks, bogus credit cards, vishing, phishing, and identity theft. There is even an "other" category to cover anything that is a previously unknown activity. New scams are hatched all the time. The main thing all scams have in common is that they are "too good to be true."

The data collected is provided to the National Cyber-Forensics and Training Alliance, who in turns shares it with law enforcement, 

Here is a link to the BBB Scam Tracker. Scammers count on people not taking the time to report their activity (assuming they do not fall for it). Reporting it is a good deed because it protects other people.

The BBB also has a video on YouTube on this tool, if you would like to watch it.

Are Lyft's Earning Claims for Drivers Deceptive?

With all the bad publicity Uber has received recently, Lyft is trying to position themselves with the public as a better option and a good citizen in the techie community. They claim all over the internet that a driver can make up to $35 an hour/$1500 a week, which sounds great, but is this claim too good to be true? I decided to find out!

To begin my adventure, I signed up and ultimately chose to use their new "Express Drive program." where a rental car is provided for a fee. To calculate what the costs would be if I used my own vehicle, I employed a tool called MileIQ to track the amount of mileage incurred and estimate what the wear and tear on a personal vehicle would be.

I then carefully read all their tutorials on how to maximize the amount of money I would make and made an appointment to pick up the vehicle via the Lyft App from Hertz at a local Pep Boys. Please note, I tried to call this car rental center over 10 times to clarify some items and no one ever answered the telephone. After making the appointment, I received daily text messages and emails reminding me to pick up the vehicle on the time/date specified.

Upon my arrival, a male wearing gym shorts and a tee shirt gruffly informed me that it was his lunch time and I would have to wait for an hour for him to return. When I told him, I had an appointment, he said the computer made a mistake and that wasn't his problem. He then got into an SUV with Lyft decals on the side and left with a male and a female. I later discovered the other two people were the Hertz employees dedicated to the Lyft Express Drive Program.

During the hour-plus he was gone, numerous drivers showed up trying to find someone because they were having issues and couldn't get anyone to answer the phone. Several of them also told me that they had made numerous calls and never got an answer.

When they returned, the male in the tee shirt and shorts (who I later identified as a contract employee for Lyft) had me watch a video and directed me to the Hertz employees. One of them took me to a Mazda with approximately 75,000 miles on it to do an inspection. The car was filthy inside and out, had cigarette ashes everywhere, and had dings all around the exterior. Having just read the paperwork threatening me with a "large fine" if I smoked in the car, I voiced concern and was told that this was being documented and not to worry about it. I was then told I would be given a self-service car wash coupon to clean the car.

I have rented cars many times for a week that were much newer and "clean" for about the same price when traveling on business or having service performed on one of my personal vehicles. My guess is the cars Lyft provides are originally regular Hertz rentals that did not sell on their used car lots.

Lyft does claim to eat the approximately $180 plus taxes a week fee if you give 85 (partial) or 105 rides (total) in a week -- but based on my overall experience and speaking to drivers -- this is unrealistic unless you work an excessive amount of hours. Please note that you also have to maintain a 90 percent acceptance rate to get this benefit, which is explained below.

We then returned to the Hertz counter and computer issues ensued causing further delay. After about three hours, I was ready to begin my "Lyft Adventure" with a filthy, smelly car and headed to the car wash. After cleaning the car myself and going home to take a shower, I was finally ready to start making money.

The first thing I noticed was the substandard navigation on Lyft Driver App (run by GoogleMaps). Frequently, it would tell me to turn at a street/exit, I had already passed. Throughout the week, I noticed it sending me in crazy loops that made no sense considering the location of the customer. In many areas, it got street names wrong, and on more than one occasion it sent me several miles out of the way before telling me to turn around and go back to where I came from. Since the customer sees the driver going all over the place on their Lyft Customer App, this causes some frustration on their part, and they blame the driver.

The next thing I noticed is how the rides are accepted. When Lyft sends you a ride request, the phone lights up and prompts you to accept it. To accept the ride, you tap on your phone and the navigation takes over. The customers are all supposed to have pictures, but many do not. Lyft's instruction is to follow their navigation and you have no idea what the ultimate destination is going to be until you are about ready to arrive. I found that sometimes, the destinations were in high crime areas, which might be a safety concern for some drivers.

Another thing I noticed is that the app literally hijacks your phone and it is very difficult to use other apps after opening it up. The main screen displays the Lyft purple ball after logging on -- and on several occasions -- it logged me on again after logging out and it accepted rides. Once, this happened when the phone was being charged in another room.

It also opened my contacts and pinned them to the main screen. I later discovered (hidden in the fine print) that I had agreed to give them access to my contacts, which they claim is to spread "Lyft Love" to everyone listed in there. Please note that a lot of malicious code does the same thing when trying to compromise a system.

You are rated based on your acceptance rate and when the phone lights up there is no sound prompt. This means you have to constantly keep an eye on the phone, which is a driving distraction and could be dangerous. It also doesn't help when the app accepts rides after you think you have logged out.

Failure to maintain a 90 percent acceptance rate also prevents you from hitting any offered bonuses, and can even get you deactivated (geek for getting fired).  Based on the chatter on numerous internet forums, few if any people, ever hit the parameters to achieve a bonus.

The next interesting thing is their rating system. At the end of each ride, both the rider and driver rate each other from 5 to 1 (5 being the best). If a driver falls below a 4.8, they start getting messages that they are at risk of being deactivated. In the week, I drove I picked up some pretty interesting people. Many were intoxicated and some were downright scary. Some of them spilled items in the car and or left their trash in it.  Often I would arrive to pick one person up and four or five people would pile in the car. Frequently these groups were intoxicated and so rowdy that it was difficult to hear the navigation. I did meet many very nice people, but you literally have no choice who you pick up if you want to maintain an acceptable rating.

I even got a homeless person and a woman, who blatantly told me she was an escort using Lyft to drive her to a client. One or two 4 ratings will knock your overall rating down and if an intoxicated person gives you a 1, it will be pretty hard to recover. In my humble opinion, this rating system is a tool used to intimidate the drivers into not saying anything to a customer when they are clearly acting in an unacceptable manner. Of course, drivers are expendable and easily replaced with fresh people responding to the "up to $35 an hour/$1500 a week come-ons."

I ended the week with a 4.7 rating, which in any other arena would be "darned good," especially considering the challenging aspects faced when providing this service. Despite this, 4.7 is considered as a "needs improvement" by Lyft.

On my third day, I got a "snippy e-mail" telling me I got a complaint that the car smelled of smoke. The customer related they had asthma, which made the ride difficult. Considering the condition of the car when I got it, I guess the smoke smell lingered on after I cleaned it inside and out. I promptly cleaned and washed the car again, purchasing a fairly expensive product to remove the smoke smell. I then emailed Lyft about this because I felt bad about what the customer had experienced. Prior to this, they had always answered right away, but this time they did not and despite daily follow-ups, they never did.


Lyft does show power zones on the navigation map, which light up in shades of red. They recommend that you go to these zones to maximize your earnings. These zones are where they claim they need drivers and are charging them higher fares (referred to as prime time). My experience with the power zones was that I would drive towards them, and they would disappear right before I got there. I also noticed that they tended to light up when I was headed home, which seemed to be a strange coincidence. On the few times, I made it to the red zone in time, I either got no business or a $3 to $6 dollar fare. The end result was a lot more gas and carbon gasses expended with no return on investment.

Please note that the reason for this could be that so many drivers are on the road trying to make $35 an hour, it has caused the market to become over saturated. There is very little doubt that they are engaged in a price war with Uber in an attempt to gain market share and that this is cutting into the amount being made by the drivers.

So far as making money, there were a few times I got busy, but there were also times where I would drive for up to two hours with no business. There were also many times when all I would get were $3 to $8 dollar rides at the rate of about one an hour (despite following all the revenue-enhancing tips provided by Lyft). Please note that these fares are the amount before Lyft took their 25 percent cut.

When in "driver mode," the app shows your earnings and details them by the ride. The earnings being displayed are before Lyft takes their cut. This tends to make the driver think they are making more money than they actually are.

Lyft advertises that they let the driver keep the tips, but few customers actually tip. I averaged about 7 percent in tips for the week.

Lyft does provide insurance while you are logged into the app, but it has a $2500 deductible. Your primary insurance will probably have to take over if an accident occurs and it is possible you will be dropped by your insurance carrier if they discover you were driving for Lyft. Consumer Affairs published a telling article detailing this risk and potential liability.

Towards the end of the week, I started getting hit with numerous messages via text and email to renew my rental. These messages confused me as to what day it was due back and I reached out to Lyft Support for a clarification. Here again, despite several follow-ups, they never answered me until a day after the vehicle had already been returned. When returning the car, I asked the Lyft employees if there was a number I could call and they told me that one does not exist.

Now for the money, I was able to make. Listed below is the summary provided by Lyft. The rental was prorated (normal cost is $180 a week) because I picked up the car a day into the pay cycle. It doesn't include gas cost, car washes, or my time cleaning the car because of the condition it was in. Also not included is the three hours to pick up the car, or the hour it took to return it.

54 Rides and logged into the Driver App for 45h 16m 57s

Ride Payments: $510.57

Tips: $35

Lyft Fees: -$127.72

Rental Fees: -$154.28

Rental Tax: -$12.86

Total Earnings: $250.72

I made $250.71, and after taking the $132 in gas/miscellaneous expenses out, I netted a whopping $118 for 45 hours work. This equates to $2.62 without taking into account overtime and would have been close to the minimum wage in the '70s. On the other hand, Lyft made $127.72 plus whatever they and Hertz made on the rental.

I calculated the miles, which if recorded could be written off in taxes on a personal vehicle, but also represent wear and tear. There are tales in the forums of drivers wearing out vehicles before they were paid off. I drove 917 miles for the week, which at the federal mileage rate of 53.5 cents a mile equates to  $490.60 (rounded up). Please note the federal mileage rate is an official calculation of what wear and tear represents.

This amounts to 50,440 miles driven a year if the driver (who gets no vacation time) drives every week.  If you subtract the $490.60 from what I made, I would have been operating at a net loss. Of course, these are all estimates, but estimates based on factual data.

I wonder how many financial losses are incurred by the auto industry when a car wears out and the person can no longer afford to make the payments?

Lyft advertises all over the Internet that a driver can make up to $35 an hour/$1500 a week. While this sounds like a great opportunity, the truth is a far different story, and Lyft is laughing all the way to the bank at the expense of their easily replaced drivers.

The drivers receive no benefits, and many of them are making a lot less than minimum wage when all things are considered. I discovered by speaking to several drivers that some of them work up to 14 hours a day/7 days a week) trying to make ends meet. I was told several times that if I wanted to make money, I would have to drive to San Francisco (4 hour round trip) and put in some long shifts.

Lyft does regulate the number of hours a driver can be on the road and there are differences in some jurisdictions, but for the most part, they allow 14 hours a day with at least a 6-hour break. There does not appear to be any limit on how many days a driver can work in a row. Of course, they are not paying overtime since the drivers are considered to be self-contractors, either.

One could make a pervasive argument that Lyft is creating a potentially dangerous situation for everyone on the road, and creating a lot of unnecessary carbon gasses in their quest for easy money and market domination.

There have been recent legal efforts to have rideshare drivers classified as employees. This would go a long way to creating a level playing field for the competition that is being run out of business by outfits like Lyft and Uber. It would also go a long way towards preventing these outfits from creating an abusive atmosphere for their drivers.

The truth is their drivers provide all the fixed costs (vehicles, gas, cell phone, time etc.) and Lyft collects 25 percent of the earnings with a computer application that maintains command and control of the driver. Because they pass on their costs of doing business and are paying no benefits, it is no wonder that they have run the competition out of business. With no benefits being paid, the taxpaying public is also probably picking up the costs of providing them to their drivers.

It is also no secret that both Lyft and Uber and pursuing the driverless car option. Will this lead to them replacing their drivers, in the same manner, they have replaced traditional transportation outfits? The sad thing is that the drivers are providing all the fixed costs of pursuing this goal and will eventually be replaced by a machine.

If most businesses were able to operate in this manner, they would probably be shut down by the government for gross violations of labor laws and essential human rights.

On a closing note, here is a list of political donations given by Lyft employees. I was shocked to discover that most of the recipients claim to be social justice warriors. Recipients include Bernie Sanders, the DNC, Hillary Clinton, Kamala Harris, and Jill Stein, They also gave a $1,000,000 donation to the ACLU to fight President Trump's immigration ban. This ban essentially blocked people from countries with no functioning government from entering the country. The Obama administration was the one who designated these countries as dangerous because of a lack of effective government and ties to terrorism.

Doesn't the first initial of the ACLU stand for American? Perhaps they and Lyft should revamp their efforts to prevent abuse to human beings in this country instead of pursuing an agenda that could be dangerous to our citizens.