How eBay Fights Fraud

In this web-exclusive sidebar, learn how a former federal prosecutor keeps eBay sellers and buyers on the level without being a burden to the thousands and thousands of honest transactions that close every day.

Rob Chesnut, a former federal prosecutor from Virginia who helped put away CIA turncoat Aldrich Ames, leads the anti-fraud team at eBay. "My job is to keep everybody in the eBay community on the right side of the law," Chesnut says.

But while Chesnut joined the company in 1999, it wasn't until January of last year that the eBay's stance shifted from reactive to proactive. That month, Chesnut became the head of a newly formed department called Rules, Trust and Safety. Later in 2002, the company launched a software system called FADE (Fraud Automated Detection Engine.) Its objective was to try to spot signs of fraudulent auction activity before money changed hands.

Though eBay continues to add capabilities to FADE and other anti-fraud software, Chesnut won't say much about what, exactly, the systems do to prevent fraud on the site. "Every company, like Visa and MasterCard, has anti-fraud engines, but they don't talk about how they work," he says. "Keeping that information secret is the key to [the software's] success."

But even after the introduction of FADE, and the establishment of the Trust and Safety Department, unscrupulous sellers still operate on the site. An Arizona couple suspected of swindling 510 would-be buyers out of more than $100,000 ran auctions on eBay between January and March of this year. (While they were at large in Colorado, the husband committed suicide; the wife eventually turned herself in to authorities.) David Steiner, a frequent eBay buyer and seller who also runs the Web site AuctionBytes.com, says it sometimes takes eBay too long to suspend suspicious sellers, even after the company gets complaints from buyers.

eBay has to perform a deft balancing act when it comes to battling scammers. The company doesn't want to get overly involved in trying to sniff out prospective fraud because it would seem intrusive to honest buyers and sellers - and because it could render eBay legally liable for every transaction that takes place on its site.

One area where eBay has gotten consistently high marks is in collaborating with law enforcement.

"We treat law enforcement [agencies] like a customer," Chesnut says. "We make sure that they get the information they need to fully and fairly investigate cases." And eBay leverages its experience with serial auction fraud - like the Jay Nelson case - to try to figure out how it can prevent future occurrences.

"Resting on our laurels isn't something that crosses my mind," Chesnut says. "I'd sure like to have the reputation of being the worst place on the Internet to commit fraud, because we're going to come after you, and you will go to jail."

Don't miss the main article: Catch Me If You Can.

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1 Comments

  • Jesse Walters

    eBay doesnt have much inclination it seems to rid the market of shill bidders and members with multiple IDs. They have no tools to see what goes in the shipped package or how it is wrapped. They dont even accept customs forms numbers as proof of shipping. They just blindly give back the sellers hard earned money to anyone who asks, without recourse. Feedback used to be a method of member assurance. That has now been removed as the seller can no longer warn others about problem buyers. Customer support is almost completely non-existent and what there is is ineffective in my educated and very experience opinion. The solution is a new Transaction Rating System with limits as to how many negative reports a member can submit. TRS ver 9. The natural nest step for a safe ecommerce future. A fully tailorable reporting system that lets everyone know what everyone thinks about any product or seller or buyer anywhere in the world.
    Reporting in 13 categories every possible complaint about a transaction and then comparing all sellers to each other, all buyers to each other and all products to each other on a bell curve chart, displaying deviation from average.