Ebay absolutely lacks the seller protection to ever make this kind of transaction. If I purposely tried to design a market that supported this kind of fraud, (even encouraged it, in a nurturing "please do this" sort of way). I couldn't do better.
I'd guess that's PayPal that lacks protection, since they are the ones making the decision. Probably because their arbitrators are ignorant in what Bitcoin is and how it works. I don't even blame them - they can't know everything, but one must know there's a risk PayPal would rule against you if you sell something that you can't prove is delivered to their satisfaction.
This is part of the form letter that PayPal sends when you are caught selling BTC after the fact:
"We have reviewed your PayPal account and found that you are operating as an e-currency dealer/exchanger including the sale of electronic media of exchange (such as electronic money or digital currency). Per our current Acceptable Use Policy for Money Service Businesses, PayPal may not be used to operate a currency exchange, bureau de change or check cashing business including the sale of Bit coin."
So PayPal knows what BTC is, they just straight up ban digital currency sales.
OK, then it looks like whoever sells BTC on eBay and uses paypal is pretty much setting himself up for trouble. So the OP has nobody to blame but himself...
Haha, you're assuming that if they knew what bitcoin was and believed that the seller and the sale was legit, that they would have sided with the seller.
eBay at one time was dealing with a lot of seller fraud with sellers that didn't ship, shipped you a rock instead of a laptop, etc. over the years they started adding more and more buyer protection to keep shoppers from being scared away. Unfortunately they tipped the scales so greatly that now, as a seller, you can very easily be scammed. The scammers have simply moved to the other side now and commit their scams as buyers.
It must work out better for eBay that way. But it sucks to sell anything of high value.
Yeah, this is the problem with fighting fraud at a venue like eBay. You invariably tip the balance to one side or the other, and the fraudsters just move to that side. The tough part about tipping to the buyers' side is that buyers always have the power of the chargeback anyway.
But, eBay probably made the decision by simply asking who it is better to frustrate: sellers who have very little choice of viable venues at which to sell, or buyers who have a plethora of choices from which to buy.
The only feedback the seller mentioned was in the buyers leaving it for him.
If the seller required a good account history, and stuck to the US, he may have not had these problems. Arguably those buyers could have screwed him on anything (remember the story about the rare violin destroyed at Paypal's request.)
There are things worth a lot more than $90 bought and sold on eBay every day. I would argue that buyer to seller reputation and thus integrity is more important than the reputation of the marketplace or medium of exchange.
This is the most classic bitcoin scam - buy with paypal, then claim you didn't receive the item. The seller has no way of proving that you did, and Paypal will rule on the buyer's side every single time.
This is why trading channels like #bitcoinotc discourage any use of paypal - but for times where you have to use it, there's the trust system.
I mean, for the small price of feeling like a twat, a small transaction fee, and locking up a couple hundred bucks for a month... you get a Bitcoin. So why aren't these listings being sponged up by a few people that don't mind the twat factor?
I don't think it's just the "twat" factor. You can only do so many "I haven't received the goods, refund my money" before you accumulate such a horrendous feedback that nobody will do business with you again. In addition there is a chance your paypal/ebay accounts can get shut down.
You exchange positive feedback before you send the refund request. And sellers can't leave negative feedback any more.
With that said, your ebay account might get shut down after this happens more than a handful of times. Better pick up some spare accounts from a botnet operator.
I am surprised that in his research, the author didn't come across any warnings not to sell Bitcoin on Ebay. This is pretty common knowledge these days.
I was also under the impression that PayPal does not allow selling Bitcoin or Bitcoin hardware. This transaction should have been stopped automatically, and it's a shame Ebay doesn't have automatic tools to stop blatant abuse of their own policies.
Ebay could easily put their own auctions up for bitcoins at 200% of current market value, then simply cancel the accounts of anyone who bid on it. They'd hit 100% fraudsters.
Actually the US buyers are the risk, since in US and Australia anyone can issue a chargeback. In most countries you can't unless you have a premium card I think. I read in in Wikipedia some time ago.
I don't think that these sort of scams are generally run using the buyer's personal credit card, and if so this feature of foreign credit cards by no means provides protection against getting scammed by international buyers. Stolen US credit card numbers are a global commodity, so it is very possible for you to be ripped off by, for instance, a Malaysian buyer using a US credit card number.
My favorite part is his earnest naivety in somehow thinking he wasn't the mark and in believing that Paypal would ever side on his behalf.
This just further confirms my suspicions that you have to be retarded to get involved with bitcoin. No group of people is so easily and quickly persuaded into losing their money, and so readily eager to repeat said behavior over and over again, than bitcoiners.
Yeah, who would believe that Paypal would side with a seller which has a proof of delivery in what is probably the most secure database in the world. Sheeesh.
How exactly am I gonna lose my money with Bitcoin? It has been there for many years, and it has grown x20. My dollars, on the other hand, have only devalued each year.
There's no scam, if there's no scammer. Think about it.
It's a good thing to be scammed for a small amount at some point IMO. It's like a vaccine; makes you more careful in the future. I lost $10 to Bitscalper in 2012; amount was insignificant but it certainly did teach me the stupidity of trusting anonymous people with money in the hopes of getting a few percent profit.
If you think the point of Bitcoin/Litecoin is being able to transact with it quickly and easily over eBay, you might want to look into the other things you can do with these new currencies.
Venue (space) arbitrage in illiquid, disconnected markets necessitates holding collateral at each venue. In this case, it means holding USD and BTC at both Coinbase and MtGox (presuming you don't know, in advance, which way the arbitrage will open up). If one can fund accounts instantly USD and BTC can be held in outside accounts, waiting. When opportunity arises one simultaneously sells in one location and buys in the other. Aggregate USD held to BTC held doesn't change, but quantities held slowly appreciate.
A challenge with a volatile pair like BTC-USD is keeping the portfolio delta hedged, i.e. neutral with regards to movements in BTC-USD. Without the ability to even borrow BTC effectively this becomes difficult to do cost-effectively. That said, a volatile pair in a fragmented market allows for market making sans leverage.
Taking a space arbitrage, as the author presented, and executing it as a space-time trade, as the author presented (buying in one place, waiting, selling in another), is not arbitrage.
Technically, sure. But 'arbitrage' today is interpreted broadly--more along the lines of buying basically the same thing and making the difference at some point in the future. Like stat arbitrage. Merger arbitrage. Capital structure arbitrage. There is an amount of non-simulataneaity in all of these. Buy two of what ought to be the same price, but are not for some reason, and wait. Sameness and waiting. I mean, shoot, in stat arb the entire thing is based on such a murky idea of sameness that two products/instruments/securities might not actually even be the same thing and may never converge. So point being, in the vernacular, yes, 100% what the author is talking about is in fact 'arbitrage.'
The words you're using make it sound very much like you know what you're talking about. And it sounds interesting. But I can only make sense of bits of it. Do you have a good suggestion where I can read a bit more about this?
I.E. Why is the space vs. space-time distinction important? Why is borrowing BTC important? You give an "i.e." but I still don't understand delta hedged.
I've learned in the past the only way to prevent and win 100% of Paypal disputes as a seller is to actually send something physical to the buyer's verified address. Besides, it's against eBay policy to sell digitally (delivering by email). You can print out a physical address for the BTC amount you're selling and send it by snail mail in addition to emailing. At least then, you'd have physical proof of shipment and confirmation of delivery. Obviously at this stage, I'm assuming those scammers wouldn't bother purchasing, but everyone should keep this in mind when selling digital/virtual items.
That's actually false. The buyer can still file a claim and just say the item was inaccurate. Paypal will side 100% with the buyer no matter what the case is. I had a case where I sold a tablet to someone and five days after she received the item, she complained to me that the device didn't turn on until she plugged in the charger. Then she stated that the power drained really quickly and she had to plug it in again to turn it on. I basically responded by telling her that the device probably ran out of batteries on the way there and she needed to charge it boot it up. There was nothing faulty with the device. My guess is she just drained the batteries too quickly or left a power hungry app on. Regardless, I gave her the option for a full refund. I didn't hear anything from her for two weeks. Paypal had already done a chargeback since day 1 when she filed a claim. I couldn't find any contact emails on eBay or Paypal's end... I escalated the claim to eBay. Guess what? They sided with the buyer and gave her two extra weeks to return the item to me for a full refund, shipping covered by ME. At the end, she never did send it back because I guess she realized it was a user error, but oh how I love eBay/Paypal.
I guess it wasn't totally clear but I was referring specifically to digital/virtual items since they're often sold as is, not applicable of defects or "item not as described".
By placing a ban on virtual currency transactions in their own fine print, but allowing most of the transactions to go through unless and until there is a problem, PayPal is setting themselves up for issues. In this case, only the author of the article was victimized, but it would be almost as easy to victimize PayPal/eBay itself even if the supply of legitimate Bitcoin sellers on eBay dried up.
One person could easily act as buyer and seller. Seller receives payment and withdraws it to a virtual bank account attached to a random prepaid credit card that can be bought at any store with cash, then "buyer" (the same person operating a different account) contacts PayPal and claims they never received it from the evil seller. PayPal must reverse the transaction and eat the loss because it was against their policies for the transaction to ever have taken place. There is some work involved, but even just one $300 transaction per day is certainly plenty of money for alot of the kinds of people that would do this.
> PayPal must reverse the transaction and eat the loss because it was against their policies for the transaction to ever have taken place
It's far from clear that PayPal must reverse forbidden transactions. In fact, the behavior seems to be "PayPal can do whatever it chooses with forbidden transactions." In computer science terms, the result of submitting a forbidden transaction is undefined: it might go through, it might not go through or something entirely unexpected (party van?) may occur.
Given the number of people who try to scam PayPal every day (it's a huge and visible target, to the extent that a security company basically spun out of PayPal), I'd be very surprised if this hadn't been tried already.
PayPal is infamous for freezing accounts indefinitely and even putting accounts into the negatives even on people who did nothing wrong. That scheme is not going to work. They are so intent on nuking any fishy business they nuke a ton of innocents as well.
No. That's not true. I once initiated a chargeback (and won the case) against a scammer seller. The amount was $80, but I inly got the $45 left in his account.
This doesn't surprise me at all. Even with physical goods sometimes the kind of proof they want us to send we don't have access to or sometimes doesn't exist.
It is not enough just to show them some online tracking which shows that the item arrived (even in some cases if it has a signature verification attached).
When it's too good to be true, it probably isn't. OP's main mistake was not checking where he was adding value - why they were paying more for his BTC.
>I have never traded stocks. I have never taken an economics course. I have never aspired to be someone who trades money for money.
This is how someone becomes greedy.
>As an advocate of privacy, Bitcoin intrigued me at a fundamental level. Trying to make money was (hopefully) merely a side effect.
Just a side effect!
>I would be scraping maybe $5-10 every BTC, and I would have to wait weeks to see the money. I also had little capital. My interest faltered.
Wow, what an academic undertaking!
But wait, he goes full casino.
>No way. Too good to be true. I know what you're thinking, there's no such thing as a free lunch, PayPal is an insecure way of trading BTC, etc. I wasn't really thinking at the time.
As far as I'm concerned anyone who is into Bitcoin has no right to be angry at Wall Street, because they get sucked into the same damn game.
I am not angry at anyone, in fact I understand why somebody can get sucked into the "game". You're right, my intentions ended up being not-so-pure. A good lesson!
I don't see any reason to get holier than thou. He is pretty clear he hoped to make a quick buck and got burned. I thought it was admirable that he is willing to post so openly about it. Most people would be embarrassed and not want to talk about it.
Don't dare compare him with Wall Street, he wasn't cheating on anyone. He was just making the Bitcoins flow more freely, and reach places they couldn't have reached otherwise. He was the free market at work.
103 comments
[ 5.1 ms ] story [ 128 ms ] thread"We have reviewed your PayPal account and found that you are operating as an e-currency dealer/exchanger including the sale of electronic media of exchange (such as electronic money or digital currency). Per our current Acceptable Use Policy for Money Service Businesses, PayPal may not be used to operate a currency exchange, bureau de change or check cashing business including the sale of Bit coin."
So PayPal knows what BTC is, they just straight up ban digital currency sales.
Paypal doesn't work that way, mate.
It must work out better for eBay that way. But it sucks to sell anything of high value.
But, eBay probably made the decision by simply asking who it is better to frustrate: sellers who have very little choice of viable venues at which to sell, or buyers who have a plethora of choices from which to buy.
If the seller required a good account history, and stuck to the US, he may have not had these problems. Arguably those buyers could have screwed him on anything (remember the story about the rare violin destroyed at Paypal's request.)
There are things worth a lot more than $90 bought and sold on eBay every day. I would argue that buyer to seller reputation and thus integrity is more important than the reputation of the marketplace or medium of exchange.
I did appreciate the author's "discovery" of a market mechanism... I'm going to go bid on some bitcoin now and do this arb the right way!
People buying your bitcoins for 100-200% above market price.
After you send the bitcoins, they do a charge back on you.
Can't get your bitcoins back and Paypal is on the buyer's side. SOL.
This is why trading channels like #bitcoinotc discourage any use of paypal - but for times where you have to use it, there's the trust system.
Clearly there is a free lunch, and it's buying Bitcoin on Ebay.
http://www.ebay.com/sch/i.html?_nkw=bitcoin
Look at all that free money.
I mean, for the small price of feeling like a twat, a small transaction fee, and locking up a couple hundred bucks for a month... you get a Bitcoin. So why aren't these listings being sponged up by a few people that don't mind the twat factor?
With that said, your ebay account might get shut down after this happens more than a handful of times. Better pick up some spare accounts from a botnet operator.
I was also under the impression that PayPal does not allow selling Bitcoin or Bitcoin hardware. This transaction should have been stopped automatically, and it's a shame Ebay doesn't have automatic tools to stop blatant abuse of their own policies.
It does appear that they haven't yet implemented a filter to prevent/warn sellers from selling Bitcoin, though.
But you can also block non-US buyers I believe which will slightly reduce your risk.
This just further confirms my suspicions that you have to be retarded to get involved with bitcoin. No group of people is so easily and quickly persuaded into losing their money, and so readily eager to repeat said behavior over and over again, than bitcoiners.
There's no scam, if there's no scammer. Think about it.
Having this mindset is a start.
Kinda takes the point out of bitcoin though doesn't it?
If you think the point of Bitcoin/Litecoin is being able to transact with it quickly and easily over eBay, you might want to look into the other things you can do with these new currencies.
No, no he wouldn't. This is Paypal we're talking about.
A challenge with a volatile pair like BTC-USD is keeping the portfolio delta hedged, i.e. neutral with regards to movements in BTC-USD. Without the ability to even borrow BTC effectively this becomes difficult to do cost-effectively. That said, a volatile pair in a fragmented market allows for market making sans leverage.
Taking a space arbitrage, as the author presented, and executing it as a space-time trade, as the author presented (buying in one place, waiting, selling in another), is not arbitrage.
I.E. Why is the space vs. space-time distinction important? Why is borrowing BTC important? You give an "i.e." but I still don't understand delta hedged.
One person could easily act as buyer and seller. Seller receives payment and withdraws it to a virtual bank account attached to a random prepaid credit card that can be bought at any store with cash, then "buyer" (the same person operating a different account) contacts PayPal and claims they never received it from the evil seller. PayPal must reverse the transaction and eat the loss because it was against their policies for the transaction to ever have taken place. There is some work involved, but even just one $300 transaction per day is certainly plenty of money for alot of the kinds of people that would do this.
It's far from clear that PayPal must reverse forbidden transactions. In fact, the behavior seems to be "PayPal can do whatever it chooses with forbidden transactions." In computer science terms, the result of submitting a forbidden transaction is undefined: it might go through, it might not go through or something entirely unexpected (party van?) may occur.
Given the number of people who try to scam PayPal every day (it's a huge and visible target, to the extent that a security company basically spun out of PayPal), I'd be very surprised if this hadn't been tried already.
It is not enough just to show them some online tracking which shows that the item arrived (even in some cases if it has a signature verification attached).
This is how someone becomes greedy.
>As an advocate of privacy, Bitcoin intrigued me at a fundamental level. Trying to make money was (hopefully) merely a side effect.
Just a side effect!
>I would be scraping maybe $5-10 every BTC, and I would have to wait weeks to see the money. I also had little capital. My interest faltered.
Wow, what an academic undertaking!
But wait, he goes full casino.
>No way. Too good to be true. I know what you're thinking, there's no such thing as a free lunch, PayPal is an insecure way of trading BTC, etc. I wasn't really thinking at the time.
As far as I'm concerned anyone who is into Bitcoin has no right to be angry at Wall Street, because they get sucked into the same damn game.
Cheers.
Are you trying to say that anyone who tries to make money through arbitrage is greedy or has no right to be angry at Wall Street?