$1.2 Million of Krugerrands @ 10% Under Spot - Scam?

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$1.2 Million Worth of Krugerrands @ 10% Under Spot - Scam?

Copyright Theft
We first noticed the eBay member who is offering this unbelievable deal on 11th March 2008, and this was because we found he was using one of our Krugerrand photographs without our permission. (eBayers do this all the time - we have several web pages about it).

Start Small
This first listing (item 290204481638) was for 5 Krugerrands, all the same date. Although he did not mention whether they were normal uncirculated ones, or proofs, the photograph he used was the obverse (head side) of a proof coin. We didn't take much notice of this point at the time, again it happens all the time.
We duly reported the listing to eBay's VeRO programme, and they removed the listing on the 12th March. (If an Internet Service Provider such as eBay fail to take-down material which infringes Intellectual Property Rights, they themselves become jointly liable to the Rights Owner for damages and costs).
If you look for this listing, you will find that a buyer has left positive feedback, but that the listing itself has been removed. This may be from a genuine buyer, or it may be from an associate of the seller. If you are going to try to sell $1 million or £2 million worth of Krugerrands, it's probably worth investing a small amount to establish a track record.

Try Again
About the same time, we noticed another listing (item number 290213346236), this time for 10 Krugerrands, again using our same image of a proof Krugerrand. Again we reported it to eBay, and they removed the listing. On this listing we noticed an interested buyer asking why there was no photograph of all 10 coins together, and the answer was that all (1974) Krugerrands look exactly the same as each other. The seller did not admit that the photo he was using was stolen from us!

And Again
Within a few days, the seller had replaced our photo with a different one, showing 1 Krugerrand in a plastic packet, and was placing multiple auction listings, each for a "10 pack" all of the same date. By today, the 16th March, he had sold 690 out of 700 Krugers, and listed a further 500 coins; making a total so far of 1,200 Krugerrands in less than one week. With gold at $1,000 per ounce, that works out at $1,200,000 worth of coins sold, and that's just so far. We don't yet know how many more the seller "owns".

Strange?
We don't know about you, but we think there is something decidedly strange about all this. Let's recap a few thoughts that strike us as odd:

People with over $1 million worth of gold coins are not usually stupid.
The eBay Final Value Fees will slightly exceed 1.5% of the total.
Selling on eBay, the coins are selling for an average of just about 10% discount below spot gold.
The sellers "loss" or selling costs are therefore between 11% and 12% of the total value.
There are listing fees in addition, and all the effort required to manage the eBay auction listings, answer questions, collect payments, pack and ship the goods,
Being based in Beverly Hills, California, the seller could pick up the telephone, and sell the whole lot to any of a number of major US bullion dealers, in just a few minutes. There are at least one or two in his local area. They almost certainly could get the coins collected by Brinks, and pay the guy on the spot by cheque (check), bank draft, or bank (wire) transfer. Most of them would snatch his arm off at a discount of 1% or less.

Stupid or Crooked?
Our conclusion from this is that the "seller" is either stupid or a crook. He could be both. Maybe there is another explanation, but we can't think of one, and we do have pretty good imaginations!

Too Good to be True?
Deals like these on offer are simply too good to be true. Scams like we suspect this to be work because of greed and fear.
We are slightly reluctant to spell this out for fear of offending any number of well-intentioned, good, honest (but perhaps slightly naive) people.
If you bid on these items, pay out the money, and get conned, it will be because of your own greed. You may have got the odd bargain before, on eBay or elsewhere, and perhaps you were careful, but we think it's because you were lucky. You are not always going to be lucky. If you go for these deals and come unstuck, we would say you are not unlucky, just very naive (that's a polite word for stupid!).
The "fear" element we mentioned is the fear that you might miss a good deal if you don't go ahead.

Want a Gamble?
If you look at the whole proposition as a gamble, call it risk assessment if you like, you should consider:
What are the odds (percentage probability) that the seller is genuine. Our estimate is greater than 100 to 1 against.
What have you got to gain. About 10%.
That's about all you need to know. It would be a better investment to put your entire life savings on a 100 to 1 outsider in the next horse race.

Fraud Alert
We reported at least 3 of this seller's listings to eBay as suspected frauds. We got the standard auto-response from eBay alleging that they take all reports seriously, but they cannot keep us informed of any results because of privacy. Frankly, we don't believe them. We actually conducted an experiment / survey some time ago, and published some of the results on our websites. We won't bore you with the details here, besides eBay would not like it.

Money Back Guarantee?
We noticed the seller offering a 3 day money back guarantee. That's very nice of him, however it is very unlikely anybody in their right mind would make an offer like that on gold bullion. It's about as likely as a casino giving you free bets (although some probably do give small credits to get punters hooked).
What about eBay's Buyer Protection Scheme?
The seller's listings state that buyer protection is "Not Available" on these items.

Silenced by eBay
We did contact a small number of the buyers, and most if not all of them thanked us for our trouble. We refrained from an outright accusation of fraud, simply stating that we would be interested in hearing if the transaction ever completed satisfactorily, and not even mentioning the fact that the seller had been using our pictures. Unfortunately, eBay's message system will not permit members to contact other members at will. There is a low limit on the number of other members you may contact each day (ask seller a question is an exception). As none of the buyers were offering anything for sale, we could not use that route. Perhaps we should have asked each buyer we contacted to in turn contact the other buyers, but by the time we had thought about it, we had used up our daily allocation of contacts. Also the system kept us locked out for longer than one day, we know because we tried a couple of times more over the next two days, with no success. It almost seems as though eBay's systems are in place to assist crooks, and obstruct vigilanteism.

Name & Shame?
We would happily name and shame the eBay member, but we don't think eBay encourage it or permit it in these guides. There is no such constraint on our websites!
The seller could easily change his eBay identity, or use another account that he probably has prepared.
One way or another we think this seller could be Going Fast soon!

Update 6th April 2008
Looking at his Feedback Profile, it now states:

goingfast3 ( 111) PowerSeller  Not a registered user
Member since 20-Sep-99 in United States

Result?

That sounds like a good result, but we wonder why it took eBay so long to react, and a couple of their other members might just have lost $10,000; $20,000; or more each. In our view, that's not really good enough, and presumably the crook walked away scot free, and probably gets another free roll of the dice for next time. Of course, we got no feedback, thanks, acknowledgment, or even KMA  from eBay. Virtue has to be its own reward!

Author
This guide was written by Lawrence Chard, of Chard Coins.
It may be one of our last. We find eBay so frustrating to use, in just about every single possible way, that we are about to all but completely boycott it. Could eBay become the next Alta Vista?

Useful?
We hope you find it interesting or useful. If so, please take a few seconds to click on the "Yes" button below. Only click on the "No" button if you are a crook!

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