from Hacker News

How Not to Sell Bitcoin on eBay for 300% Profit

by dysruption on 8/25/13, 4:23 AM with 100 comments

• by JumpCrisscross on 8/25/13, 6:30 AM

  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.

• by noonespecial on 8/25/13, 4:36 AM

  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.

• by STRML on 8/25/13, 5:26 AM

  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.

• by vbuterin on 8/25/13, 6:04 AM

  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.

• by nullc on 8/25/13, 8:26 AM

  It's pretty sad, considering that if the buyer sent the bitcoin address to send to through paypal you can prove to paypal cryptographically beyond any and all doubt that you really sent the coins.

  Even when someone isn't claiming their account was hacked (which would be a problem no amount of cryptographic proof would solve) paypal simply doesn't care. I guess that really sums up paypal: Paypal doesn't care.

• by downandout on 8/25/13, 6:35 AM

  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.

• by unclebucknasty on 8/25/13, 2:42 PM

  I run an online business and the level of fraud we have seen out of China is insane. We are constantly changing tactics and the fraudsters follow suit. They are dogged, determined, and will persist until they put you out of business if you let them.

  Of course, we don't purposely do business with anyone from China, but they go to great lengths to cover their origin, even employing Mechanical Turk workers to do some of their dirty work. The guy who purposely sold BTC to someone out of China was literally begging for what he got.

  And these guys are virtually untouchable. We are a small business and we see a ton of this stuff, so I can imagine what larger businesses must experience. eBay alone must be the conduit for tens or hundreds of millions in fraud from China.

  Amidst all of the talk about stolen IP, military secrets, etc. emanating from China, the likely billions of dollars in fraud targeted at American consumers and businesses is the great untold story.

• by tadfisher on 8/25/13, 5:29 AM

  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.

• by badman_ting on 8/25/13, 1:19 PM

  I think you have to be a little bit crazy to sell anything on eBay. But anyway, it struck me that there is a way to make money here (buy BTC then charge it back), the author just found himself on the wrong side of that process. As they say, if you don't know who the sucker is, then it's you.

• by cheeyoonlee on 8/25/13, 6:31 AM

  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.

• by patrickk on 8/25/13, 1:44 PM

  I wonder if this would work if you sold the BTC in a bitcoin wallet, stored on a cheap USB key (or even a bitcoin paper wallet[1])?

  It's slower, and there's the slight cost of postage, but as least you have proof of postage as it's technically a physical item.

  eBay sellers who sold virtual goods got caught a few years ago when eBay changed their policy on virtual items, but I've noticed sellers often now delivery the item via email but also on a burned CD or whatever to skirt the rules.

  [1] https://blockchain.info/wallet/paper-tutorial

• by vizzah on 8/25/13, 11:34 AM

  I was told by Paypal Ireland (oversees EU) that they do not allow chargebacks for "virtual/digital" items and I was granted a win in a dispute on a number of occasions when buyer topped up his account on my service site and then wanted to reverse that transaction after service was consumed.

• by t0 on 8/25/13, 5:54 AM

  You could have printed a paper wallet from Coinbase and offered to mail it to them. You could then provide proof of delivery.

• by fexl on 8/25/13, 2:10 PM

  Never forget the May Scale of Monetary Hardness, from my old friend J.P. May:

  http://stakeventures.com/articles/2012/03/07/the-may-scale-o...

• by ck2 on 8/25/13, 5:30 AM

  Selling virtual items on ebay is a bad idea.

  But you can also block non-US buyers I believe which will slightly reduce your risk.

• by yelnatz on 8/25/13, 5:24 AM

  Yep, the classic paypal chargeback scam.

  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.

• by mthoms on 8/25/13, 6:15 AM

  Ironically if you had sent it through the post on a USB key you'd be in the clear.

  Kinda takes the point out of bitcoin though doesn't it?

• by Havoc on 8/25/13, 12:33 PM

  I'm on the opposite end of the transaction - I'd like to buy some BTC but everyone is (rightly) so scared that the only mechanism available is via bank account. Great...except im not in the US. I'd have to string together multiple online currencies to arrive at something that is accepted. Or trust a tiny local exchange.

  So much hassle to cover VPN costs...

• by marban on 8/25/13, 6:30 AM

  And keep in mind: Should the buyer still receive the bitcoin after all, he would have to destroy it as per paypal's terms...

• by tghw on 8/25/13, 5:20 AM

  Really? PayPal has always protected buyers more than sellers. This scam has been running since BitCoin started being traded.

• by robryan on 8/25/13, 6:54 AM

  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).

• by mortdeus on 8/25/13, 11:08 AM

  It took me a little more than 10 seconds with google search to find this ebay bitcoin scam.

  http://bitcoinfan.blogspot.com/2011/12/why-selling-bitcoins-...

  If something seems too good to be true; it probably is.

• by LancerSykera on 8/25/13, 8:28 AM

  I sold e-gold for Paypal once. I knew at the time though that a chargeback was quite likely, and sure enough, it happened. Somehow, though, I managed to win that case and keep my money.

• by amenod on 8/25/13, 7:01 AM

  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.

• by PaulHoule on 8/25/13, 2:11 PM

  Don't sell downloadables over Ebay and PayPal. You'll get about as much sympathy as if you were selling cocaine no matter how honest you are.

• by markdown on 8/25/13, 9:50 AM

  Paypal always always always ALWAYS sides with the buyer.

• by patrikr on 8/25/13, 6:48 AM

  TL;DR: Chargeback fraud exists. PayPal sucks.

• by mangotree on 8/25/13, 6:16 AM

  So, can't you remove the money straight away, then close the account? Sounds like this should be doable.

• by C1D on 8/25/13, 8:01 AM

  All it would've took is a google search about why no Bitcoin exchanges allow PayPal.

• by tuananh on 8/25/13, 5:40 AM

  Rule #1: DO NOT sell virtual item on eBay.

• by Helianthus on 8/25/13, 7:10 AM

  >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.

• by consonants on 8/25/13, 5:51 AM

  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.

• by pbreit on 8/25/13, 6:29 AM

  Duh.

• by bingeboy on 8/25/13, 6:24 AM

  Sorry kid, nice post!

• by ydnaod on 8/25/13, 5:14 AM

  So interesting