eBay fraud probe could take months

It could be months before police can unravel the spectacular collapse of one of the biggest Australian sellers on eBay, which left hundreds of users out of pocket hundreds of thousands of dollars.

Despite setting up a special PayPal fund to help some of the burned buyers with refunds, eBay has been criticised for not acting to remove the company's account earlier.

eBay users say they warned the auction site of problems with EBS International as early as 2006.

A group of disgruntled sellers say the auction site set up the special fund only to avoid being sued for negligence for allowing the company to continue selling on the site despite complaints.

EBS International, which sold items including exercise equipment, furniture and bikes on eBay under the name ebusiness-supplies, went into administration on Friday.

SV Partners, the company's liquidators, said it was being inundated with calls from eBay users seeking to be added to the list of creditors and would not be able to start its formal investigation for weeks.

Detective Senior Constable Michelle Cavanagh, a member of the fraud squad at Queensland Police, said she was waiting for advice from the liquidator to determine whether any criminality was involved. The fraud department had received 16 complaints so far, she said.

The list of people affected by the collapse of the company continues to balloon.

Yesterday, more than 450 people - who bought items from the seller at heavily discounted prices in the lead-up to its collapse - had left negative feedback for the seller.

Today, the number of negative feedback comments left in the past month sits at more than 650 and eBay has finally decided to disable the company's user account. But the tales of woe from hundreds of disgruntled users remain visible on the seller's feedback page.

In the three months before its collapse, ebusiness-supplies, the seventh biggest Australian eBay user in terms of the number of items sold, sold more than $1 million worth of goods. Most of those goods weren't delivered and the buyers have been left scrambling for their money.

Directors of EBS International, who recently relocated to China, have told liquidators that the company collapsed because an agent in China took the company's money without delivering goods.

But a large eBay seller who competed with ebusiness-supplies believes the collapse is suspect. The seller, who did not want to be named, said EBS International changed its product mix before its demise to favour large value items and sold them at prices below cost.

He said he purchased from the same Chinese factories as EBS International and did not accept the agent excuse because EBS International dealt only with factories directly.

PayPal managing director Andrew Pipolo set up a special PayPal fund to deal with this incident and said everyone who paid for items using PayPal would be entitled to refunds.

But those who paid using other methods such as a bank deposit or credit card must now rely on their banks and the liquidators to help them get their money back.

Before its demise, EBS International was selling items on a "pre-sale" basis, promising to deliver goods within 30 days.

PayPal's own rules state that, to offer PayPal as a payment option, sellers must guarantee delivery of pre-sale items within 20 days.

The loophole - and the fact that EBS International's PayPal account was soon emptied - meant many buyers were not entitled to refunds under PayPal's buyer protection program, despite a buyer protection logo being included in EBS International's listings. Furthermore, many of the bikes sold by the company are not covered by buyer protection because they are classed as vehicles.

Robert Vandermeer, who represents a coalition of eBay sellers, said PayPal only set up the special fund to reimburse buyers who lost their PayPal payments so it would not be legally liable for negligence.

"We will now have our lawyers look at the legality of the EBS listings and eBay's actions and inactions since then to explore the potential for a class action for sellers who used other than PayPal to pay EBS," he said.

"There's a growing case for negligence against eBay - this happened before their wide-open eyes."