Is It Fraud If You Collect One Penny Legally Over And Over Again?
from the legal-conundrum dept
If you've ever needed to associate your bank account with some online service (such as PayPal), you know the drill: you provide the necessary info to the service, and a few days later, it makes two small deposits into your account (usually between 1 and 5 cents or so). You then have to report back the amount of the deposits to prove you own that account. It's a relatively cheap way for the services to confirm the account details. However, to one man, it was also an opportunity to make some cash. He set up automated scripts to basically use just such a system to open thousands of accounts and collect approximately $50,000 of these micro-transactions. As the guy noted for at least one of these accounts (with Google's CheckOut system), he read through the terms of service and this did not appear to violate the terms. In fact, it does make you wonder how illegal this really was. The fact that the guy used fake names (of various Mike Judge characters, which seems like a nod to the "skim a penny" computer hack from Judge's movie Office Space) probably hurts his case -- but it still raises some questions. If there are no limits on accounts and no other terms of service that prevent this sort of action, what exactly about it is illegal? Is there a certain number of accounts that you can open before it's considered fraud? Or does it have to do with his intent -- which was solely to get the microdeposits, rather than to use the accounts?
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: fraud, pennies, verification
Reader Comments
Subscribe: RSS
View by: Time | Thread
Intent
I doubt the courts would look kindly on it, though if there was no barrier in the EULA, I don't know how severely he'll be prosecuted.
[ link to this | view in chronology ]
Re: Intent
[ link to this | view in chronology ]
Technically fraud
I think that's the part that makes it fraud. What's the punishment for 58,000 cases of fraud?
[ link to this | view in chronology ]
Re: Technically fraud
[ link to this | view in chronology ]
YES!
The setting up of bank account by using fragulant names ie Mickey Mouse is illegal so the accounts were not set up legually.
The settin up of fradulant account is what the charges are about; not about the reception of the penny.
[ link to this | view in chronology ]
No
[ link to this | view in chronology ]
Re: No
PayPal is the same as a credit Card Company is the same as a bank account is the same as a stock account, a money wire transfer accounts et when it comes to setting up accounts in anything but your own proper legal name.
Using Mickey Mouse et for any of these is illegal. Good for a few years in the old slammer. You know the place where the sun don't shine.
[ link to this | view in chronology ]
Possibly Computer Fraud and Abuse
http://www.securityfocus.com/news/11519/1
[ link to this | view in chronology ]
Re: Possibly Computer Fraud and Abuse
[ link to this | view in chronology ]
[ link to this | view in chronology ]
It is fraud...read the base article...
That is fraud.
Using misleading on wrong information to obtain services and goods, duh!
Suppling fake name, fake addresses, fake Social Security Numbers; fake means fraud.
[ link to this | view in chronology ]
heer yay go Mikey
Same problem as with a bank worker handling gold coins all day long in his own special gloves and then burning the gloves at home after each week of work to extract gold
Mikey has trouble interpreting basic facts
[ link to this | view in chronology ]
Re: heer yay go Mikey
I am not really equipped to talk about the legality of gathering the remnants like this -- I'm sure they put something in their employment contracts that forbids it, but I don't know that its illegal.
Similarly, while this guy made a legal mistake by using false information, the act of gathering all these micro-deposits like this ... I don't think it's illegal.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Never confirmed account
[ link to this | view in chronology ]
[ link to this | view in chronology ]
They're starting to the the opposite
In criminal law, fraud is the crime or offense of deliberately deceiving another in order to damage them – usually, to obtain property or services unjustly.
IANAL, but I think this fits pretty clearly - the deception is from creating all those fake IDs, the damage has a direct, obvious material value (50 grand), and clearly this money was obtained unjustly - abusing a confirmation system to get thousands of handouts instead of 1.
On a side note though, a lot of companies are starting to take the opposite approach - they take a very small amount of money OUT of your account, you report the amount, then they credit the amount towards your first transaction. Of course, no one really minds, since you aren't signing up for the service until you intend to make a transaction anyway.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Multiple accounts NOT allowed
"PayPal allows members to have one Personal account and one Premier or Business account."
That means a total of two accounts. So at least for PayPal, he was in violation of their TOS.
[ link to this | view in chronology ]
Re: Multiple accounts NOT allowed
[ link to this | view in chronology ]
multiple accounts
He must have set up thousands of accounts.
at a max of 39 cents per account... how many accounts did he have to make for $50,000?
128,206 accounts!
Seems like a lot of work. Even for $50,000.
Frankly I don't believe it...
[ link to this | view in chronology ]
OF COURSE IT'S FRAUD
OF COURSE IT'S FRAUD
Registering accounts under a false name? FRAUD.
Registering accounts under false pretenses? FRAUD.
What do people insist on pretending that just because something is done using a computer it's somehow not illegal or unethical.
http://dictionary.reference.com/search?q=fraud&x=0&y=0
[ link to this | view in chronology ]
Re: OF COURSE IT'S FRAUD
[ link to this | view in chronology ]
wow...
[ link to this | view in chronology ]
[ link to this | view in chronology ]
I can't help but wonder if his name really is "enough" or if he committed fraud (by his definition).
[ link to this | view in chronology ]
[ link to this | view in chronology ]
it's always some mundane detail that gets you...
[ link to this | view in chronology ]
Fraud
[ link to this | view in chronology ]
Torch The Place!
[ link to this | view in chronology ]
The Point...
I think people are missing Mike's point.
He's not suggesting its not illegal to commit fraud, because he pretty much says it, though "probably hurts his case" was perhaps weak phrasing.
The question Mike was asking was: "If there are no limits on accounts and no other terms of service that prevent this sort of action, what exactly about it is illegal?"
[ link to this | view in chronology ]
[ link to this | view in chronology ]
not necessarily a fraud
[ link to this | view in chronology ]
[ link to this | view in chronology ]