
How Not to Sell Bitcoin on eBay for 300% Profit - dysruption
http://whatilearnedtoday.jameslarisch.com/?action=view&url=bitcoin-ebay-profit
======
JumpCrisscross
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.

~~~
larsonf
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.'

------
noonespecial
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.

~~~
smsm42
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.

~~~
tadfisher
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.

~~~
smsm42
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...

------
STRML
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.

~~~
danneu
Gee, if it's really so foolproof then all of these comments (and OP's
lamentation) seem to be missing the point.

Clearly there is a free lunch, and it's buying Bitcoin on Ebay.

[http://www.ebay.com/sch/i.html?_nkw=bitcoin](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?

~~~
pakitan
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.

~~~
michaelt
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.

------
vbuterin
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.

------
nullc
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.

~~~
phoboslab
I guess it's a bit more specific: PayPal doesn't care about sellers.

I sell a JavaScript Game Engine[1] and have made the exact same experience
over and over again. Someone buys it, I send out the license email and the
download link and 2 days later I see a chargeback. I can show PayPal
screengrabs of the license email and database records, showing that my
software really has been downloaded from the account in question. They don't
care. It's not "proof of shipment" if the shipment doesn't go through physical
mail that supports tracking.

I have since come to terms with the fact. I see it as simple piracy - it still
annoys me, but I have to live with it.

Funny thing is: if someone sends me an email, saying he's not happy with my
software, I always give them a full refund - which somehow isn't nearly as
taxing on my mind as PayPal chargebacks.

[1] [http://impactjs.com/](http://impactjs.com/)

~~~
jedberg
Why not send a small postcard with the license key that requires them to sign
to get the postcard? Give them an instant key good for 14 days and then make
them use the one on the postcard for long term use. Then you'll have your
proof (and be pretty close to PayPal's chargeback limit)

~~~
bitJericho
You don't need to send him a different key in the post. Give him the key
digitally and send the same key via post.

~~~
jedberg
The reason you don't want to do that is because they can just reject the
postcard. That's why you have to give them needed info on the card. The point
of the temp key is so they can get immediate satisfaction.

~~~
bitJericho
You could offer other services that having access to a valid key gives you,
such as support, updates, community, so on.

------
downandout
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.

~~~
lnanek2
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.

~~~
fnordfnordfnord
PayPal nukes fishy business when PayPal doesn't profit on the transactions.

------
unclebucknasty
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.

------
tadfisher
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.

~~~
dysruption
Honestly, all I saw was the quick buck. Total ignorance on my part. You're
right, I should have researched it better.

~~~
tadfisher
If it looks too good to be true, it probably is :)

~~~
bingeboy
At $300 yes, but what about $130? BTC isn't the easiest thing to dive into as
a NOOB.

~~~
tadfisher
If you are new to Bitcoin, you should probably review the ToS of any service
that allows you to purchase legal currencies with it.

------
badman_ting
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.

~~~
eli
Sure, just like running a bot net is way to make money.

------
cheeyoonlee
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.

~~~
rickyc091
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.

~~~
cheeyoonlee
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".

------
patrickk
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](https://blockchain.info/wallet/paper-tutorial)

------
vizzah
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.

------
t0
You could have printed a paper wallet from Coinbase and offered to mail it to
them. You could then provide proof of delivery.

------
fexl
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...](http://stakeventures.com/articles/2012/03/07/the-may-scale-of-
money-hardness-and-bitcoin)

------
ck2
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.

~~~
jafaku
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.

~~~
shawn-furyan
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.

------
yelnatz
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.

------
mthoms
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?

~~~
dsterry
Shipping the USB key isn't 100% fraud-proof.

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.

~~~
mthoms
That's my point. The useful features of Bitcoin are completely lost in this
situation. I was noting the irony of it all.

------
Havoc
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...

~~~
aianus
Why not purchase them locally in cash? Localbitcoins.com probably has some
sellers near you who would be happy to help.

~~~
Havoc
This being South Africa, "local" is a bit more difficult and often not all
that safe. I've got solid local contacts - the problem is nobody is _selling_
here. Everyone is buying BTC & the only ones selling are scammers. So honestly
I'd rather risk money dealing with an American/EU than a local tbh.

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

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

~~~
fixxer
True. This is neither new, nor limited to Bitcoin. I got burned last year on a
small sale.

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!

------
robryan
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).

------
mortdeus
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-...](http://bitcoinfan.blogspot.com/2011/12/why-selling-bitcoins-on-
ebay-is-bad.html)

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

------
LancerSykera
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.

------
amenod
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.

------
PaulHoule
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.

------
markdown
Paypal always always always ALWAYS sides with the buyer.

~~~
Negitivefrags
I used to think this too for the cases of Virtual Goods, but Paypal surprised
me. Our company suddenly started getting Paypal chargebacks resolved in our
favor one day. Not all of them, but more than the zero we previously had.

We have a fairly large number of transactions per day, so I can only assume
that our account got flagged somehow.

That said, Paypal only sides with us if it was a transfer of Paypal balance.
If the transaction was backed by a credit card, and the credit card was
charged back rather than done via a Paypal dispute, we will lose every time.

------
patrikr
TL;DR: Chargeback fraud exists. PayPal sucks.

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

~~~
smartwater
PayPal will take the money right out of your bank account. If that doesn't
work, they send you to collections and your credit score takes a dive.

------
C1D
All it would've took is a google search about why no Bitcoin exchanges allow
PayPal.

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

------
Helianthus
>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.

~~~
dysruption
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!

~~~
Helianthus
To be clear, my criticism is meant to be directed at Bitcoin and Bitcoin's
culture, not at your honest and well-crafted story-telling.

Cheers.

------
consonants
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.

~~~
jafaku
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.

~~~
onebaddude
>How exactly am I gonna lose my money with Bitcoin?

Having this mindset is a start.

------
pbreit
Duh.

------
bingeboy
Sorry kid, nice post!

------
ydnaod
So interesting

