Shell games tempt only the gullible, don’t they? So long as YOU don’t fall for them, what’s a little income redistribution among wretches? That’s an attitude shared only by the uninitiated. So-called internet “penny auctions” exploit human vulnerability like trust and avarice, leaving victims to blame their own stupidity or greed. You may shrug off getting burned as a lesson learned, but all confidence tricks count on that. Websites like Quibids and Scriptmatix’s PennyAuction are neither novel discount methods, adventure shopping, gambling scenarios or lotteries. They are con games that lead you to believe you are getting something for your money, until you don’t.

Just because YOU can figure it out -from an objective distance- doesn’t mean Quibids is not patently dishonest. US laws governing fraud are enforced by local statutes, but common law is enough to define this internet scam as representation of falsehood with the intent to profit. Whether or not the auctions use shill bidders, or fail to honor unprofitable outcomes, as have been accused by disgruntled victims, the websites are misrepresentations. The former are obvious illegal practices. The latter is fraud. Or are we so cynical that we accept this kind of scam as merely “predatory capitalism?”

Wikipedia defines fraud in layman’s terms:

1. a representation of an existing fact;
2. its materiality;
3. its falsity;
4. the speaker’s knowledge of its falsity;
5. the speaker’s intent that it shall be acted upon by the plaintiff;
6. plaintiff’s ignorance of its falsity;
7. plaintiff’s reliance on the truth of the representation;
8. plaintiff’s right to rely upon it; and
9. consequent damages suffered by plaintiff.

In particular this scam begin with what’s known as the advance-fee fraud except this buy-in is ongoing and lasts until a mark is tapped-out.

Quibids and ilk call themselves “penny auctions” as if there is such a thing. Onlooker suspicions are assuaged by the inherent implication that if a business scam has a name, it must not be a crime.

Are penny auctions a veritable thing, besides the self-defined new crook on the block? Well, yes, but. The “penny auctions” of yesteryear had nothing to do with these pay-to-play auction schemes where bidders buy vouchers for the privilege to ante into a bidding pool. Penny auction refers to the Depression era strategy of sabotaging farm liquidation auctions by forcing the auctioneer to accept bids in increments of one penny. Aided by cooperative neighbors, bankruptcy victims were able to grind their creditor’s actions to a halt, for a time, because collusion was itself unlawful. Obviously this is a far cry from the neo penny auctions which require customers to buy “bids” with which to place dibs on a desired item, increasing its auction price by a penny each time and prolonging the bidding for another fixed period.

On Quibids, price and time increments can vary between auction items to confuse watchers trying to do the math. As an average, a bidder might pay 60 cents each time he wants to put his name on the desired item, raise its price a penny, and extend the auction expiration by another ten seconds. The last person to cease paying money to keep the auction up in the air gets the item for the final price. But the final cost includes of course what he paid to play.

Imagine musical chairs except you pay 60 cents for every successive measure, an unlimited number of party-goers circling a solitary chair. So long as somebody pays the piper, everyone gets to stay in. Except they’re not “in” are they? Only the last person who put money in gets to take the chair.

The music stops when the next to last person refuses to ante up.

On the internet, the victory or loss is experienced alone. Your embarrassment is “shared,” but anonymous. Now imagine a convention hall, full of sidelined bidders who dropped out as they realized the insanity of paying into a potentially endless kitty whose real value to them represented a diminishing return. Imagine dozens or scores of former adversaries looking on as the last man standing gets the chair, everyone else leaves empty handed and empty pocketed, while the house rakes in the pot worth many times the value of the chair. Think that scam would fly in a non-virtual world?

In the real world, marks who’ve fallen victim quickly learn that there’s a racket of onlookers quick to step in and silence any complaints. Try to warn off the next bystander who looks like they’re about to fall prey and you’ll see exactly what criminal muscle lurks behind the charm of the charlatan.

Oh, it’s a silly, silly hook this penny bidding scheme, and online it’s hard to tell how many dupes are actually taken in. We have only the Quibids customer relations departments to assure us that none of the other bidders are phantom bots or paid shills. It would be so easy of course for the javascript to be otherwise. The same voices explain that Quibids can afford to offer its auction items at these unbelievable discounts due to the income derived from its inventive bid-selling process.

Simple math suggests they could award a winning lot several times over and still keep a tidy profit. Yet their FAQ explain that 50% of their transaction result in an operational loss. If indeed this is true, that percentage is factoring the auctions they offer for packages of “bids,” where customers place bids to win more bids. One can only hope that buyers are given the upper hand on these transactions. Otherwise the 50% percentage tabulates the auctions by number and not their dollar value. Quibids’ losses are phantom, worthless bids sold at a fraction of their worthless value, versus their profitable ones, where $200 consumer goods net $1000 or more.

That kind of scheme resembles a lottery where more tickets are purchased for a fixed-sum reward. Quibids deflects categorization as a gambling scheme by explaining that auction losers have the option to apply their losses toward the retail price of the item, if they elect to purchase it as consolation. How many players take them up on such an offer, only they know.

Upon losing the Christmas raffle, would having the option to buy the turkey at above retail price be reassurance enough for you to prove the affair wasn’t in reality an unregulated raffle?

First of all, the sites use very clever software, and a money-changing scheme to defy the average grasp of math. But the trap mechanism well oiled, the more duplicitous energy goes into the promotion. Quibids is using social networking and email to expand the reach of the news outlets they ensnare. Our attention was drawn when this week the Colorado Springs Gazette directed its readers to this exciting new discount website.

A scan of the various “penny auction” websites would seem to indicate they are using identical software. That opens a whole other can of worms, doesn’t it? This could be an installation one can license, just as one would WordPress or Zen Cart. In fact there is a PHP setup marketed by Scriptmatix who charge $1,250 plus for an installation. First they nail people greedy enough to want Nikon D90s for next to nothing, then they turn their dupes into willing con artists themselves.

Here’s a screen grab from the Scriptmatix brochure, where they explain what kind of return eager entrepreneurs can expect on their $1,249 investment.

It might look like a safer legal recourse to franchise the “penny auction” scheme and let client operators do the defrauding and ultimately face the authorities. Maybe selling the blueprint to a confidence trick does not constitute a crime. Unless of course you are pretending to peddle a fully legitimate business model that you know is actually against the law. We’re back to fraud.

Of course the key to convincing users that your site is not a ripoff lies with successful PR. It’s very likely that many of these multiple installations are Quibids figuring out how to outrun Google searches of Quibids+Scam. Aptly-named rival Swipe-bids for example looks more to me like a designated heavy, meant to make Quibids appear to be honest by comparison. Who knows how many websites this operation has used to elude tar and feathers.

Here’s the SWIPE-BIDS website whose main page stream a promotional video, actually for a competitor, as if it was its own. On watchdog sites, Quibids cries foul, but it’s hard to tell what argument is authentic.

Does “swipe” seem a term well chosen to inspire trust? It’s as obvious as a black hat in a wrestling match. Of course “Quibids” is the most poetic choice for truth-in-tradenames. “Qui” is French for who and doesn’t that account for the mysterious identity of who is bidding against you?

And the watchdog websites sprouting up to monitor the penny auction eruption are themselves shadow operations. Any “penny auction watch” that prefaces their posts with the concession that some auction sites are good and some are bad, is obviously shilling for someone. They may be a village idiot with no concept of the scamming afoot, or they’re innocent at all. But this is speculation.

By all appearances, these sites are reaping Keystone times six, and simply drop-shipping the goods.

A legal indictment of Quibids can precede a formal investigation based simply on their of self-promotion. Theirs may look like expertly crafted PR, and these days of diminished expectations about the objectivity of our media, it may suit many to congratulate the charlatans on their savvy, but Quibids’ self-promotion documents their intent to defraud.

Layers of press releases and paid editorial columns appear to shore up a single real news item which the Quibids outfit eked from an Oklahoma news team earlier this year.

At right are stills from KWES NEWS9 reporting about Quibids, as far as they were told, a home-grown auction website.

Quibids hasn’t chintzed on PR, but they do appear to lack for real faces to front their operation…

According to their own site, Quibids was the brainchild of Oklahoma City entrepreneur Matt Beckham, joined by Shaun Tilford, Jeff Geurts, Josh Duty, Bart Consedine, and spokeswoman Jill Farrand. The 27-year-old Beckham’s identity is confirmed by the Quibids.com domain registration.

Have a look at who NEWS9 is interviewing for the so-called customer testimonial. The kyron reads “Zach Stevens” who purports to be thrilled with the deal he’s gotten on Quibids.

Do we know whether this interview footage was pre-packaged for the NEWS9 team? The distinction is unimportant, but we might note that the cuffed sleeve does not belong to the female reporter.

This TV segment streams on the upper right corner of the auction sites, serving as a de facto suggestion of the site’s legitimacy. The footage streams in a very small window.

But enlarged in these captures, a closeup of “Zach’s” laptop and username reveals this “customer” is none other than Quibids’ owner Matt Beckham, smiling like he has no idea the perp walk that awaits him.