Last month, ICE agents raided the home of two Vietnamese exchange students at Winona State University in Minnesota, seizing documents and computer equipment. The students, Tram Vo and Khoi Van are accused of selling software, video games and gift cards on eBay, and then shipping buyers products that they'd purchased with stolen credit card numbers.
Here's how it works. Using stolen information the criminals set up eBay and PayPal accounts in other people's names and start selling products -- $400 Rosetta Stone software or iTunes gift cards, for example. When legitimate buyers purchase these products using PayPal, the scammers then order them direct from the manufacturer, using stolen credit card numbers. By the time the credit card user reports the fraud, the scammers have already moved their money from PayPal to another bank account. Then they move it offshore to accounts in Canada or Vietnam.Vo and Van apparently made more than $1.2 million from their role as money transfer mules, though haven't yet been formally charged. This particular scam has been a really big problem for U.S. merchants. The nationwide investigation, dubbed "Operation eMule," has spanned more than a year and is still ongoing. More here: PayPal, eBay Targeted in Web Theft Scam That Stole Millions.
The online merchant is the big loser in the deal, but the consumers whose information was stolen also take a hit, as they have to untangle themselves from the fraudulent credit card transactions and fake eBay and PayPal accounts.