Washington Attorney General Steps Up to the Plate Holds Shill Penny Auction Accountable

On January 18th of this year we found PennyBiddr.com shill bidding, well thanks to a referral from the FTC  the Washington Attorney General is holding them accountable. It’s about time! There are many more sites that are shill bidding and we hope that consumers will report these sites so that everyone who has been defrauded will be refunded.

Read the press release from Rob Mckenna, Attorney General of Washington:

FOR IMMEDIATE RELEASE

Sept. 28, 2010

PennyBiddr agrees to cash out and refund consumers under agreement with Washington Attorney General

Some penny auctions use cheap tricks to cheat consumers, state warns

SEATTLE – Penny auction sites lure consumers with cheap prices on brand-name electronics, designer handbags and discounted store gift cards. But an investigation by the Washington Attorney General’s Office shows how some of these sites can fool consumers into paying big bucks on an auction with no winner. These sites use shill bids to drive up prices by one unlucky penny at a time.

The owner of PennyBiddr, based in Federal Way, agreed to shut down the site and refund consumers nationwide as part of a settlement announced today by Attorney General Rob McKenna and Assistant Attorney General Jake Bernstein. Documents filed by the state in King County Superior Court accuse the company of using phony bids to artificially increase prices and sometimes make it impossible for consumers – who had already spent money – to win an auction.

“Here’s my two cents on penny auctions,” Bernstein said. “They’re essentially a form of entertainment in which you to pay to play. In a legal auction, a consumer may be able to buy an expensive item for an incredibly low price. But if you don’t know how these auctions work or you find it difficult to stick to a spending limit, you can easily be suckered out of lots of money. Worse, some site owners collude with friends or even use an illegal software code to place bogus bids.”

Bernstein said the Attorney General’s Consumer Protection High-Tech Unit began investigating PennyBiddr after receiving a referral from the Federal Trade Commission. The company was launched by LionHeart Mint, LLC, owner Kanwal Preet Singh, a.k.a. Laly Singh, in November 2009. Singh, who complied with the state’s investigation, recently shut down the site.

In a traditional Internet auction such as eBay, a bidder decides what item they want and how much they’re willing to pay for it. If no one bids higher, they win the item. Consumers who lose the auction pay nothing.

In a penny auction, a consumer pays to bid. The price varies; bids cost $1 each on PennyBiddr. All auctions are time-limited, usually starting with several days. But as the time ticks down to a few minutes or seconds, each bid extends the auction by a few more seconds and increases the product purchase price by a cent. In this fashion, continued bidding prevents an auction from concluding until no more bids are placed. When the auction closes, the individual who placed the last bid must pay the final price of the item, plus shipping and handling. That’s on top of whatever was spent on bids. For every winner, there are also losers who are out whatever they spent on bids.

Some sites including PennyBiddr use shill bids, which Bernstein said are illegal. These bids are placed automatically by a software program or people may be hired to manually place bids. Each fake bid inflates the price and extends the auction time and the number of bids required to win an item. Moreover, the program used by PennyBiddr would allow an auto-bid to “win” an auction, in which case nobody received the item and the company simply pocked the money spent by real bidders. Bernstein said the software program used by PennyBiddr was created in the United Kingdom.

The state’s settlement doesn’t require any finding of wrongdoing or admission of guilt. As part of the agreement, Singh will refund every consumer who paid for a bid on PennyBiddr. The Attorney General’s Office estimates about 85 consumers are owed money. Refunds will be made through PayPal and are expected to total more than $7,700.

Singh will also pay $8,000 to reimburse the Attorney General’s Office for legal costs. He is prohibited from using a penny auction site to generate income again.

PennyBiddr Complaint

PennyBiddr Consent Decree

There are many penny auction sites operating illegally and we hope that this will be just the beginning of regulation.

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11 comments… add one
  • David September 28, 2010, 9:24 am

    I can't wait of the day that someone will publish something positive about the penny auction industry.

    Reply
  • iwontgiveup September 28, 2010, 6:03 pm

    I on the other hand an glad to see this happen. People who own PA sites and shill bid their customers and defraud them out of their hard earned money, should pay the ultimate price. In this case, it wasn't as severe as I would have done it, but it still serves him right.

    Would really love to start seeing this happen to all other fraudulent PA sites, especially swipebids and swipeauctions.

    Reply
  • RICHARD JACKSON October 1, 2010, 1:26 am

    Truely is great news. I have spoken to A few local officals about 3 different sites, They seemed quite interested in what I was shareing with them. To be honest I just talked w/them on the 29th. They allowed me about 45 min.of their time . After about 10 min. one of them (TERRY) stopped me from talking and he went and got pen,paper and started taking notes.I really feel their will be a follow up on these matters. It was left at they would be turning this info over to one of the big chiefs. (Investigatort terry' words not mine.) This took place at the Mesa P.D.in AZ. I was also told if i get the call from their boss, It will be out of phoenix. (IO MILES UP THE RD) I was glad to hear that though, Phoenix will have the funds to proceed very strogly if they do follow thru w/ the investigation. Bidders, I realise I didn't share w/you all details of the conversation I had w/the detectives..And reason being I don't want to mislead anyone with B.S. Players Please make sure Amanda is aware of this. We spoke afew weeks ago thru personal e-mail about alot of the thiefs in the P.A business. And I made it very clear then that I was going to take action,Amanda supported and encouraged me to follw thru. I let them know of 2 sites that are operating like ponzi schemes. From their my words became aloy stronger.I will keep in contact weekly or so. I know of alot of you thru P.A. sites. Some of you cost me alot here and their. But I did enjoy the P.A. at one time. Wishing everyone the best. Hope to hear back from you Amanda R. Jackson

    Reply
  • John October 4, 2010, 4:34 am

    Same thing needs to happen to Swipe Auctions and any other scam penny auctions.

    Reply

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