Trading standards officers bust software scam worth millions

A raid by Police and Trading Standards Officers on a South London address this month brought an end to a software pirating...

A raid by Police and Trading Standards Officers on a South London address this month brought an end to a software pirating operation that sold millions of pounds of illegally copied business packages on major Web auction sites.

Bill Goodwin

Customers of QXL, E-bay, Yahoo, Ricardo and Ebid have been duped into buying poor quality copies of Microsoft and Adobe packages in hundreds of auctions held on the sites over the past four months.

Thousands of copies of supposedly new premium business packages, including Microsoft Server 2000, Office 2000, Visual Basic and Adobe Photoshop, have been offered for sale on the auction sites at cut price rates.

The auctions have raised concerns from small business organisations who fear their members are being let down by the failure of Web auction sites to rapidly close down fraudulent auctions. "Our members are using sites like this. They haven't got time to go out shopping for software," said David Hands, director of the Federation of Small Businesses.

The raid was the culmination of a four month investigation by Trading Standards Officers and the Business Software Alliance. It follows complaints from angry customers who sent money for new boxed copies of packages, only to receive poor quality pirated versions.

Trading Standards Officers from Southwark and Lewisham, accompanied by officials from Adobe and Microsoft seized pirated software worth tens of thousands of pounds in the raid on 15 November. Items removed included copies of Adobe Autodesk, Corel Macromedia and a range of Microsoft products, a laptop computer, a CD writer, and accounts detailing auctions on a range of Web sites.

Computer Weekly has established how the pirates were able to con customers of the QXL Web site - just one of the sites targeted in the scam - by blitzing the site with over 400 auctions during five weeks in September and October. The pirates were able to avoid detection by using a series of false names and temporary e-mail addresses, and by posting their auctions on weekends, when the site was less heavily policed by QXL staff.

The first auctions appeared on the QXL Web site around 16 September. A group calling itself EZ Auctions advertised premium business packages, worth £800,000, in 100 auctions spread over three days. The pirates reappeared a week later, this time as DN Moore, with an almost identical set of auctions. Other auctions followed under the names Software Auctions and Raymond Wholgemouth. The total value of the software on offer was an estimated £3.2m.

The sales always followed the same pattern: 100 auctions each offering between 15 and 25 copies of a well known business package. And crucially, in each case, customers were asked to send their money to the same address in Deptford.

Customers that have contacted Computer Weekly have accused QXL of failing to spot these tell tale patterns in the pirate auctions quickly enough to prevent them from losing money. At least 30 customers have posted complaints to the QXL Web site and 10 have contacted Computer Weekly by e-mail.

"I suppose I should have realised it was a rip off as the price was so good. You do tend to place trust in an organisation like QXL. But it is incredibly simple for rogue traders to register under different aliases," said Mark Beresford, one of the victims of the scam.

Although QXL received its first complaints on 25 September, customers say the site did not send out warning e-mails about the first auctions on the site until 17 October - a month after they first appeared.

QXL said that it takes care to protect its customers by monitoring sales on a daily basis and closing down pirate software auctions as soon as they are discovered.

Customers have the option of paying a small fee to join QXL's safeship service which ensures that sellers are not paid until customers receive the goods promised. There is no suggestion that QXL had any investment in the pirate operations.

Following the raid, a man has been cautioned and is facing possible charges under section 93 of the Trade Marks Act - an offence which carries a maximum prison sentence of 10 years.

Read more on Integration software and middleware