Site Crash Is Latest EBay Stumble

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EBay began 2001 the same way it ended 2000: rocky.


A series of failures to its primary and secondary backup systems brought down the site for 11 hours on Jan. 3.


In a letter to users, eBay Chief Executive Officer Meg Whitman wrote that the failure "was compounded by a decision we made to delay the replacement of certain hardware components in an effort to avoid disrupting service during the busy holiday season," and that the "we have known for awhile" that the potential for a problem existed. eBay extended all auctions affected by 24 hours and credited all associated fees.


Last week's outage followed a December in which the site weathered charges against two sellers for mail fraud, spam accusations, stolen member information and charges of playing games with opt-in policies.


An FBI investigation, felony mail fraud indictment and spam accusations preceded the crash.


Federal investigators on Dec. 26 arrested George Arthur Cruz, 31, of Artesia, CA; and are still searching for Hen Ben Haim, 27, of Encino, CA, in a separate case. Both are accused of offering electronics items for auction on eBay, taking money from winning bidders and sending nothing in return. They are suspected of cheating bidders out of a total of $110,000.


Assistant U.S. Attorney Dorothy L. Shubin said these unrelated cases are among the first criminal prosecutions in the burgeoning online auction industry.


"It's an old-fashioned fraud using new technology: promising products and not delivering," she said.


Cruz faces felony mail fraud and felony money laundering charges, and was released on bail. Haim faces mail fraud charges.


They reportedly hoodwinked up to 240 potential victims into mailing payment. Postal inspectors have recovered about $34,000.


An eBay spokesperson said fraud is rare on the site. The company offers buyer and seller rankings to assist users in gauging authenticity.


Separately, eBay in late December warned 100,000 members that their preferences for using its service and opting out of promotional and other messages were to be reset, leading some to question the message's legitimacy and others to raise the issue of spam.


"Several times a month, eBay sends out valuable e-mail communications with news, offers and special events that help you buy and sell," the e-mail said. "Unfortunately, we have noticed that an error occurred during your registration process that prevented you from receiving these communications. Many of your Notification Preference defaults were set to 'no' rather than to 'yes', which means that unlike other eBay members, you are not receiving these types of communications."


The message continued: "We'd like to resolve this problem quickly and efficiently. Therefore, on 12/19/00, we returned all your Notification Preferences to the standard default of 'yes' to put you in line with the rest of the eBay community."


The reason for the message, according to Henry Gomez, an eBay spokesman, was to alert registered members that there was a bug in the company's registration software that automatically set their opt-in preferences default to "no", effectively opting them out of receiving further messages -- promotional and otherwise -- from the company. Those defaults normally are automatically set to "yes", he said.


"E-mail is the most effective way to let people know what's happening," Gomez said. "There was a bug in the system and all of their preferences were incorrect."


He said that as a result, certain functionalities of the eBay Web site could be disabled because of the bug. Members were told they had a 15-day window during which they would not receive any e-mails from eBay and that they could reset their preferences if they chose.


At the same time, a bogus e-mail message has been circulating among the online auction community's members telling them registration information needed to be changed and directing them to a fake eBay Web site set up to capture personal data.


To some, the way eBay chose to alert its members about the registration bug was problematic.


"This sounds like eBay took a page from Kozmo," said John Lawlor, president of e-mail service provider Email Channel, Boca Raton, FL, referring to the legitimate e-mail message.


He noted that New York online shopping and delivery service Kozmo.com Inc. on Nov. 23 sent an e-mail to consumers who opted out of future mailings asking them if they were sure they wanted to be left alone.


Lawlor characterized the Kozmo message as "spam, plain and simple." He did not go as far as to characterize the eBay message as spam, declining to speculate because he has not actually seen the message.


Rodney Joffe, president and founder of CenterGate Research Group LLC, Tempe, AZ, said that technically eBay's legitimate e-mail does not constitute spam in and of itself. It does, however, leave the door open for possible future abuses, he said.


"Spam has a clear definition, which I don't think eBay crossed," Joffe said. "They sent a service notification to their customers stating they had to reset values. The result of the reset values [e-mail sent in the future] could be construed as unsolicited e-mail, and so they will be spamming when they send new e-mail out."


Meanwhile, on Dec. 28 eBay said in a safety reminder posted on its announcement board that bogus messages asking members to reset their registration information have been circulating recently.


The fake e-mail said there was a problem with members' registration information and contained a link that appeared to lead to the eBay home page, but was a nonrelated site set up to capture personal data of unsuspecting users.


Gomez said he thought the bogus e-mail was sent to a small number of members, but the company nonetheless thought it necessary to warn everyone about the scam.
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