Shawn Hogan - CEO of DigitalPoint Solutions sentenced to Federal Prison

[Eric Lyon]

Found this article a pretty interesting read today. I think it definitely qualifies as industry news since Digital Point Forums also has a small hold on domain marketplace selling.

Shawn Hogan, the CEO of a successful online marketing company called Digital Point Solutions, was sentenced to five months in federal prison for his role in defrauding eBay of an alleged $28 million in online marketing fees.

He must remain on three years' probation after that, and was fined $25,000. Hogan will enter prison on July 14, according to federal court records. Hogan previously reached a civil settlement with eBay also.

The sentence brings to a close one of the strangest chapters in eBay's history.

READ MORE: http://www.businessinsider.in/eBays...ederal-Prison/articleshow/34511382.cms#!HtEnR

 

[iowadawg]

And a large hold on the scammers and spammers.
Could not have happened to a worse forum owner.

 

[Faithfull]

Found this article a pretty interesting read today. I think it definitely qualifies as industry news since Digital Point Forums also has a small hold on domain marketplace selling.

Small hold is an understatement... lots of business going on at their forums.

This is a huge case, and a very interesting read indeed.

Lack of trust of other big parties could mean less ad revenue and the need for more paid accounts.

Let's see how this develops, and what the concequences will be for DP in the long run.

 

[Eric Lyon]

Shawn replied publicly on DP when this topic was brought up over there. Below is his quoted statement to DP members:

Funny, I was just going to create a thread since I knew someone else would soon.

Anyway, long story short is that this has been going on since 2007, so this ends everything (including civil case with eBay).

I've spent millions in legal fees over the last 7 years, and taking both the criminal and civil stuff to trial would have cost many millions more. So I look at it this way... I'm not sure we would have lost the case had it gone to trial, but there's no guarantee. It's cheaper to settle/take a plea deal, and not have to worry about something crazy happening in a trial where a jury feels like they are doing you a "favor" and fine you $10M restitution and put you in prison for 10 years.

When the option presents itself to do a global settlement that ends the criminal and civil suit, spend a few months at prison camp, well... it's something you will seriously consider regardless if you think you could have prevailed in the civil or criminal suits. After 7 years neither had even gone to trial yet and would have cost many millions of dollars to defend (so in a best case scenario, you are out millions of dollars to defend something, and probably spend another 5 years of your life dealing with the legal system). Just want to get all this dumb stuff over with really.

 

[JB Lions]

Small hold is an understatement... lots of business going on at their forums.

This is a huge case, and a very interesting read indeed.

Lack of trust of other big parties could mean less ad revenue and the need for more paid accounts.

Let's see how this develops, and what the concequences will be for DP in the long run.

People actually pay for accounts there? Haven't logged in there in years. Was always overrun with spam.

 

[-EM-]

I thought the ebay case was closed already...

 

[johname]

Well That's the way the cookies crumbles

 

[enlytend]

I was surprised to hear about the sentencing also - the story broke a couple of years ago.

Whether anyone at eBay knew what was going on or not, that's no excuse. I don't think anyone who was a honest ebay affiliate around the same time (and essentially had some of their commissions stolen) is shedding any tears.

 

[Eric Lyon]

More case details in a 2010 article:

Indictment Specifics
Several interesting specifics were outlined in both of the indictments:

• Between 2006 and June 2007, Shawn Hogan (Digital Point Solutions) earned approximately $15.5 million in commissions from eBay. Hogan was eBay’s number one affiliate.
• Between 2006 and June 2007, Dunning (Kessler’s Flying Circus) earned approximately $5.3 million in commissions from eBay. Dunning was eBay’s number two affiliate.
• Hogan and Dunning are accused of generating hidden forced clicks on both their own web sites as well as sites not connected with the defendants in order to increase the number of computers storing the eBay affiliate tracking cookie.
• The legal criteria for wire fraud was established not.....

Read More Here: http://www.revenews.com/affiliate-marketing/affiliates-indicted-for-cookie-stuffing/

Shawn Hogan's blog post about the events in 2010:

The Beginning
I started doing things with the eBay affiliate program in the fall of 2004. On October 20, 2004, I decided I would see if I could rank well for one of the “holy grail” SEO keywords… “eBay“. On November 9, 2004, I was in the top 10 in Google for “ebay”… specifically I was #9 (at the time, the top 50 results were just the various official eBay sites for various countries). On December 10, 2004, I held the #4 *and* #5 position in Google for the keyword “eBay” and this was a position I held in Google until April, 2006 (when Google updated their algorithm, and I no longer cared about the ranking). I also held the #1 spot for other things like, “eBay Registration” (even higher than....

Read more here: http://www.shawnhogan.com/2010/08/w...rism-and-meg-whitman-have-in-common-ebay.html

3 pages of very detailed accounts from 2013:

eBay alleged that what Hogan did to earn the sting operation and the knock at his door by the FBI was to rig eBay's system so that it falsely credited him for sales he did not generate. He did it by seeding unknowing users with hundreds of thousands of bits of tracking code, or "cookies." If any of those people bought something on eBay, the code signaled to eBay that Hogan should get a cut of the sale — even though he had done nothing to promote eBay.

The sting also netted Brian Dunning, eBay's second biggest affiliate marketer. The company had paid Hogan and Dunning a combined $35 million in commissions over the years, court papers say. Both men have since pleaded guilty to wire fraud....

Read More Here: http://www.businessinsider.com/ebay-the-fbi-shawn-hogan-and-brian-dunning-2013-4?page=1#!ItsHU

 

[mhdoc]

For a while there was an "opportunity" to improve your sites search engine rankings by adding some code they provided to your site(s). It would randomly place links to other participants in the program on the bottom of your pages. It was presented as a free advertising program.

There was even a fund raising program where people could make contributions to a fund to pay for the servers and bandwidth which powered the system

 

[HeyNow]

In my opinion, good riddance to Hogan. Sounds like he got off easy with only 5 months. At least his case played itself out. Hope he gets reamed in prison. Also, his quote in this thread mentions a jury. Well, a "bench trial" was probably also an option, where the judge decides guilt or innocence, not a jury. In my experience, defendants expect a better outcome from a stupid jury than a smart judge.

 

[DomainAgents]

Cookie stuffing was (and probably still is to an extent) a big issue for forums back in the day.

Basically users or spammers would place small 1x1 images in their forum posts which would add an Amazon or eBay cookie to your system and the next time you bought something there, they would get credit for it.

 

[Weber]

So, were all visitors of digitalpoint getting ebay cookies?
Hard to believe a niche wizard alone would generate those kinds of earnings.

Also, being a nation of laws that we preport to be, does a federal law actually exist that states that cookie stuffing is illegal?

 

[alistair80]

are you guys suggesting whatever big companies like ebay etc do...is all legal and clean? lol

 

[enlytend]

So, were all visitors of digitalpoint getting ebay cookies?
Hard to believe a niche wizard alone would generate those kinds of earnings.

DP and probably any other sites he had.

There are no specific laws against it (I think this case was prosecuted as wire fraud? embezzlement?) - but personally much as I hate sleazy affiliates, I wouldn't want the government attempting to regulate an industry they know nothing about.

 

[Dave_Z]

Also, being a nation of laws that we preport to be, does a federal law actually exist that states that cookie stuffing is illegal?

Maybe not exactly cookie stuffing is illegal, though Hogan's cookie-stuffing action was argued as essentially wire fraud.

 

[joshny]

defrauds ebay for 28 million, pays a 25,000$ fine

PocketChange lol

 

[Ronald Regging]

I don't think there was anything inherently fraudulent about his actions. Sites are allowed to set cookies and he did promote eBay through his forum for selling domains, etc. I'm kind of curious to see how many of these "fraudulent" referrals had purchased a domain from eBay...

 

[JB Lions]

I don't think there was anything inherently fraudulent about his actions. Sites are allowed to set cookies and he did promote eBay through his forum for selling domains, etc. I'm kind of curious to see how many of these "fraudulent" referrals had purchased a domain from eBay...

You don't think fraud is fraudulent? Most people, ebay, the courts etc. would disagree with you. Let me give an example domainers would understand.

Let's say this morning you visited Shane's site, saw some auction that was ending today at GoDaddy, clicked thru setting a cookie. Auction wasn't ending for another 3 hours. That person came to Namepros to read some threads. Let's say Namepros was setting GoDaddy cookies on people's computers by them merely visiting the site. Later that day that person bids and wins the auction. Namepros gets credit, not the actual referrer Shane. That's fraud.

Merchants want you to set cookies with a click, not cookie stuffing or forced clicks.

 

[HeyNow]

I don't think there was anything inherently fraudulent about his actions.

Holy cow.

 

[namey]

I wish we knew out of that $28 million how much they paid back to eBay.

 

[Ronald Regging]

You don't think fraud is fraudulent? Most people, ebay, the courts etc. would disagree with you. Let me give an example domainers would understand.

Let's say this morning you visited Shane's site, saw some auction that was ending today at GoDaddy, clicked thru setting a cookie. Auction wasn't ending for another 3 hours. That person came to Namepros to read some threads. Let's say Namepros was setting GoDaddy cookies on people's computers by them merely visiting the site. Later that day that person bids and wins the auction. Namepros gets credit, not the actual referrer Shane. That's fraud.

Merchants want you to set cookies with a click, not cookie stuffing or forced clicks.

That sounds like a flaw or limitation of the system, not fraud. DP set cookies on people's computers who visited that site. There is nothing inherently fraudulent about that. Sites set cookies all the time. You have the option to block cookies, or to view/delete them if you don't want them. Just because one site sets a cookie, technically, doesn't mean it has a claim to anything. If one cookie can be overwritten by another cookie, than that just shows that using cookies is an ineffective method of referral tracking. Someone designed a shoddy system and then wants to sue when someone else discovers it's flaws? And we accuse the guy of fraud? Maybe those affiliates who didn't get paid should be suing Ebay for gross negligence, since their entire method of tracking sales is completely flawed.

 

[JB Lions]

Sounds like you didn't even read the article. Accused of fraud? They plead guilty to it. They admitted it. Hence, the prison time. You're disagreeing with them at this point.

"According to the FBI's account of its interrogation of Dunning, he and Hogan — while playing "World of Warcraft" — had discussed "techniques for masking activity that could be labeled as being outside the Affiliate Program's terms of service."

I guess you see nothing fraudulent in that either?

"Sites set cookies all the time"

Right, which has what to do with this? This is a case of cookie stuffing.

It wasn't just DP, goes to you not reading. It was the widget that was distributed to many other blogs - http://www.businessinsider.com/ebay-the-fbi-shawn-hogan-and-brian-dunning-2013-4?page=1

 

[DU]

Holy cow.

And you wonder why people still use snapnames? Holy Cow is right.

 

[enlytend]

If one cookie can be overwritten by another cookie, than that just shows that using cookies is an ineffective method of referral tracking. Someone designed a shoddy system and then wants to sue when someone else discovers it's flaws?

FYI, that's how affiliate marketing works. Some merchants give partial credit for the entire click trail from first visit to purchase, but still the visitor has to KNOWINGLY click through to the merchant's site.

DP set cookies on people's computers who visited that site. There is nothing inherently fraudulent about that. Sites set cookies all the time. You have the option to block cookies, or to view/delete them if you don't want them.

That's BS. Of course you "can", but who does that?