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

 

[johname]

Well That's the way the cookies crumbles

 

[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.

 

[iowadawg]

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

 

[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

 

[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.

 

[HeyNow]

A guy robs a bank, then gets caught, convicted, and sentenced to prison. Other potential robbers discuss it in a bank-robbers forum and blame the bank for having all that money stored in one place, conveniently waiting to be stolen. That's what some of the posts here sound like.

 

[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.

 

[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.

 

[enlytend]

If I had a business with an affiliate program, I wouldn't use cookies as a means of referral tracking if I were concerned about how easily it can be manipulated.

Interesting ... so how exactly would you propose to do it? (Off topic for this thread, but you're welcome to drop by the Affiliate Talk section and discuss)

So if you worked 6 days a week at a car dealership selling cars, and some guy sitting on a beach somewhere found a way to manipulate the system to have all your commission directly deposited into his own account while he swilled umbrella drinks and watched hot babes in bikinis, you'd have no problem with that?

 

[enlytend]

Secondly, you said so yourself that some companies track the referrals along the entire path and give partial credit in cases where one person was the initial referrer and another closes the deal. Apparently, Ebay didn't do this, because if they had, they would have noticed an anomalous pattern very early on.

Doesn't stand to reason they would notice anything -

BTW, first/last click attribution is still done using cookies .... but they use data from multiple points to allocate commissions. He'd still have been getting a piece of someone else's pie.

No one stole anything from anyone, because those referrers didn't actually complete a sale and never had anything to begin with.

If a sale wasn't completed, there would be no commission paid. Since the cookie was set without the visitor's knowledge and without any action (click) on their part, it's Hogan who "didn't actually complete a sale" - he just siphoned off commissions direct from the merchant in some cases and from other affiliates in others.

Staying out of jail is rarely an issue for ethical business people.

Really, these people should be angry at themselves for not being more professional businesspersons and demanding accurate tracking capabilities from their partners.

Experienced affiliates test that their sales are tracking - if not, the affiliate manager gets a call, if it's not resolved the program gets dumped.

You keep talking about more accurate, fraud-proof tracking - I'd still like to hear your detailed plan for implementing that. My invitation to have a constructive discussion on the issue in the Affiliate section still stands.

 

[DU]

You keep talking about more accurate, fraud-proof tracking - I'd still like to hear your detailed plan for implementing that. My invitation to have a constructive discussion on the issue in the Affiliate section still stands.

Cart Total $xx.xx

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Default the last.


I'm guessing that most people don't like affiliates and it's a shitty business model that yields low quality sites, low quality customer experience. I say let everyone opt out and then really opt out of 3rd party cookies altogether.

 

[Ronald Regging]

Selling phones to the elderly in Florida, reverse mortgages, there are a number of legal ways to dick people over. What about the guy in Florida I read about - owns 12 house 10 of which were paid off with sinkhole insurance "claims". He rents them out and not one neighbor ever recalls seeing any remediation - law didn't require you spend the money on remediation. Some people say clever and ingenuous. I say throw him into the biggest hole we can find.

It shouldn't always be incumbent on society to come up with lock proof solutions or air-tight laws.

No, it should. The point is that someone in power devises a plan to manipulate and profit off the masses (insurance is one of the biggest fraud scams ever). All of the systems in place are designed to concentrate wealth and power. While, I agree with you entirely about the scammers and the fraudsters who target granny... The point is, these scammers and fraudsters are SMALL POTATOES compared to the systemic fraud that is inherent in a system that is thrown together to enslave us all. Everyone gets mad at the people who figured out how to "manipulate the system," but they give no credence to the fact that the entire system is inherently fraudulent. We attack those who figured out a way to be successful given adverse conditions, instead of those who placed us in those adverse conditions.

 

[Fonzie]

He didn't devise a scheme under false pretenses to try to defraud someone.

Yes, he did... so egregiously that it inspired a test case that broke new legal ground.
If you want to see a bunk prosecution, Weev/Andrew Aurenheimer under the CFAA or Aaron Schwartz, those are examples of bunk prosecutions where technology is presented as witchcraft to scare the villagers by ambitious prosecutors who couldn't care less about right or wrong.

What this guy did was straight up fraud. Given the totals involved, he's very lucky he got 5 months and not 5 or 10 years.

 

[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...

 

[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

 

[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.