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

 

[Ronald Regging]

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?

I hate this term "manipulate the system." First of all, it's not my system, I never asked for it, and you can be damn sure that the system favors those who created it and manipulates the rest. These entities want to create systems to benefit themselves, but then get butt hurt when some intelligent person actually sits down and analyzes those systems in order to make informed decisions? Apparently, according to sdsinc, this is called insider trading?? I guess we are all just supposed to ignorantly and happily use systems that have been put in place to control us without actually researching the available information? What I see here is more a factor of a highly flawed control system, coupled with a public-private policing partnership (Fascism) and a scapegoat named Shawn Hogan. They create flawed systems and then outlaw any activity that exposes the flaws. Knowledge is criminal.

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. So, your analogy of some guy depositing my money into his bank account is not accurate. No one stole anything from anyone, because those referrers didn't actually complete a sale and never had anything to begin with. And, really, the only one they should be angry at is Ebay, for not more accurately tracking referrals. According to you, Ebay had the means to implement a more accurate tracking system, but did not. Really, these people should be angry at themselves for not being more professional businesspersons and demanding accurate tracking capabilities from their partners. I don't know about others, but I don't work for free.

 

[iowadawg]

Well, I wonder how many people set their browsers to automatically clear out all cookies?
And yes, most people see an affiliate link and either have learned what to strip from it, or they just go directly to the site.
I say, eliminate cookies completely.
See how namepros acts up then....hahahahha

 

[TheWatcher]

It will hunt you! If not now, maybe in the future.

Greedy bite back!

 

[crunchyg]

eBay wined and dined this man and flew him in private jets to get MORE and MORE traffic so their CFO could brag to investors every quarter and inflate the stock price. eBay's managers at the time were getting ridiculously high bonuses for growing affiliate traffic, so they had a direct incentive to encourage their affiliates to do shady stuff. If you've ever worked at a big company, you'll know how many rules are broken by individual employees systematically in order to get that bonus.

The wire fraud law is a catch-all used when nothing else can be applied. eBay made a scapegoat out of this dude and got away with breaking huge parts of the Internet for nearly a decade by littering it with spam just to drive their affiliate numbers.

If you want to know details, read Shawn Hogan's post from 2010. It's an eye-opener for people who are not in the loop on just how filthy that system is.

 

[DomainMagnate]

It wouldn't surprise me that the AFFILIATE managers knew, or at the very least stuck their heads in the sand and looked the other way. Very unlikely that the top brass did. I doubt anyone at eBay (other than the affiliate management team and marketing) was using affiliate performance as a KPI.

He was the top affiliate on ebay for a while. Probably by a significant margin. I'm pretty sure many at ebay knew what he was doing. According to him - they even encouraged it, as that would supposedly help show better financial reports for them.

 

[-EM-]

So they had some kind of agreement and at some point Shawn didn't respect?

 

[alien51]

I think what Ronald Reagan was arguing back there, was that if you put out a defective machine to your users, and your users exploited the defect to get what is not rightfully theirs (if the machine had no defect), then such users cannot be charged with fraud, since the ability to defraud did not come from them. The opportunity for fraud presented itself, and they took it.

I would think the scenario would be like.... you know this story..... an ATM machine in some supermarket, out of the blue, suddenly started churning out wads and wads of 100 dollar bills when all you wanted to withdraw from the machine was 50 bucks. The machine obviously was defective, and for 10 minutes, it churned out a total of 10,000 dollars.

What would you do with the money ?? You never asked for 10 grand. The machine gave it to you "for free". Ronald Reagan here is saying, you take the money and you cannot be accused with fraud, because it was not your fault that the ATM was defective.

 

[enlytend]

Except that they didn't just "accidently" deposit those commissions into his account - there was deliberate action on his part.

More like the person who rigs up a skimmer on an ATM. Does that mean the ATM's "defective?" Isn't that person showing ingenuity by figuring out details and finding an advantage that can be used to their own benefit? I don't think there are any laws on the books anywhere which are specifically worded to say "It's illegal to attach a skimmer to an ATM", and there are lots of dirty players in banking/credit industry - maybe some of them use that ATM. Does that make it OK?

What he did, did nothing for eBay's bottom line. It detracted from it, because they paid commissions on actions which did not result from bona-fide commissionable referals. The transactions would have still been there, but the fraudulent ones would have been attributed to their proper channels instead of looking like they all came from him.

 

[enlytend]

"Deliberate" would probably be the bone of contention here, in case this went to trial.

Stuffing cookies requires some technical shenanigans on the part of the cookie stuffer - as opposed to posting a normal affiliate link. Pretty much impossible to do it by accident.

All in all, he did get a pretty good deal.

 

[Fonzie]

Fraud would need proof that there was "willful intention" to take unlawful advantage.

This is the sort of internet-lawyer-theorizing that people don't realize will sink their ass in front of an impaneled jury of 6/12 people who get to decide whether they believe your bullshit or not.

What he did was not accidental and by every measure was fraudulent.

 

[crunchyg]

What he did was not accidental and by every measure was fraudulent.

That's not the issue. The issue is that his account managers at eBay encouraged all of this activity and assisted him in covering up the tracks before the auditors. That's his story, and it's actually pretty believable.

 

[Fonzie]

That's not the issue. The issue is that his account managers at eBay encouraged all of this activity and assisted him in covering up the tracks before the auditors. That's his story, and it's actually pretty believable.

Oh, whether or not he perpetrated fraudulent actions against ebay is very much 'the issue'.
Whether he was in collusion with eBay insiders, that's interesting and maybe even likely, but the annals of law are filled with people inside companies who make self-dealing arrangements with people outside the company at the expense of the company itself.

The result is they usually all get prosecuted but prosecutions are inherently selective so its possible that only he takes the bullet.

 

[enlytend]

That's not the issue. The issue is that his account managers at eBay encouraged all of this activity and assisted him in covering up the tracks before the auditors.

Let's say you work in a bank and you found a way to get away with siphoning money from certain transactions into your own account. And your manager knows you're doing it (maybe she's in on the action...)

Aren't you still robbing the bank?

 

[OhByteMe]

Hey y’all. I know this thread is ages old and I wound up here by happenstance. After reading the convo, I thought it necessary to put my two since worth in. I’ve known Hogan since he was in his very early 20s.... since the mid 90s....IRC days.... when he’s just started DPS in his La Jolla bedroom. We even dated for a minute and during that time, I learned a lot from a dude who is three years my junior. Inadvertently, I am where I am because of his inspiration.

I am a tough nut to impress. Y’all, he’s brilliant.... highly gifted; a prodigy.... and he’s never, EVER set out to do anything shady... not once. An opportunist? Absolutely. But isn’t any built from scratch entrepreneur? They discover (even if by way of a video game convo) and harness what’s not being done then, make it happen. Then, as they should, reap the bennies of it. What he was doing was unprecedented and eBay hated it. They manipulated their own TOS to wrangle in a multi-millionaire and take “back” what they believed should have been theirs. Instead of talking with Hogan and figuring out how to make a partnership of it, they did what 99% of the suits do.... get a hard on for litigation.

Hogan fought as long as he felt it was viable. In his situation, (and I have been there) I would have done the same thing. Say what you will... but out of all of you, who else is a multi-millionaire?

 

[OhByteMe]

Maybe you didn’t read but I said I saw this was an ages old thread... you get all your info based on what the media feeds you. I am speaking from experience and until you walk in his shoes, ease off. He’s a damn good dude. When you read that your friend is getting lambasted by people who hide between their kb and monitor, you’d wanna set the record straight, too; no matter how much time has passed.

peace out.

 

[-EM-]

Maybe you didn’t read but I said I saw this was an ages old thread... you get all your info based on what the media feeds you. I am speaking from experience and until you walk in his shoes, ease off. He’s a damn good dude. When you read that your friend is getting lambasted by people who hide between their kb and monitor, you’d wanna set the record straight, too; no matter how much time has passed.

peace out.

OK, will give to your friend a cookie since he likes them a lot.

 

[OhByteMe]

OK, will give to your friend a cookie since he likes them a lot.

"He" is actually a She. And how gracious you are... *rolling eyes*