September 29, 2016

Here’s how you pull off a multimillion-dollar e-book scam

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If you bought this, you got conned, but that's kind of on you.

If you bought this, you got conned, but that’s kind of on you.

The secret to getting rich in the bookselling business is to sell lots of books. Big house publishing and most bookstores rely on gargantuan sales from a handful of tentpole books to keep the lights on, but you can always take the opposite tack: instead of selling a lot of a few, try selling a few of a lot! Unfortunately, that’s really hard to do — unless you cheat.

Which is exactly what Valeriy Shershnyov did, racking up millions of dollars in profit by publishing trash e-books on Amazon and  gaming the site’s algorithm to sucker consumers into buying them. Zach Whittaker details how Shershnyov pulled it off over at ZDNet:

Catfishing isn’t new — it’s been well documented. Some scammers buy fake reviews, while others will try other ways to game the system.

Until now, nobody has been able to look inside at how one of these scams work — especially one that’s been so prolific, generating millions of dollars in royalties by cashing in on unwitting buyers who are tricked into thinking these ebooks have some substance.

Shershnyov was able to stay in Amazon’s shadows for two years by using his scam server conservatively so as to not raise any red flags.

What eventually gave him away weren’t customer complaints or even getting caught by the bookseller. It was good old-fashioned carelessness. He forgot to put a password on his server.

Shershnyov was able to avoid detection by judiciously employing an army of sockpuppet email addresses — so many that their sheer numbers outpaced Amazon’s attempts to shut them down. These addresses and other data on the fake e-books were discovered on the aforementioned unprotected server by the MacKeeper Security Research Center, and paint a fairly risible picture of Amazon’s security protocols.

The database contains information about 1,453 e-books, all on various esoteric topics (everything from homesteading to herbal remedies to understanding body language), and all described as “littered with spelling and grammatical mistakes.” The way Shershnyov made his money isn’t unfamiliar to anyone who’s seen The Wolf Of Wall Street or committed financial crimes; it’s essentially a “pump and dump” scheme.

Here’s how it worked: first, Shershnyov created thousands of fake email accounts to publish the fake e-books and collect royalties. He would then briefly offer the e-books up for free, loosing more fake email accounts—which he routed through proxy servers to further evade detection—to download the e-books. This would inflate the e-books’ sales ranks and push them into spots of higher visibility on Amazon’s extremely niche category lists. All of this took place without any money changing hands. Once the free download period had expired, the books would be free for purchase by any unwitting dupe hoping to educate themself with a readable text on esoterica, only to realize they had been scammed.

And while subsequent complaints from buyers would be enough to suspend or shut down the publisher account, the time window is enough to make some serious dough. How serious?

Even if that momentum is maintained over a few days for each ebook, each little boost adds up.

Once the royalties (and refunds, rarely) begin to trickle in, the transactions are recorded in Amazon’s sales and royalties reports. Shershnyov’s royalty report showed that itemized revenues from the 11 master accounts generated $2.44 million since June 2015, which is when Amazon changed the terms in which authors were paid based on the number of books loaned. (It’s not known what was made during the six months prior to that, which was when the scam began.)

The scheme also generated $83,340 in physical book sales since early March 2016.

Yikes! That’s a lot of ill-gotten gain. Since the story broke, Shershnyov has gone to ground, scrubbing his various social media profiles and company websites from existence (or, at least, mostly from existence). If he surfaces, he’ll likely face some type of legal action from Amazon, who have been very litigious when it comes to fake reviews. But, as Whittaker points out, while Shershnyov has broken Amazon’s terms of service, he hasn’t committed a crime — in this case, caveat emptor still applies.

But such is the natural state of unregulated techno-bazaars run by private monopsonies, and judging by how long Shershnyov operated in secret (and how blindingly dumb the act that brought him down was), he’s likely squandered his millions on magic beans and will be back at it in no time.

And finally, let me just conclude with a little advice for e-book buyers: To avoid getting scammed, learn to recognize the hallmarks of a fake book cover. This requires being well-versed in what actually well-designed covers look like, so the best way to get experience in that is to spend hours in bookstores and libraries and fill your house with books. Good luck!

 

 

Liam O’Brien is the Senior Sales & Marketing Manager at Melville House, and a former bookseller.

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