State Shuts Down Penny Auction Site

SEATTLE (CN) - An auction website used shill bids to drive up prices and will be shut down and pay refunds, the Washington attorney general says in a lawsuit and consent decree. Lionheart Mint dba PennyBiddr and its owner-operator Kanwal Preet Singh used a software program to place fake bids, inflate the number of bids required to win an auction and let the software program "win" the penny auction so the company could keep the item and pocket the money spent by real bidders, the state says.

A penny auction bidder pays to bid in a timed auction in which each bid increases the amount of time remaining in the auction. When the auction closes, whoever who placed the last bid must pay the final price of the item in addition to whatever they spent on bids.

"Here's my 2 cents on penny auctions," Assistant Attorney General Jake Bernstein said in a statement. "They're essentially a form of entertainment in which you to pay to play. In a legal auction, a consumer may be able to buy an expensive item for an incredibly low price. But if you don't know how these auctions work, or you find it difficult to stick to a spending limit, you can easily be suckered out of lots of money. Worse, some site owners collude with friends or even use an illegal software code to place bogus bids."

Singh and Lionheart Mint will pay about $6,200 in customer refunds through PayPal and $8,000 in costs and attorney's fees and Singh is prohibited from operating a penny auction site to generate income, according to the consent decree in King County Court.

The state suspended payment of $25,000 in civil penalties if the defendants comply with the terms of the settlement.

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