I get email notifications whenever someone purchases one of my ebook titles at the Smashwords website, which is less common than the sales I get from Amazon. About 99.98% of my sales on Smashwords come through the third-party premium catalog (i.e., Apple, Barnes & Noble, Sony, and many others). I was happy to have a sale. And then I read the notification email. Five copies of my newest flash stories ebook in a single transaction. This was a fraudulent ebook purchase.

How did I know that this particular transaction was fraudulent?

All my direct sales through the Smashwords website are single-copy orders for an ebook. Although it’s possible to purchase multiple copies of a single ebook to gift to other Smashwords readers, five copies in a single transaction was irregular. Even more so when I don’t have a large enough fan base to send copies flying off the virtual shelves. If I did, such a transaction would be buried—and perhaps undetectable—in a lengthy sales report.

If you’re a Smashwords author, you have to read the site updates on a regular basis. Reports of credit card fraud appears from time to time when such activity impacts numerous writers, usually after the sales reports gets updated and prior to the quarterly payments being paid out.

Why would someone use a stolen credit card to buy ebooks? The two most common reasons are:

• Buying single copies of numerous ebooks to post on an illegal download website for others to read for free.
• Testing the buying limits of the stolen credit card by purchasing multiple copies of a single ebook.

After I logged into the Smashwords website and clicked on the comments link at the top of the page, I reported the transaction as being suspicious. My sales report got updated forty-eight hours later to reflect that the original transaction voided due to a fraudulent credit card payment and the $4.05 USD I earned from the sale reversed.

Traditional authors were often advised to go through their quarterly royalty statements with a fine-tooth comb and report any irregularities to their agent or publisher. Indie authors must do the same with the sales reports from the ebook retailers. Credit card fraud hurts everyone in this business.