A jewellery company which allegedly bid on its own eBay auctions to "illegally drive up prices by as much as 20 per cent" will pay $400,000 (£204,000) in "restitution and penalties", Reuters reports.

The New York state attorney general's office said Ezra Dweck of EMH Group and his employees made over 232,000 bids on auctions in the company's Jewellery by Ezra eBay store. The store regularly held no-reserve auctions, but Dweck "ensured his employees knew of which auctions to bid at along with a predetermined price".

In around a year, these bids totalled some $5m, the attorney general's office claimed. Attorney general Andrew Cuomo said: "This scam highlights the growing vulnerability of online auction shoppers. Consumers should not have to surf with sharks."

Dweck and EMH deny the claims, and a lawyer for the company said it had agreed to cough up the cash "only to avoid an interminable, costly battle with the AG's office". He explained: "EMH and Mr Dweck did not intentionally encourage any fraudulent bidding. A buyback program, which was vetted by two attorneys, was created to give winning bidders an incentive to sell back to EMH certain items."

The attorney general's office was alerted to the alleged scam by eBay, which "helped in the investigation over several months". eBay spokeswoman Nichola Sharpe said: "We do not tolerate criminal activity and proactively assist law enforcement to prosecute any individual who may try to defraud our users."

Cuomo's office added that Dweck and EMH Group have also been "banned from the online auction industry for four years under the terms of the settlement agreed to by the parties". ®

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