I love the wet check idea! Personally, I always humor them and see if they'll send me the check. I have a nice stack of them that I'm collecting. Once I get active again on ebay this week I'm sure I'll see more.
My goal is to annoy and cost them as much money as possible (in the overnight postage). Sooner or later they'll spend so much on this that they won't be making much.
As far as what you can do legally? NOTHING. Unless you've actually lost the $$, the authorities don't really care as no crime has taken place. I got a check written on what looked to be a car dealerships account, so I called them. The number on the check was no good, so I looked them up online. They were also starting a collection of fake checks. They tried to go to the FBI, but no dice. They hadn't lost any money, and the FBI is only interested in large dollar amount losses apparently. These small check guys (as in 4 digit max) aren't worth their time apparently.
Just have fun with the guy. I enjoy it.
