The innocent victims will be mr and mrs joe public. They can do what they want but they must ensure that innocent victims have at least a chance of making an informed decision.

Funny though, that the issue may be related to the Disavow Tool.  Surely this is exactly what the tool is for, and yet +Matt Cutts makes no mention of that?  Why cant the OP buy the $5,000 domain and simply disavow all the links?

Perhaps because the Disavow Tool doesn't actually work?

Don't get me wrong, I realise this is an impossible position for a small operator to grapple with. Not only do they have no idea of the nuances of Google, their guidelines and their penalties – they have no insight into how they might determine a risky investment.

Maybe in time Google will provide an API to the domain industry so that they can provide a risk assessment figure on a particular domain between 1-100 for instance. They do that sort of thing with the web hosting environment now, so it isn't an impossibility and it'd certainly provide some amount of insight as to how risky the purchase is in the eyes of Google.

The point is that the average webmaster isn't an SEO, and has no way of telling a Penguin domain.  In fact none of us do without seeing traffic stats – I can show you countless domains with backlink profiles that should be penguined but that are not.

Matt is mixing up Penguin and Manual penalties in this video – you cant get a reconsideration request through their filters unless you have a manual penalty.

He's basically saying "we're going to punish the many for the sins of the few".

Of course a $5K domain was selected for the example, it allows Google's deception of the buying public to be glossed over. That's just cynical PR management.

Google has no right to take action that causes financial harm to innocent third parties. If they want to do it, they should make sure that consumers know what they are doing. If they tried the same trick  in the real world, there would be sanctions.

If you were going to spend $5000 on a car, would you want to make sure it was road worthy, get an independent check done it, make sure that it isn't stolen or encumbered in debt that you'd need to carry if you purchased the car?

I'd want to do the above things for a domain name and in fact I did do the background checks on domain names I've purchased on the secondary market only in the 4 months for exactly this reason, which weren't $8 domains but in the thousands of dollars.

At least Matt has said that it is possible to recover from that scenario with the appropriate documentation but Google are not going to simply remove a penalty from a domain that has been spammed into the ground because a user (new owner or existing spammer) sends in a weak reconsideration request.