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Get a new USB cable and update the drivers. Don't go through a powered hub, that will probably cause interference to the signal. Might pay to get a new USB cable extensions as well. Check out your connections first before you goto the serious stuff with the camera itself.
However, your suspicions about a faulty device and a dodgy character who sold it may be correct.
If you still have trouble after new cables and updated drivers, and it is the camera itself, ditch it and grab a new DSI II off Bintel...for $499.
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