There is a freeware application available that can test USB flash drives and tell you their true capacity. Basically, it puts information onto the drive, a Gigabyte at a time, up to what the drive says is its capacity. Then it reads the information back off. It reports how much information was actually able to be read from the drive, giving you evidence of the true size of the drive. So our hypothetical 32GB drive, which is actually a 4GB drive, will be able to have approximately 3.9GB of data read back- and the program will report that 28GB of your data was lost.
You can read a Google translation of the English version of the site of the H2testw program's creator, or go to the original site to download this program if you have a suspect USB flash drive.
SOSFAKEFLASH.com has a list they update regularly of sites and of eBay sellers who have sold faked USB flash drives. They update their list regularly, and a new version was released May 1st 2009. They also offer advice to people who bought a faked flash drive from an eBay seller on how to report their situation, and how to respond to blackmail if the seller refuses to refund your money unless you give them good feedback.
They also have links to a tutorial on how to try to fix your counterfeit flash drive so it shows its true memory capacity.
From stories on the SOSFAKEFLASH.com site and reading forum posts about people who are asking about whether the 128GB drives exist, or how to reclaim the mysteriously vanished capacity of their newly purchased 128 GB drive, this has been going on large scale for the last five to six months. The SOSFAKEFLASH.com site is eagerly soliciting information from people who were tricked into buying a faked capacity drive. If you are suspicious, or know you were burned, share your information with them to help others from being
tricked.
Other than the new Kingston 128GB drive above, the only 128 GB USB drives that are actually available are solid state drives, not USB flash drives. They also cost a good deal more than the $35 to $100 the faked drives are priced at, and by no means resemble a USB thumb drive.
If it seems too good a bargain to be true- it very likely is a fake. At the very least, check the manufacturer's site to see if they make such a drive- and what it should look like.