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It sounds like you're the victim of typosquatting...a variation of cybersquatting. It is not entirely illegal depending on what they're using it for. From what you've posted, they're selling the exact same product. Does the website look exactly like yours? Are they trying to deceive your customers into thinking they're purchasing from you?
There is no cut and dry answer to this question. Do a search for typosquatting and you'll find tons of resources that can help you out.
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Skype: Triplexprint
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