« MMO Sex please we’re Avatars | Main | More Immersive Immersion »

Jun 21, 2004

Comments

1.

Here is an e-mail which was sent out to all GOM members.

---------------------------------
Ok, here's what's going on.

Sunday afternoon, a new client purchased over $3000.00 worth of ISK and SWG credits. He nagged us for delivery, and then immediately after receiving the goods, reversed the charges claiming we never delivered. He was making use of a well-known loophole in PayPal's chargeback policy that favours the purchasers of "intangible goods" over the sellers. He explained this to us in an email he sent today. He claims the ISK and credits he stole are "payment" for the lesson he tought us.

This incident has been reported to the FBI Internet Fraud Department, and tomorrow to the RCMP. We have compiled as much information as possible on this person, including his name, address, phone number, email addresses and the IPs used to log into our site. All of this information will be turned over to the authorities.

Now, the complaints registered with the FBI were two-fold. The first was about this person who scammed us. The second was about PayPal. PayPal's policy rewarding the perpetrators of this type of fraud not only makes it easy, it actually *encourages* it. Please take this as a lesson learned the hard way. If you deal in any "intangible goods", be it downloaded software, music, documents and data, or game currencies or items, PayPal is *not* your friend.

We are currently providing as detailed information as possible to the PayPal fraud department, but we're not holding out hope for a favourable settlement. Our PayPal representative has made it very clear that we can provide any evidence we want, but that it doesn't matter - we deal in intangible goods and hence have no rights.

*** NOTE: Any employees of CCP or Sony Online Entertainment (or any other game publisher for that matter) are encouraged to contact us. We know we violate your user agreement - we just want this behaviour to stop! It hurts everyone, *including* your paying clients! I know you have detailed transaction records proving exactly when and where those transactions were made. This information could help get the ball rolling. Linden Lab has worked with this. So can you! ***

Now we have always called ourselves a "secure way to trade". By that we mean that we *actually* provide seller protection because *we* guaranty delivery. We are holding true to this policy, and absorbing this $3000.00 loss. This $3000.00 is approximately 70% of our profits since January. We didn't build GOM to make us rich. We built it as an experiment in digital world economies, and to provide people like you with a cheaper and more efficient alternative to eBay. We cannot afford to be tought another lesson.

Until further notice, all trading in *all* games except Second Life is halted. All currency you may have on deposit with us will be returned to you at a mutually convenient time. Please request a withdrawal and contact either Tom or myself to schedule it. PayPal withdrawals will also be made on our regular sporadic schedule.

Linden Lab (creators of Second Life) is the only publisher to support our efforts. Second Life business will continue as usual. Please accept my apologies for this delay. Linden Lab has worked with us before on this type of fraud, and we're confident that our future with them will be long, happy and prosperous for all. :)

Keep yer stick on the ice.

Jamie Hale
President - Gaming Open Market Corp.
[email protected]

2.

Very interesting case. Note that the fraudster did not end up a single real world dollar richer, he only charged back what he paid. So effectively, what he "stole" was "only" virtual currency. And whether that is a crime or not depends totally on the question of whether virtual currency can be a real life property. At which point we all have to go back two threads and read Richard Bartle's paper on the pitfalls of virtual property.

I don't see how you can blame PayPal though. Either they allow chargebacks in trades of intangible goods, or they don't. As they do allow it, fraud is possible by chargebacks. If they wouldn't allow it, fraud would happen the other way round, with the seller never delivering the intangible goods. The current policy favors the buyer over the seller, which I would consider the better of the two options. Unless you involve some sort of clearing house, I don't see how they could implement a policy that would prevent fraud.

3.

Julian's blog entry is probably a fair example of the typical exchange between PayPal and every hapless virtual trader.

4.

Few things.

There's a new message up on GOM's home page to the same effect as the above-posted e-mail.

I love that exchange on Julian's blog. Besides illustrating the difficulties inherent in this whole mess it reminds me of every conversation I've had with customer service. (i.e. The time I called the credit card company trying to learn why I was being assessed a penalty for paying the amount their automated phone system said I owed. Or the time I sought Alienware's assistance in fixing the computer I bought from them.)

5.

tobold> I don't see how you can blame PayPal though. Either they allow chargebacks in trades of intangible goods, or they don't. As they do allow it, fraud is possible by chargebacks. If they wouldn't allow it, fraud would happen the other way round, with the seller never delivering the intangible goods. The current policy favors the buyer over the seller, which I would consider the better of the two options. Unless you involve some sort of clearing house, I don't see how they could implement a policy that would prevent fraud.

The digital world operators do know whether the delivery happened and a standard could easily be established to allow delivery reporting. Or, a digital world could decide to act like an issuing bank and say, for example, that the maximum liability in digital currency is L$50. In other words, if a chargeback happens, it is treated as fraud, the person who sold their digital currency gets most of their currency refunded and the user who made the chargeback is suspended or banned from the world.

Obviously, this would require cooperation between the digital world operators and the trading sites, which comes back to one of my core disagreement with Bartle et al. Since world creators can't stop commodification -- yes, they *may* be able to reduce it, but there is no evidence that they can stop it -- there is tremendous harm by