Practical Fraud Prevention

Chapter 9. Digital Goods and Cryptocurrency Fraud

Living in a material world…

Madonna¹

The term digital goods covers a wide range of items, from streaming or software subscriptions and services to ticketing, gaming, gambling, gift cards, and more. Although cryptocurrency is a separate phenomenon with its own rules and regulations, we are addressing all of these diverse industries in this chapter because, from the perspective of fraudsters and fraud fighters, the similarities are far greater than the differences.

A fraudster looks at both digital goods and cryptocurrency in the same way, exploiting the vulnerabilities common to each. The idea is to translate a stolen payment account or card into goods or cash (gift cards and cryptocurrency essentially being forms of cash), maximizing the amount spent, and flipping the goods as quickly as possible. With digital goods, that’s very fast indeed.

To do this, fraudsters focusing on digital goods and/or cryptocurrency tend to utilize the methods we talked about so far, such as IP masking and mules. Mules in particular are popular in cryptocurrency fraud because they can provide their true IDs or, if they’re aware that something illegitimate is going on and they don’t mind, they can use stolen IDs provided for them by the fraudster but with their own headshot. This is important because cryptocurrency is now regulated, so many of the Know Your Customer (KYC) types of considerations apply here just as they do with other currencies. ...