Online Gaming and Financial Crime

Where online worlds exist, virtual economies are bound to thrive. After years of iteration, they are an integral part of MMO gaming today. Complex economic systems exist to enable the flow of currency and goods between players. Long before my MMO problem began in the late 1990s, the basic constructs of a manufacturing base were introduced to online gaming. Closed economic systems in games such as Everquest eventually brought large scale supply, demand, crafting and trading to their worlds. A far more complex economy spawned from these systems and grew far beyond their virtual constraints. In Everquest’s world of Norrath, manufactured goods, services, and even player accounts became commodities with value in the real world. The virtual wealth of Norrath was even calculated as roughly equal to the 77th richest economy in the world during 2002.

With such large, complex economies in the virtual world, it is no surprise that acts of financial criminality are a serious threat to players and economies in online environments, just as in the real world.

The Bank of England describes financial crime as “any kind of criminal conduct relating to money or financial services or markets”. This includes offences involving fraud, dishonesty, misuse of financial information, handling the proceeds of crime and financing terrorism. While wizards, Orks and Warlords of Dreanor are not traditionally known for their financial acumen, virtual worlds are not entirely disconnected from the influence of economics and crime.

Theft and Bartering Systems/Fraud

Theft involves the dishonest redistribution of property belonging to another person and deprives the owner permanently of its possession. It comes in many forms including larceny, embezzlement, and other sophisticated fraud. At its most basic, theft serves as a means to obtain wealth from another individual and is just as pervasive in virtual worlds as in real economies.

Wherever goods have perceived worth, people will attempt to acquire those valuable items through various channels. Sometimes this includes theft. Direct theft between player characters, known as larceny, is a fairly infrequent occurrence in virtual worlds if it is not already supported by game systems. Games such as EvE online support this type of behaviour as part of its core game design and it is subject to the same risks and rewards pirates would encounter in the real world. Areas of EvE that encounter the highest rate of theft between players are known as lowsec and are sections of space devoid of any organised security presence. While there is an arguable parallel between player behaviour in the virtual space of lowsec and petty theft in the real world, to consider them truly comparable would be disingenuous. EvE is an online environment where piracy is a fundamental component of the game and the results of this are a core element of EvE’s economic systems.

A more common form of theft between players is the trade scam. Many players will recognise this form of criminality and the destabilising influence it can have on an economy. Bartering systems in games, as in the real world, provide an effective avenue to obtain goods and services for a fair price. Gamers utilizing these systems to engage in transactions with other parties can find themselves exposed to unscrupulous sellers, with no intention of fulfilling their contractual obligations.

It is common, even in modern multiplayer games, for this sort of nefarious practice to exist. Players purchasing items may not receive goods at the close of a trade or find that items are not as initially described . The history of MMORPGs is littered with tales of trade scams, including Runescape’s historical Black Lobster scam. The Black Lobster left duped players with worthless junk, which looks regrettably similar to an incredibly rare drop. Even more recent multiplayer games such as Diablo 3 have proven to be fertile ground for fraudsters peddling  trade scams.

Functionally, many of these incidents are similar to the type of criminal fraud that occurs across online auction websites. Victims of real life scams can also find that goods are not delivered or do not match the sellers description. Virtual and real world fraud is committed by a mixture of individuals and organized groups by subverting the normal operation of a transaction. In the physical world this can have a destabilizing impact on an economic system if left unchecked. The cost of complaints reported to the FBI Internet Crime Complaint Centre easily exceeded $700,000,000 in 2014 alone and with more than $69,000,000 attributed to online auction and undelivered good fraud, scams pose a real threat to stability and consumer confidence in all economies.

The activity of scammers reaches far beyond the internal economic structure of the MMORPG, but studios can protect virtual economies from internal threats by design. The implementation of in game bartering, communication channels and even character progressions systems all have an influence on player exposure to scammers. Players can be incentivized to engage in risky behavior by implementing steep, power based, progression or heavy grind. Restricting trade to a central nexus, such as a trading post, and setting conditions on other systems, like messaging, can arguably impinge on a scammer’s ability to interact with players and affect the wider economy.


Player to player trade fraud is clearly a substantial threat to virtual economies if left unchecked. The financial cost of a single instance of fraud between two players can, however, be insignificant in comparison to embezzlement. Embezzlement is the fraudulent conversion of another’s assets by a person in a position of trust. In the real world, during 2008, it was revealed that banker Bernie Madoff had misappropriated funds worth over $50 billion from investors. This is one of the largest cases of fraud in history and an example of embezzlement. In Madoff’s case, he acted as a hedge fund manager, soliciting money from investors, as part of a Ponzi scheme, who trusted the fund to responsibly oversee their money. In reality over $50 billion was never returned and Bernard Madoff was convicted for his actions.

In virtual economies few positions of trust are more valuable than that of the Guild Leader. Guilds act as a communal experience for players and allow them to work towards common goals. These communities regularly accumulate vast amounts of wealth, hoarding vaults full of gold, armor, and other valuable materials as a result of their combined efforts.

Theft of assets deposited in a guild bank is not rare and can be the result of embezzlement. Senior ranks within organizations, such as guild leaders, are commonly trusted with the cumulative wealth of a group of players and the misappropriation of those assets is a sore subject among gamers. The total value of a guild’s assets can include vast sums of currency, valuable materials and undistributed loot. While it is not unknown for players to raid these depositories, the actions of a single rogue leader are dwarfed by the gargantuan scale of EvE Online’s most infamous incidents of embezzlement.

EvE allows players to intentionally engage in nefarious activity, from corporate espionage to outright piracy. Some of the most extreme misappropriations of funds in gaming occurred in the EvE space sandbox, committed by players in positions of trust. Over a few short months, at the beginning of 2009, EvE was rocked by successive embezzlement scandals involving two massive player run banks. EBANK and Dynasty Bank were raided by high ranking officials within their respective institutions, resulting in losses that range into billions of ISK. It is notable that these acts had a similar result as they would in the real world. EBANK suffered huge losses of capital and with the impact to consumer confidence, they also incurred a substantial run on their funds. Customers flooded to withdraw their money, but these incidents did not collapse either organization. EBANK saw around 8.6% of its deposits simply vanish. Coupled with the pressure of a run on funds, liquidity problems, and financial uncertainty, this sort of criminal behavior can have an adverse impact on any virtual economy. The incidents in EvE are particularly troubling as stolen funds never returned to the economy through other channels.

Stolen ISK was converted into dollars by the offending parties and removed from the game entirely. Recent global financial crises, in the real world, saw huge losses appear on just a few institutions books and stalling entire financial systems. This was capable of destroying entire economies overnight. These examples demonstrate that a large enough single loss and a fragile enough system can end up costing far more to resolve than the initial loss.

Unfortunately, virtual economies do not have vast stocks of government liquidity to fall back on. Despite potentially unlimited liquidity, from dungeons that never close, developers cannot simply dump gold into a market on a whim. Changes to a game are subject to development procedures where adding new quests or currencies can take a protracted period. With clear evidence that badly controlled financial structures can collapse overnight, good forward planning is a necessity in controlling these problems. This can include the use of systems like gold sinks and trading post fees, which can act like a tax.

In the real world cash in hand trading, the sale of illicit goods and other illegal services are problematic for Governments as they can be difficult to tax. Tax is used, by governments, to provide facilities to their population, but in a virtual economy equivalent systems are used to funnel money out of player’s pockets. Gold sinks act as a virtual counterbalance to inflationary pressures by removing currency from the virtual world. By engaging in black market activity players can place additional inflationary pressure on the economic systems they use regularly.
As players circumvent measures to remove currency from the market, less gold is lost to gold sinks and the increasing volume of currency in the market can create an inflationary crescendo if left unchecked. Inflation can become detrimental to an economy when unnaturally large injections of cash have an unexpected impact on the availability of goods or the average value of a unit of currency is decreased. Resulting goods become prohibitively expensive to a significant section of players with all sorts of catastrophic results, creating an economic underclass and resulting in massive hyperinflation if not managed.

Gold farmers can particularly undermine an economy and pose a severe inflationary risk. Using an array of methods, commercial gold farmers generate considerable levels of unintended currency in the virtual world. In its simplest form, gold farmers repeatedly and systematically kill, loot, and repeat for protracted lengths of time in order to generate unintended wealth. This can result in unforeseen fluctuations across virtual economies, driving up prices as large deposits of currency come crashing into the market without any significant balancing forces in place. Recipients of this unforeseen wealth can go on to inflict massive swings in the markets behavior, driving up prices and causing low consumer confidence. Gold farmers clearly pose a major risk to online economies and can be compared to criminal counterfeiters in the real world, who introduce fake cash into an economy, generating artificial wealth.

Even with billions of gold swirling around a virtual world, a handful of credits is not particularly useful at a local market. As online connectivity grows, crypto currencies are beginning to blur the line between cash and Kinah (the virtual currency in Aion.) Virtual economies are beginning to intersect with the real world. Even without legitimate mechanisms to directly convert currencies, players have always found ways of trading virtual goods outside the game world. This black market economy was prevalent shortly after the launch of Runescape due to the prohibitive complexity of conducting business in game. As a result Runescape’s population took to message boards, informal chat and online auction sites to facilitate trades. Quickly establishing that a bunch of polygons or a collection of voxels are the basis for a viable trade, the clear divide between virtual and real world economies started to rapidly recede. The black market of virtual gaming is now as ubiquitous as the cash in hand culture that exists in most economies. The black market trade in virtual assets has reached such endemic proportions that in 2007 a World of Warcraft account was sold between players for an estimated 7,000 euros.

The activities of gold farmers is not entirely limited to illicit activity in virtual gold and while money laundering may be more commonly associated with Swiss bank accounts than the Black Lion Trading Company it is a very real threat to online gaming. As virtual economies become more complex, more opportunity exists for real life criminals to infiltrate the virtual worlds of online gaming. Money laundering is an activity that attracts little media attention in MMORPGs, but is becoming increasingly attractive to online cybercriminals ( Laundering Money Online: a review of cybercriminals’ methods Jean-Loup Richet) . As far back as 2008 cybercriminals, who used gold farmers to trade in virtual currency, were arrested after laundering $38,000,000. In this instance virtual currency was bought and sold to facilitate the transfer of illegal cash between China and Korea. MMORPGs are especially attractive to online cybercriminals as the established trade of virtual currency can be used to obscure cash and illegally acquired funds from the real world. The global, interconnected nature of the Internet, as well as the anonymous nature of online gaming, make virtual economies an attractive option when faced with the stringent anti-money laundering legislation applied to real world trades.

Closing Thoughts

What is apparent is that virtual economies face attack from a multitude of angles. Developers must be aware of the array of risks that impact a virtual economy from inside the virtual world and external actors. Occurrences of player criminality are entirely assured with the Internet’s alluring combination of opportunity, reward and anonymity. It is likely that as online gaming becomes more pervasive, the risks to virtual economies will widen further as will the pressures on support staff to protect players. Gaming studios have been making significant strides in incentivizing players to utilize systems such as PLEX and cut off the influence of organized operations that influence the economy in an uncontrolled manner. It is likely that going forward we will see tighter controls on player influenced economies as the spread of online gaming continues to grow.

Published: December 14th, 2015   |  3,294 Reads

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Edward "Screenager" Orr

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