Another figure in the coupon counterfeiting game has been arrested, and it’s such a strange tale that it’s not easy to explain to people unfamiliar with the darker side of the internet.
Consider this: In addition to the World Wide Web that you’re using now, the public web that anyone can easily access, there’s another web. Known as the Dark Web or Darknet, this web isn’t something you or I will stumble across while browsing the web with Firefox, Internet Explorer, or Chrome. It’s hidden from the public and must be accessed with specific software or anonymity clients (Tor.) Once a user opens the client, he or she can begin browsing the dark web and its services and sites that are hidden from view when browsing the web traditionally.
One of the largest marketplaces on the dark web was called Silk Road. It was an Amazon-like site where people could anonymously browse for, buy, sell, rate and review products of a darker nature — drugs, weapons, and other items that are illegal to sell. Dark web buyers and sellers use Bitcoins for their transactions so no physical currency is exchanged. This Gawker article profiled Silk Road in its heyday if you are interested in reading more about it.
In 2013. the FBI shut down Silk Road and arrested its founder. Wired has a fascinating story about this as well — it reads like a true-crime novel. How do you find a hidden marketplace built on anonymity and being accessed by users anonymously? Even when it appears “no one’s doing anything” about illegal activity, the truth is that the wheels of justice often turn very slowly.
Today, Silk Road’s founder was sentenced to life in prison. And now, with that background, you’ll be able to understand the details of yesterday’s counterfeit coupon bust.
A counterfeit coupon seller known as “ThePurpleLotus” sold counterfeit coupons on Silk Road. After Silk Road was busted, a second Silk Road 2.0 was set up by others. Purple Lotus continued selling counterfeits there, and that site, too, was taken down. But, as is the nature of the dark web, other marketplace sites continued to pop up in its place. Agora is currently the largest marketplace on the dark web, and counterfeit coupons continued to be sold under the Lotus moniker.
Yesterday, the man behind “ThePurpleLotus” screen name was arrested for creating and selling counterfeit coupons. Several of my readers have sent me stories over the last 24 hours asking for help understanding exactly how and where the counterfeits were sold. While there have been quite a few articles written about the arrest, Wired magazine’s new article on the Purple Lotus’ takedown is one of the easiest to understand:
The Dark Web has become notorious for the sale of drugs, stolen financial data, and even guns, but in their latest crackdown, the feds are dragging another unlikely cash cow of the contraband underground into the spotlight: counterfeit coupons. For one fraudster, those fakes were good for tens of millions of dollars worth of every consumer product from kitty litter to Clif bars to condoms.
The FBI accuses Wattigney of doing $1 million in total damage to the affected companies—which range from Sony to Crest to Kraft. But Jane Beauchamp, president of the fraud consultancy Brand Technologies, says she’s been tracking ThePurpleLotus for more than a year on the Dark Web, and assesses the damages to be “significantly” higher. “I’d estimate that the consumer packaged goods industry experienced tens of millions of dollars of counterfeit coupon damages,” from just ThePurpleLotus’s sales, Beauchamp says.
In addition to those packages of pre-made coupons, ThePurpleLotus also offered a $200 package of “coupon-making lessons.” That digital guide to counterfeiting included a powerpoint presentation showing the step-by-step process of coupon fraud, from generating bar codes to copying legitimate-looking logos and watermarks.
With the bust, one of Purple Lotus’ coupon creation videos has been released on YouTube. Consider this an example of what not to do — but also note how very little time it took to create brand-new, working counterfeit coupons:
Taking the counterfeiting one step further, Purple Lotus also created an automatic coupon-generating service. Choose what product you want a coupon for, enter the amount you want it for, and bam — that coupon would appear on your screen with a Lotus watermark. If you liked what you saw, you could pay a fee and receive the printable coupon, minus the watermark.
According to the court filing, Purple Lotus’ earnings from the counterfeit coupon sales were nearly $75,000.
You can read the Justice Department’s full bill of information regarding this case online at this link. Coupons in the News also spoke to some of the people involved in the case, and that story is here.
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