The dark corners of the internet offers lots of illicit things for sale: drugs, weapons, malwar and even counterfeit coupons. The web's most notorious coupon counterfeiter, known as ThePurpleLotus, is now behind bars after the FBI raided his house on Thursday.
Indicted in the scheme is 30-year old Beauregard Wattigney, of Louisiana, on charges of wire fraud and trademark counterfeiting. He operated on now-busted Dark Web marketplaces Silk Road and Silk Road 2.
Wattigney sold packages of coupons for almost every consumer product imaginable including beauty products, alcohol, cigarettes, video games, cleaning supplies, and consumer electronics. The knock-off coupons offered discounts just as effective as the real thing and were sold in packages that cost customers around $25. Like most underground items on the web, payment was to be made in bitcoin. The $25 packages contained hundreds of dollars in savings.
The FBI said that Wattigney did just shy of $1 million in total damage to the affected companies, who are big name corporations like Proctor and Gamble, Pepsi and Kraft. While scaremonger Jane Beauchamp, president of the fraud consultancy Brand Technologies (who obviously have a vested interest in inflating the total to get more business for themselves), says the damages are “significantly” higher, given the small size of the total possible damage this was more a hobby industry than big business.
For comparison, if the total damage was $1 million in counterfeit coupons, that means sales would have been something close to $100,000. Silk Road's drug sellers are estimated to have conducted over $2.3 billion in sales during the life of the marketplace.
A big fish this is not.
What it does demonstrate is that coupon fraud remains easy.
“We have the best, most consistent, most precise, most scannable, most accepted, most diverse collection of coupons anywhere. They are not on anyone’s ban list. They are not blacklisted anywhere,” states PurpleLotus’s advertisement on Agora, the largest currently active black market on the Dark Net. “They will save you a ton of money…If you use the coupons for the everyday things that you normally buy, the golden goose will continue to lay golden eggs.”
“Every day new codes get added to the blacklist,” said Beauchamp. But new fake coupons are being made at a faster pace than ever, she says. “The problem is that it’s a blacklist, not a whitelist. And that affects the whole industry.”
The Coupon Information Corporation, which maintains one list of known fraudulent coupons on behalf of the retail industry, counters that other security measures beyond a blacklist exist to combat coupon fraud. But Bud Miller, the president of the CIC, said “if you make a high quality counterfeit coupon, from time to time it can be passed at the cash register. The industry is working on a number of solutions, from better identification, to what we've done, to prosecutions.”
Wattigney wouldn’t be the first to be caught faking coupons at large scale. Two years ago, 25-year-old Lucas Henderson was given three years of supervised release and forced to pay $900,000 in restitution for his own coupon fraud scheme. Henderson, a Lubbock, Texas student distributed his self-made coupons through Web forums such as 4Chan.
For American consumers who frequent coupon clipping sites, its important to know the source of the coupon. Trust big, reputable sites and shy away from small, crude looking ones that promise discounts seemingly too good to be true. Also stay away from people offering coupons in private messages or mass emails - these are often fakes and could land you in trouble at the register.