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Fraud in Video Games and Loss of Digital Assets

Playing online games on any form of gadgets is not only a form of relaxation but it is also a mode of updating or catching up with old friends and making new ones. The virtual world is more accessible to building friends as well as cementing relationships with both old and new people in our lives because we do not have to leave the comforts of our homes or spend more time in coffee shops and bars. We find comfort and security reverting to this particular language of children where all are welcome in our virtual world and all breaks in our relationships are easily mended and healed. 

Most of us play online games such as PUBG, Minecraft, Apex Legends, Fortnite Battle Royale, Call of Duty, Mobile Legends, Dungeon Fighter, Subway Surfers, and the like. Each of these games provides us with not only entertainment but also a peculiar sense of self-worth in relation to our successful growth or progress in the game levels. We interact socially in these online universes as we share gameplay moments with the other players; we delve into enhancing the depth of our interpersonal and communal relationships through our wins and losses; and more importantly, we manage the movement of our virtual universe through our individual acceptance of our weaknesses and strengths in these games. Moreover, we realize that our participation in these games is more manageable than the living and person-to-person reality we participate in in real time. 

The financial physical set-up we knew then has moved to this virtual reality. We accept our game tokens, and tokenized game assets as valuable virtual commodities that we can use to do commercial trade, buy and sell online items, update games, and convert cash into fiat currency or physical money. We even have a new term for our virtual finances; we call these digital assets- anything that presents themselves in digital format and in digital files, which are identifiable and discoverable. These two forms of digital assets include personal and professional digital assets and game developers and gamers’ digital assets.

  1. Personal and professional digital assets refer to the gamers’ workaday world, their personal lives and professional work, and their productive outputs. These digital assets include the following: (1) written documents, emails, and audio data; (2) images such as photographs, illustrations, and logos; (3) presentations, reels, PDFs, graphics, and spreadsheets; and (4) design files of online game updates and offers of new games.
  1. Game developers’ and gamers’ digital assets include (1) in-game items – avatar, skins, clothing, accessories, equipment, and weapons; (2) tokenized digital assets -virtual land, virtual buildings; and (3) digital representation of traditional financial instruments such as title certificates of ownership of commercial and residential portions of real estate, precious metals, bonds and stocks, arts and collectibles.

However, as we go deeper into the tempting challenge to participate in this virtual universe and earn more to increase our digital assets, we open ourselves to online schemes that target both our professional and gamers digital assets. Hence, the best defense is taking the offensive using a strategy called Knowledge – Strategy. We must embrace this knowledge of the existence of fraud in digital assets and prepare to act on a strategy either to avert or to manage it.

  1. Use of the Defense of Knowledge-Strategy against Fraud in Digital Assets

1.  Knowledge in fraud involving digital assets. There are four common types of fraud in digital assets. These are (a) confidence scams or pig butchering; (b) rug pulls; (c) account takeover; and (d) market manipulation. 

1.1 Confidence scams or pig butchering involves gamers or non-gamers accessing the player-victim’s digital account and moving the funds to a wallet the former owns or controls. They get the attention of the gamers by pretending that they are representatives of a legitimate asset exchange or investment platform and then provide plausible false information of possible investment payoffs in digital assets. Since the false investment schemes appear legitimate, the gamers’ desire is stroked and the scammers persuade the former to transfer their digital assets to the scammer’s wallet. Once done, the scammers disappear along with the gamers’ digital assets. 

1.2 Strategy. To avoid being a victim to a confidence scam or pig butchering, gamers must do the following:

1.2.1 Be cautious. Be attentive to identify and isolate unsolicited or pop-up offers of investment opportunities that offer quick or high yields or returns. Avoid releasing your personal information online; keep your personal and confidential data close to you. Unless the offer is legitimate, look at all offers as scams.

1.2.2 Validate legitimacy. Ask information about the genuineness of the investment offers and the digital asset exchanges from your online friends. Be specific with the type of information you want to receive, verify if their experiences with the investment schemes and digital asset exchanges are validated by other online friends who may not belong to any online game platforms or who play the same online game and belong to the same online gamer community. The more responses you gather, the better you can check the legitimacy of these investments and exchanges. Filter this information according to the simplicity and sustainability of the investment offers.

1.2.3 Set aside quick impulsive decisions. Your digital assets are important; you can convert these to fiat currency. Avoid impulsive decisions that endanger these assets; avoid giving in to tempting investment offers and digital asset exchanges where the offer appears too-good-to-be true; and remember what appears so easy and likable may not be a sound and solid choice.

1.2.4 Use secure and simple-to-use digital platforms. Selecting a secure digital platform requires that the platform must be packed with security measures embedded in it, easy to use, flexible, compatible with various blockchain networks, legitimate, and registered and compliant with appropriate digital asset and investment regulations.

1.2.5 Protect private keys. Private keys are passwords that provide you access to and control of your digital assets. Avoid keeping screenshots of your private keys and sensitive information of your digital assets on your computers and mobile devices. Fraudsters can access these using phishing or malware.  Write your private keys down and place them in a safe place to avoid unauthorized access. These are your private keys akin to a number combination of your safety deposit box or Personal Identification Number (PIN) of your phone or your bank. Never share these to anyone.

1.2.6 Updates on common scams and red flags.  Be vigilant, be updated with the latest news on digital scams. Recognize red flags such as guaranteed high returns for higher investments, loan offers, exclusive use of digital assets, unregistered investment platforms, inability to withdraw funds, fake celebrity endorsements, social media scams, unsolicited emails, calls, and text messages, unrealistically low prices for high returns, and requests to click links and downloading apps.

2Rug pulls is a scam where game developers promote a product to attract gamers to fund it, then they abandon the product and abscond with the gamers’ investments. Most often, they leave tokens for the investors whose value is worth nothing. Generally, they do rug pulls by artificially boosting the value of the product or using malicious backdoors in contracts to make it impossible to sell or charge exorbitant trading fees or creating an unlimited new cryptocurrency.

2.1 Strategy. To avoid being a victim to rug pull schemes, gamers must do the following strategic actions:

2.1.1 Investigation and research. Gamers must be adept at these two strategic skills: investigation and research. They must allot time to investigate the game developers’ history, track record, reputation, and previous product development and release to the market. Perform a background check on these developers with other online gamers and get their feedback. Participate in community forums or fora concerning the emergence of new online games and the process of converting digital assets to fiat currency.

2.1.2 Check transparency and authenticity. Gamers must weigh the game developers’ transparency about their plans, progress, and possible investment risks concerning the games they are marketing vis-à-vis the authenticity and the trustworthiness of the game developers.

2.1.3 Interaction. The game developers’ interaction with the gamers assures open communication between them. The gamers perceive the trustworthiness of the game developers in relation to their developed products when the former get immediate feedback to their queries. Likewise, the game developers find a faster mode of enhancing their products because the gamers provide immediate constructive comments or feedback during and after the game. 

2.1.4 Investment gradation. Gamers who are immersed in a specific online game should be cautious in investing in an evolved or an emergent online game or an enhanced online game of the same genre. After a thorough background check of the game developers, gamers who desire to invest should do this slowly. It is common for gamers to be taken in with the offer of new levels of the game or with the emergence of a new game falling within a similar genre to trust the game developer and invest big. The best investment move, however, is to start small to ascertain the game developers’ legitimacy and the marketed game before investing heavily.

1.1.5 Presence of red flags. Always be wary of deviations from the predictive flow of the online game. These red flags include unrealistic promises of high earnings, easy conversion to fiat currency, lack of transparency, and sudden changes in game development.

3. Account Takeover. Malicious software or Malware works insidiously; it enters the computer and the mobile phones suddenly and infects the gamers devices and opens an account takeover for the attackers, who then steal the gamers’ digital assets, cryptocurrency wallets, and private keys. Malware comes in modes such as phishing, social engineering, credential stuffing, and malware attacks. 

3.1 Phishing involves tricks which attackers use to entice the gamers to reveal their information through fake login pages or emails from someone whom the gamers know.

3.2 Credential stuffing refers to stolen or leaked credentials from one website or online game platform in order to access other website accounts.

3.3 Malware attacks involve the entry and installation of malicious software in the computers or mobile devices of the gamers. Currently, these three are the common types of malware which destroy the gamers’ play histories and attack their digital assets.:

3.3.1 Ransomware encrypts the gamers’ data and demands a ransom fee for its decryption. When gamers fail to pay the ransom, they lose their data and digital assets.

3.3.2 Fileless Malware modifies the operating system of the gamers’ devices and affects their memory. It manipulates legitimate programs within the system leading to unauthorized access, data theft, or worse, system control.

3.3.3 Spyware operates stealthily and gains access to the gamers’ passwords, subscriptions, and payment information.

3.4 Strategy. To avert the gamers’ loss of their digital asset accounts, game developers and gamers should note the following strategic actions:

3.4.1 Avoid downloading apps from unknown and unverified sources.

3.4.2 Use strong and unique passwords to prevent attacks.

3.4.3 Frequently change passwords but avoid using your significant dates such as birthdays and anniversary dates, telephone numbers, or business or home addresses. 

3.4.4 Regularly check for compromised credentials.

3.4.5 Set limits for login attempts. Once the limit is reached, the gadget or the application automatically freezes.

3.4.6 Set a time delay for change of online password.

3.4.7 Activate the notification settings for account changes.

3.4.8 Activate two-factor authentication (2FA).

3.4.9 Monitor and flag suspicious activities.

3.4.10 Regularly update applications, games, and software systems.

3.4.11 Prioritize defense strategies.

4. Market Manipulation. This fraudulent scheme involves the intentional manipulation of the online game market or the in-game items or in-game tools to artificially inflate their value or create an increase or decrease of their value or employ a sudden surge of demand and supply thereby marking these items or tools as scarce and creating a pseudo felt need to level up in the game. 

Market manipulation may come in various forms, such as (a) spreading online rumors or false information in the gamers’ online community; (b) creating a false surge of demand and supply; or (c) engaging in insider trading. 

When online gamer-fraudsters use these market manipulation tactics, they unfortunately form an online bubble where the imbalance of a bloated demand for specific online games rise and the game developers’ inability to supply the demand raises the selling of these game and its in-game items and in-game tools to outrageously high prices, which do not reflect their true value. Likewise, when the gamer-fraudsters participate in insider trading they possess knowledge of upcoming game updates, which give them an upper hand and provide them with an unfair advantage; they then sell their games at a higher price without suffering any loss from the sale and leave the buyer or new owner with nothing but a false expectation of an update.

4.1 Strategy. To prevent being an unwilling participant in a fraudulent scheme like market manipulation resulting to a loss of your digital assets, gamers together with the game developers must protect themselves by using these strategic actions:

4.1.1 Transparency. Game developers must guarantee transparency in both mechanics and guidelines for trading, so the gamers are assured of the legitimacy of the economy of the game. Any deviations from the given are the gamers’ red flag and they can have their defenses in place to thwart any fraudulent schemes.

4.1.2 Monitoring. Game developers must always be vigilant and consistently monitor their games in the virtual world. To protect their gamers and ensure their loyalty and continued patronage, the game developers must implement strong and safe monitoring systems that will immediately detect unusual trading patterns, erratic item prices offered or sold, and unauthorized access to accounts and transactions.

4.1.3 Regulatory Compliance. Gamers must be aware of the latest updates on laws, rules, and regulations governing virtual economies and digital asset trading. Avoid complacency and expect the game developers to consistently post these updates on their websites or provide these on the games, rather be online mature to look at these updates and educate yourselves to avoid any misappreciation of the rules of the online games, especially those that deal with digital asset trading.

4.1.4 Controlling limited supply. Game developers, through their consistent monitoring of their games, should establish clear and reasonable pricing structures to avoid any artificial erratic bubbles of virtual item prices. Should the gamers see a sudden drop or rise of these item prices, they must flag this and inform the game developers immediately. Or better yet, avoid gobbling up these too-good-to-be true offers and wait for the prices to settle down. 

B.  Recovery of Lost Digital Assets

There is a process to follow to recover lost digital assets.  These include the following: (1) Knowledge of consumer protection laws; (2) Prompt report of the loss; and (3) Understanding the scammer.

  1. Knowledge of consumer protection laws. Game developers and game studios must embed in their games specific information that raises the gamers’ awareness of current online scams and online frauds that target their games vis-a-vis the common strategies to ward these scammers off.  In the United States, two laws are enforced: (a) the Consumer Financial Protection Bureau (CFPB), which specifically provides protection to gamers and game developers and (b) the Electronic Fund Transfer Act (EFTA) monitors and protects gamers and game developers from frauds, financial loses, and unauthorized transactions in relation to banking and payment regarding the storage and exchange of valuable digital assets in games.  
  1. Prompt reporting of loss. Game studios and game developers must encourage their gamers’ prompt reporting of their digital losses or suspicious attacks of their personal data, e-wallets, and game updates through an established method of reporting mechanisms which are real-time and data-driven. It is equally important to work closely with law enforcement agencies and with the online community to stop the proliferation of online scammers because working alone is no longer an option. 

2.1 Strategy. To recover the loss of your digital assets, use these strategic actions:

2.1.1 File a formal written report to the game studio stating the occurrence of the unexplained loss of digital assets and requesting the restoration of these assets. Cite the specific provisions of the applicable consumer protection laws. 

2.1.2 In the event the game studio refuses to investigate or to restore your loss despite a favorable positive finding of its investigation, inform the game studio formally that you are escalating the dispute to the consumer protection authorities such as the Consumer Financial Protection Bureau (CFPB) and the Electronic Fund Transfer Act (EFTA).

2.1.3 Be persistent with your dispute, provide the necessary, material, and relevant information to ensure a successful recovery.

3. Understanding the scammer. Generally, there is a pattern to an online game scammer. The scammer’s goal is to create trust with the gamers for easy access to the latter’s sensitive information. mode of payment, and digital assets.  Since this is an ongoing unlawful theft of digital assets, scammers consistently show the following behavior:

3.1 Repetition of same or similar tactics which includes account hacking, chargeback fraud, virtual asset fraud, and bubble creation. Fraudsters often offer unrealistic returns with no risks involved; likewise, they use complicated technical language to mislead the gamers and rush them into an unwise decision of investing their digital assets to them.

3.2 Exploitation of gamers’ vulnerabilities such as a lack and/or weak security measures, lack of gamer skills, and the innocence and gullibility of young gamers. Online game scammers are wary of targeting or exploiting seasoned or veteran gamers because the latter can easily spot their suspicious activities; seasoned players immediately sound the alarm of their presence in the online community or report them to the gaming studios or send a report to the consumer protection authorities. 

3.3 Offer of tempting lures to catch the gamers’ attention and voracious online game appetites. These lures include easy investment scams, promises of guaranteed return of investments (ROI), and offers of free virtual currency and rare online game items.

3.4 Exploitation of the anonymity of blockchain transactions to perform their fraudulent activities.  A blockchain transaction refers to gamers transferring their digital assets to another, which includes the amount, the destination of the funds, and a signature to prove the authenticity and legitimacy of the transaction. 

3.5 Strategy

3.5.1 Use strong and unique passwords to protect your email accounts and enable a two-factor authentication (2FA) to these accounts to ward off unauthorized access.

3.5.2 Change your passwords regularly, preferably after every two months of use.

3.5.3 Flag emails from unidentified senders and send them to spam. View the subject of the content in the spam folder but do not open these. Once done, delete these immediately. Clean your trash regularly.

3.5.4 Be vigilant in accepting friend requests in your social media accounts. When possible, call the requester and ask if they made this request.

3.5.5 Avoid clicking links, responding to phishing emails, smishing or fake texts, and answering vishing or voice calls from unknown entities. Delete these immediately.

3.5.6 Whenever possible, encrypt your files to prevent unauthorized access to sensitive personal information and digital assets.

3.5.7 Use hardware wallets for offline storage. Move your digital assets of an offline external hard drive or storage device. 

The best defense is offense. There is definitely no foolproof online game; the game developers create these games not only for the gamers’ entertainment and the affirmation of their creative output but also for both parties to profit. As it is, both are open to online scammers aiming to appropriate the gamers’ digital assets to themselves while also nibbling away the reputation and stability of the game, which results in a decrease in the number of gamers patronizing it. 

Hence, to thwart these online villains and the threats they pose, both gamers and game developers must work together and have concrete defense strategies on hand. These include a deep-seated vigilance to monitor their accounts, their games, and their digital assets, to recognize online scams, to use strong and unique passwords and two-factor authentication (2FA), to regularly update both software and operating systems, and to report to the game studio any suspicious activities. 

The online community is similar to a real-time community. Likewise, the gamers’ online finances must be safeguarded well to avoid any loss since these assets can cross the virtual world to the real world and be converted into negotiable instruments.

C.  Contact a Video Game Fraud Lawyer

When you’re a victim of video game fraud, you need a qualified and experienced attorney on your side. Contact the experienced lawyers at today for a free consultation. We don’t charge a penny unless you win!

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