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Whenever I hear about people spending outrageous amounts of money for something that should be really cheap, the first explanation that springs to mind is money laundering.



Yes, absolutely. This is a cornerstone to a lot of p2p markets. You take a % of the cut and let money launderers buy and sell between themselves via your market.

For example, let’s say I want to sell x$ illegal goods. I just tell the buyer to bid up my 1 million virtual cat and I’ll transfer the goods to you. The transaction goes unnoticed. What’s even better, the buyer can sell the cat at a lost and recover some Cash.

What’s more the money launderers buy and sell the virtual pets so as so mix up their money in the market.

There was a huge art deal recently. You have to wonder how much of the money laundering factored into the purchase of Salvator mundi.

It goes even further. Participants in the market know that money laundering is taking place and rely on it for profit. They bid up the virtual goods.

Of course, there is also a pyramid scheme / hot potato at play as well. Last one holding the bag loses.

And yeah, there are the naive folks whose out there with their money in not a understanding what’s really going on.

Valve profits from this quite nicely, and second life. Lots of these games with virtual goods.


This sounds plausible, but it seems like speculation. Given two hypotheses: "the Valve hat economy is used for money laundering" and "many Valve gamers are willing to spend money on hats", I'm more inclined to believe the latter without more solid evidence.


Also the only way to cash out money out of steam is by selling games on third party websites.


Or selling accounts. (See how WoW account sales are/were common.)


It's been years since I was involved in the hat economy (TF2, way back when keys were 2.33 ref, to be specific), but the two hypotheses aren't exclusive. Valve gamers are willing to spend money on hats, but someone using the economy to launder money is willing to take a percentage loss, so it was cheaper to buy keys (the default currency) with Paypal from people who had bought them Valve using stolen CCs than from Valve directly. If I remember correctly, the official price was $2.50 per key, but they could be bought on forums or subreddits for around $2/each.

Again, it's been a while and not a topic I actively tried to remember, so please don't take this as necessarily authoritative.


but this doesn't make sense at all because you can just send eth to someone else relatively anonymously.


the point is that the game can be used to give the trading a "legitimate" purpose


I have a different hypothesis: easy money.

There's plenty of people out there with stockpiles of ethereum that they mined early on, or bought during the pre-sale in 2014. For them, it's just virtual tokens. It's not like they're using any hard-earned cash from the real world to buy virtual kitties.


I would be extremely surprised if this was the case. If I found a hoard of gold coins in the basement I would still appreciate their very real monetary value despite not having invested any real time, effort or money into obtaining them.


Here's your proof [1] - 250 ETH, or almost $100K. I must say that the kitty in question is pretty cool [2].

You're free to believe in what you want to believe, but to me it's pretty obvious: the $3M that circulated in the CryptoKitties over the last 5 days is real, and certainly not from people laundering money.

You can also hang out with the devs and other hard core users (investors?) on CryptoKitties' Discord channel [3]. Some surreal but fascinating conversations.

ps: to offer a different perspective: I bought a Gen0 cat on Sat for fun; today the cheapest price is 3x. Not sure the future liquidity of the kitty marketplace (particularly if it crashes and burn, like Pokemon Go, which is very likely), but some folks are rushing to it like an ICO boom.

[1] https://twitter.com/nicksdjohnson/status/937596285917548544

[2] https://www.cryptokitties.co/kitty/101

[3] https://discordapp.com/channels/387021283503636500/387024670...


Thanks for the links. Its not that I necessarily believe its money laundering I just have such a hard time wrapping my head around someone essentially throwing money out the window since ETH can be so easily turned into USD.

I would have the same reaction if I learned someone was trading Apple Stock or other non-cash asset for these kitties.


I understand this position, but when the money involved is crypto -- which is inherently highly "launderable" -- I'm not so sure. Why run your money through a cat when you could run it through a mixer?


If you use the proceeds of your online drug business to buy virtual cats from yourself, you can tell anybody who asks how you made your money that you made it selling virtual cats on the internet. And back it up with documentary evidence. That's better than simple avoidance of direct ties between your money and illegal activity.


Because your money is guilty till proven innocent. If you can’t show the legit origin for the money, they will take it.

I disagree with the policy, but that’s how it works. Using a mixer makes it more difficult to explain the source of the money, it makes things worse not better.


Plausble deniability?


Maybe in some cases, but it seems like whenever anything tickles people's fancy hard enough, they naturally piss money away. And much more if it's a word-of-mouth fad.


There's the greater fools theory. People are happy to spend $100k on something that they believe they can turn around and resell for $150k in a month.

There's also an anchor effect from loss aversion. If I bought a crypto-cat for 1 Ether, and then Ether price increase by 300%, I might refuse to sell the crypto-cat for less than 1 Ether, even though there's no intrinsic reason for my cat to appreciate at the same rate as the base currency.


"Over $1M" in total is not indicative of notable amounts of money laundering.


Maybe so, but we're just talking about virtual cats though and one game that was just launched. So it's a pretty good hint at least.


On the flip side people regularly spend tends of thousands of dollars on mobile games. Terrible ones at that. People spend lots of money on stupid stuff.


that's silly, this is no different than on the spot created virtual currencies in Candy Crush or any mobile game

any marginally successful one of those is going to rake in tens of millions of dollars via those transactions

the only difference here is the technology used is perfectly fungible

when that perfectly fungible technology powers the entire ecosystem, it isn't improbable that one third party application will catch on.




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