The 'bud mob

In December 2012, a Canadian economics student named Samuel Louie discovered that a small circle of organized traders had caused a massive spike in both the volume and price of one of TF2's most valuable and oft-traded items. The size of the operation was so big that it had some speculating about Russian mafia involvement in the TF2 trading community, and it brought into question the system's potential for organized fraud.

In a forum post on the Steam scam reporting site SteamRep, Louie, aka "base64," brought the issue to the trading community's attention.

"It was a bright Sunday morning when I stumbled across an extremely abnormal behavior," Louie's account of his discovery began.

Louie discovered a massive spike in the trading volume of Earbuds, a pricey TF2 item used in some trades as a de facto currency. The number of units being sold had quadrupled overnight.

"I began investigating who sold such 'buds, at what prices, and at what time[s]. It turns out that there were dozens of unique traders successfully selling 'buds at 28, 29 and 30 [Crate Keys] each," wrote Louie.

Mann Co. Supply Crate Keys are flat-rate items available in unlimited quantities from Valve at a price of $2.49 each; at the time, the usual value of Earbuds was closer to 25 keys. For large quantities of them to sell for up to 30 keys each meant someone was willing to pay $10 worth of keys more than the usual trading price that day — and was unwilling to deal with cash trades, even though Earbuds are often available for around $35 directly from cash sellers.

Asked for details by Polygon on how he discovered this purchasing trend in the first place, Louie points to the Steam API. "The API allows Steam users to download other users' item inventories in a computer readable format for free," Louie says. "After gathering the data, you can rearrange the rows and columns to find meaningful statistics."

Louie's analysis of this API data suggested the suspicious-looking Earbud purchases were coming from a small group of relatively new Steam accounts, all of which appeared to be of Russian origin. The owners of these accounts were buying huge amounts of keys from Valve, then buying the Earbuds for the inflated price of 28-30 keys, and finally selling the Earbuds to someone else for real money.

When they sold the items they had purchased for real money, they were only selling them for around 700 Russian rubles, which is the equivalent of about $22. So why were they investing up to $75 per item only to turn around and sell them for just $22? The explanation varies depending on who you ask.

Many in the Steam forum community believed the Earbud bubble had something to do with money laundering, pointing to the Russian IP addresses for proof. Louie disagrees. He believes there's simply not enough people buying and selling items for real-world cash to launder any serious quantity of money that way.

"Given the number of 'grey market' cash trades on Steam, there is no way such trade volume can support a [money laundering] organization," says Louie. "The market for the PayPal-to-Steam item trade is limited. The number of buyers who check the cash trading forums each day is low, and after converting dirty [Crate Keys] to clean Earbuds, they only have a couple of hours to sell all the clean items for cash before Steam tracks them down."

Instead, Louie believes the answer to the riddle of the Earbuds is something a bit more mundane: credit card fraud.

Louie believes someone came into possession of some stolen credit card numbers, used them to purchase as many Crate Keys as they could before the cards were deactivated and then traded those keys for items they could sell via PayPal for clean money. Despite losing over two-thirds of the money they charged to the stolen credit cards, they still came out with a pile of nearly untraceable cash.

It is also possible that neither theory is correct. One of the curious side effects of the all-digital economy is that the interplay between Steam's marketplace, Paypal and the various internet service providers that connect users to each service and to one another are all private entities and, compared to proper banks, relatively unregulated. The Earbud buyers may not even have been Russian but merely spoofing Russian IPs from anywhere in the world.

The unfortunate truth is that we will likely never know who they were or what game they were playing with all those 'buds. But the fact remains: Someone manipulated the economy — albeit in a circuitous and nonsensical manner — for profit. If it happened once, it will likely happen again.