The Decline and Fall of an Ultra Rich Online Gaming Empire

For a long time, maybe a year and a half, the game was pretty much what remained of Brock Pierce’s life: He would wake up, sit down at his computer, log in, and play. Thirteen dollars a month bought him around-the-clock access to this imaginary world, a place of perilous dungeons and enchanted woods where online gamers came together by the thousands in a never-ending quest for treasure. Some assumed the roles of dwarves or lizard-people; some were humans. Pierce would play for hours—as long as 24 hours without a break—slaying monsters, wresting precious coins and jewels and magic weapons from their corpses. Later, he added extra computers to his setup and taught himself to play as many as six characters at once, one per machine. After that he’d sit there in the glow of half a dozen monitors, hands flitting from keyboard to keyboard, eyes shifting from screen to screen, yet still, somehow, not finding time enough for all there was to accomplish in the game.

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“There were times I came outside,” he says, “and the sun hurt.”

Pierce was 19 at the time and hardly the first young American male to step away from the sometimes painful light of reality for an extended, free-falling obsession with an online fantasy videogame. But it’s safe to say that the reality he was shrinking from in 2000 was not that of a typical teen. At 16, Pierce had retired from a career as a modestly successful Hollywood child actor; by 18 he was a dazzlingly successful dotcom entrepreneur, living large on a $250,000 executive salary and the promise of millions more in post-IPO equity. By his 19th birthday he had lost it all. Pierce’s high-profile startup had flamed out in a blaze of scandal that included accusations of sex with minors, and he and his cofounders had found it prudent to leave the US. He lived now in a rented house in a strange country, on the dwindling remains of a crash-ravaged stock portfolio.

And he played the game. You could call it solace: a way to fill the emptiness of failure with the curiously convincing sense of purpose that comes from steadily amassing a make-believe digital fortune in magic staves and platinum coins. But in time it would be more than that. Much more. Soon enough, amid the daily grind of his obsession, he would see in the game itself a way out of the bleak hole he had fallen into. He would take a clear-eyed, calculating look at what he and his fellow players had been doing all those months—at the countless hours they’d given over to the pursuit of purely virtual but implacably scarce commodities—and he would recognize it not just for the underexploited form of productivity it was but for the highly profitable commercial enterprise it might sustain. He would spend the next half decade bringing that business to life. And though some people would hate what he was building, and others would want to take it all away from him, there would come a day when Pierce, eight years older, could look back on an accomplishment that was bigger than he had ever envisioned—and stranger than he would ever comprehend.

That day has come, and it’s a Saturday: a bright, clean Saturday in the hills above Los Angeles, where the views from Pierce’s $3 million house are impressive. From the poolside patio, you can look down across West Hollywood and Beverly Hills all the way to the rolling breakers off Santa Monica. In the living room, big canvasses by high-end contemporary LA artists hang on the walls. The views are also impressive in the kitchen, where a row of empty wine bottles includes a $5,000 1945 Domaine de la Romanée-Conti.

That Pierce lives the life of a former corporate mogul at the age of 28 is remarkable enough in itself. Even more so, perhaps, is that he got here by dominating an industry in which orcs, trolls, elves, dwarves, and minotaurs are major segments of both the customer base and the labor force. That industry is known to insiders as real-money trading, or RMT, and if I tell you now that I’ve made some money in it myself, that’s not because I expect you to take it on my say-so that there are people who might pay as much as $1,800 for an eight-piece suit of Skyshatter chain mail made entirely of fiction and code. Or that there are millions more—players of World of Warcraft , Age of Conan , EverQuest , EVE Online , and other massively multiplayer online role-playing games (MMORPGs, or MMOs)—who have given other players real money in exchange for the virtual weapons, armor, currencies, and other sought-after items around which these games revolve. Or that despite the game companies’ widespread prohibition of such transactions, their number has grown to support an estimated $2 billion annual trade, a half dozen multimillion-dollar online retail businesses, and an enormous Chinese workforce earning 30 cents an hour playing MMOs and harvesting treasure to supply the major retailers.

It’s all true, but don’t take my word for it: Just ask any of the world’s 20 million MMO gamers, for whom real-money trading has become commonplace, despised by some as a form of cheating and a blight on play, accepted by others as a necessary shortcut through some of the most elaborate (and time-consuming) games ever made. I’m mentioning my own familiarity with RMT—I spent most of 2003 peddling virtual items on eBay and made, if you must know, a grand total of $11,356.70—only to establish that I was around before the virtual treasure trade got to be big business.

Which is to say, I was around before Brock Pierce and the company he founded—Internet Gaming Entertainment—made its mark on the industry. I was around before most people in the trade had even heard of IGE, let alone before it became a synonym for virtual currency sales. I was around when RMT as a profession was almost exclusively the province of small-timers like me and the very notion of a multinational, 500-employee virtual-items business doing over a quarter billion dollars in trades was practically unimaginable. And I was around three years later when rumors of a $60 million Goldman Sachs investment in IGE first broke and for a moment it seemed possible that Pierce had a handle on something deeper and more enduring than just a profitable business: the future maybe, not only of virtual retailing but of economic life in general.

And I am here today, admiring the views at Pierce’s LA home, because I figure it’s my best shot at an answer to the only question I can think of asking in the face of a story like IGE’s: How did it happen?

Pierce, standing in his kitchen, considers the question for a moment and dives in, going all the way back to when he first learned there might be more to videogames than pure amusement: “Avid gamer my whole life, from a very young age,” he says. “I played Mortal Kombat competitively in arcades. Played for money at 10, hustling the 20-year-olds. Five bucks on whoever wins. Which, at 10 years old, is real money.”

He smiles as he talks, and it’s a smile I’ve seen before. You may have, too, actually: Right there in your local Blockbuster on the cover of the 1996 Disney romp First Kid , in which a 15-year-old Pierce starred opposite the immortal Sinbad. His appearance hasn’t changed much—he has the doe-eyed good looks and elfin dimensions of an eternal golden boy—but it’s the smile that has changed the least. Relaxed and open and at the same time taut with the intention to appear relaxed and open, it’s an actor’s smile, a mask. And it occurs to me that if I’m ever going to get through to what’s behind it, this story is going to have to begin somewhere else.

The year 1998 was a great time for bullshit, especially if you were selling it and especially if it came with the magic suffix .com attached. In Los Angeles, where the average media exec still didn’t know a backslash from a flashback, this was doubly true, and 37-year-old serial entrepreneur Marc Collins-Rector was making the most of it. Having just secured a fortune from the sale of Concentric Network, one of the early dialup ISPs, he was now declaring that his new startup—an online video content site called Digital Entertainment Network—would bury old media.

“The boob tube zombie television is dead,” Collins-Rector wrote in a vision statement. “Global entertainment will be delivered over the Internet. Digital Entertainment Network will create the last network.” This rebel assault on the Death Star of TV was to hinge on smart, hip video programming aimed at young people. That none of this programming yet existed was a hurdle, but the company already had a lock on Gen-Y cred by virtue of its two executive vice presidents. The older of the two VPs, 23-year-old Chad Shackley, happened also to be Collins-Rector’s lover and had been since he was 16. The younger of the two, age 17, was Pierce.

Pierce had come to DEN by way of a teenage midcareer crisis. He had been a working actor since he was a toddler—”My first memory,” he says, “is of being on the set of a commercial when I was 3″—but the truth is that the work had never really been his choice: “It was my mother’s.” He played the young Emilio Estevez in two Mighty Ducks films and continued to work steadily. But by age 16, he was ready to move on.

He moved on to the world of business, more specifically to the world of Collins-Rector and Shackley, which by all accounts was a lively one. They’d recently bought a $2.5 million mansion in Encino, California. Studded with waterfalls and aquariums and equipped with a swimming pool, a screening room, and a hot tub for 12, the sprawling M&C Estate (for “Marc & Chad”) was made for parties and reportedly saw its share. Pierce became a fixture at the place, but ultimately his presence there was not about the parties. It was about the future that Collins-Rector and Shackley seemed to be offering when they invited him to join them as a founder of DEN.

Pierce says he has no regrets about taking them up on it. “DEN was an incredible opportunity to learn,” he says. “That was business school.” But frankly, it was not the sort of b-school anybody wants to have on their rèsumè. DEN indeed took off, and over the three years of its existence it went on gathering momentum, soaking up nearly $90 million in venture funds before self-destructing and becoming what it remains: a canonical example of dotcom-era excess and absurdity.

The sum of DEN’s creative output was a few dozen episodes of reality shows and teen dramedy, far too bandwidth-hungry for modem connections of the time, memorable mainly for their awfulness or the tragic sums of money spent in making them (or both, as with the stupendously cheesy $12 million pilot episode of DEN’s gay-teen weeper, Chad’s World , produced by Pierce). But the failure to perform didn’t stop the influx of venture capital or the company’s extravagant spending. Executives were compensated lavishly, especially by Internet startup standards; president David Neuman had a salary of $1.5 million. Pierce himself, at 18, was earning $250,000 and had 1 million shares of DEN stock in his name.

In the fall of 1999, plans were proceeding for a $75 million public offering despite news that the company had lost $20 million in the first half of the year on revenue of $0. But in October, one month after the company filed for its IPO, Collins-Rector settled a suit in New Jersey brought by a boy who claimed the DEN founder had sexually molested him over three years, starting in 1993 when he was 13. Collins-Rector settled the suit quickly and quietly, but the damage was done. The IPO was deferred, and on October 25, DEN’s three founders resigned.

More lawsuits followed, other young men naming all three former DEN executives in sexual harassment claims. Some $4.5 million in judgments were awarded by default—Pierce insists he didn’t even know about them, and according to one of Pierce’s former attorneys, the claims against him were later dismissed. But at the time, nobody could locate the defendants to collect.

Pierce knew exactly where he was: “I ended up getting lost in EverQuest for a year and a half.”

By the time DEN finally laid off its last employees in May 2000, the founders were living quietly in Spain, in the seaside resort town of Marbella. Pierce, however, was spending most of his time in another place altogether: the magical universe of Norrath, in which EverQuest (then the Western world’s biggest MMO) took place.

The relative appeal of Norrath wasn’t hard to explain. Spain was nice enough, but it was still undeniably part of the same real world in which Pierce’s fortunes had lately gone to crap. “I had thought I was going to be a billionaire,” Pierce says. “I had all this stock, and now it was worthless.”

In the real world Pierce was just a 19-year-old washed-up child actor living far from home and going slowly broke. But in Norrath he was none of that. In Norrath he was the dark-elf wizard Athrex, and he was a champion. He played on EverQuest ‘s Vallon Zek server, by far the most competitive of the three dozen subcommunities into which the EverQuest player population was segregated, and even there he stood out. “There would be server-wide tournaments and I would win them,” he says, proud even now of his skill in both combat and the endless grind of monster killing and gradual, relentless “leveling up” that defines MMOs.

Pierce was a pioneer of the art of “six-boxing”: Hopping between half a dozen computers, he would run his dark elf and five little 3-D helpers through dungeons designed to kick the ass of all but the best-trained and best-equipped player groups. He got so good he could reliably kill the mushroom-headed Myconid Spore King, thus securing a regular supply of enchanted Fungi Tunics, which dropped from its corpse. In MMO-speak, Pierce was now single-handedly “farming” Fungi Tunics—acquiring them as a matter of routine. This coveted piece of armor sold for up to 50,000 Norrathian platinum pieces, an amount of virtual money that took most players a full 150 hours to earn. That much virtual loot could cost $500 on eBay.

Pierce knew how much real money his farming could have earned him. By then he was rising to prominence in Vallon Zek’s premier guild, Twelve Prophets, led by Swiss 18-year-old Alan Debonneville, who in addition to managing the guild was selling EverQuest items and currency on the side. “I was in charge of the market on my server,” Debonneville says. “I would net $6,000 to $8,000 per month.”

Pierce had certainly thought about turning pro. Before DEN took off, in fact, he’d started a business in virtual trading cards in the online game Sanctum and had pulled down $30K a year. And it wasn’t a legal issue: “There clearly was a market for selling virtual items for real money,” Pierce says. “It was less clear that it was against the rules, and it was certainly not against the law anywhere.” But what held Pierce back was a problem of scale: He still was looking for a way back to the multimillion-dollar business world he’d run away from, and somehow the $13-a-month fantasy world he’d run away to didn’t seem like the place he’d find it. The kind of business it would take to fit Pierce’s ambition—a truly corporate retailer of the virtual, complete with org chart, business plan, and potential IPO—was without precedent. It was a thing so improbable and awesome, come to think of it, that actually making it happen might redeem not just the years he’d lost to DEN but the additional year and a half he had now spent doing little else but play a videogame.

And once he finally did come to think of it that way, Pierce was playing a new game: making his redemption a reality. In May 2001, he founded IGE with what was left of his own savings, setting up corporate headquarters in a 700-square-foot office in downtown Marbella and hiring some locals to do the farming—to rack up EverQuest items he could sell for cash. The company’s ultimate goal, Pierce says, was to shift to the far more efficient model of acquiring its supply entirely from freelance farmers—and within a few months, IGE would be doing just that. But first Pierce invited Debonneville down to Spain for a look around. There, as Debonneville would relate in a legal complaint several years later, Pierce introduced him to Collins-Rector and Shackley, explained that the three of them had made millions, and invited Debonneville to join him now in making millions more. “I told Alan this could be a $100 million business,” Pierce says. “I had that vision.”

Debonneville didn’t hesitate. He moved to Spain and joined IGE with a 2 percent ownership stake and full responsibility for the management of sales, supply, and technology, thus freeing Pierce to concentrate on long-term strategy. And if, in the months that followed, Pierce was slow to give Debonneville a more detailed picture of his business background, well, who could blame him?

In any case, Debonneville got a pretty good understanding in June 2002, an eventful month that began with Pierce’s mysterious failure to show up for work one day. Debonneville was told at first by Pierce’s Spanish lawyers that his partner had gone on vacation to Thailand. In fact, Pierce was in government custody. According to Debonneville’s initial complaint, which was later sealed by the court in the course of a business-related suit, Pierce later told him that a Spanish SWAT team had moved in on the house of the former DEN execs with guns and helicopters. Pierce and Shackley spent a month in detention before being released, but Collins-Rector remained in the Spanish prison system for another year and a half, fighting extradition to the US on criminal charges of transporting a minor across state lines with intent to engage in sexual activity. Debonneville claims Pierce spent much of that time trying to help Collins-Rector—at one point even flying to Africa to try to buy his former boss a Liberian diplomatic title and whatever immunity might go with it. At the same time, Pierce was busy sorting out his own legal affairs, hiring lawyers to help get the civil claims that had defaulted against him when he’d left the US dismissed.

Through it all, though, the sales of virtual platinum kept churning. And if anything, IGE was on steadier ground now that Pierce was no longer distracted by lawsuits. This meant one less obstacle standing between the company and the triumphant future Pierce envisioned for it, and only two more to go—one being the tangle of legal and ethical questions that shrouded virtual item sales in gray-market illegitimacy, and the other being a guy named Jonathan Yantis.

The tangle could wait. It was time to get Yantis out of the picture.

Yantis was old-school—as old-school as it was possible to be in a business as new as RMT. He was 31, and his Web site—MySuper Sales.com—had been the dominant EverQuest virtual retailer almost as long as EverQuest had been the dominant MMO. He was the competition to beat.

Yantis declined to participate in this article, but he spoke with me at length in 2002 about his business. He was netting roughly $2,500 a day—nearly $1 million in annual profit from an operation consisting of himself and an assistant working out of his house in Rosarito, Mexico. He also had maybe a dozen in-game delivery agents in places like Romania, working for the equivalent of $3.50 per delivery. They were the virtual-world equivalent of couriers, walking their avatars right up to the purchaser’s avatar to hand over the in-game goods.

Yantis was the epitome of pre-IGE cottage-industry virtual retail: informal, personal, and very low-profile. He forbade his family to play EverQuest , and he never touched the game himself, on the theory that this made it harder for the gamemaker to trace his operations back to him. It also meant he never had to accept the license agreement that prohibited his business. Getting busted meant losing inventory, losing inventory meant losing money, and losing money wasn’t what Yantis was about. He once went to Texas to confront a player who had cheated him on a trade. “I flew right in and took a taxi to his house, sat down with his parents, and got a check cut right there.”

As long as Yantis got paid he really didn’t care what people thought of him. Pierce, on the other hand, cared a lot, and by 2003, with his legal problems now cleared up, he started a campaign to win gaming-industry hearts and minds. I first met him and Debonneville that November at the State of Play conference on virtual worlds in New York City, where academic games researchers and MMO designers all stared slack-jawed at these smiling emissaries from what many still thought of as a semi-criminal underworld. The boys wore nice suits, handed out business cards, and clearly meant business. IGE had set up US headquarters in Boca Raton, Florida, but the real base of operations—mainly engaged in around-the-clock delivery of EverQuest items—was now in Hong Kong and soon would occupy two floors in the same building as AOL Time Warner Asia.

I was in the business myself at the time, selling items in the classic MMO Ultima Online . After the conference, I blogged “Brock Pierce looks like a Norman Rockwell 13-year-old, talks like a coked-up 35-year-old, and happens to have turned 23 last Friday. He is either my new best friend or my new worst nightmare.” What alarmed me was the news that IGE was planning to move beyond EverQuest to other games—including Ultima . “I haven’t even had a chance to get my little five-and-dime up and running,” I lamented, “and already the Wal-Mart is coming to town.”

But I was kidding myself if I thought I was even on IGE’s radar. All its efforts were aimed at crushing Yantis. “It was a market-share game,” Pierce says. If Yantis lowered his prices, IGE did, too. If Yantis sought to exploit his more-established reputation, IGE sought to bury him in Google AdWords. (“We were probably one of Google’s largest advertisers,” Pierce says, adding that they spent about $1 million a month on text ads touting their affordable EverQuest platinum.)

Yantis’ great misstep, Pierce says, was not thinking big enough. “Jonathan believed that this would only be a market in EverQuest . We had successfully diversified; in Final Fantasy XI , we had a nice profit margin. We were able to bring our margins down in EverQuest . We said to him, ‘We are going to bring this market to ruins unless you come join us.'”

IGE was still the underdog, but in the end it was Yantis who blinked. The press release went out on January 22, 2004: IGE and Yantis’ MySuperSales site were merging. Yantis got payments totalling $2.4 million and a 37 percent stake in the new company, and he joined the team as chief operating officer. “After that, the money started to flow,” Pierce says. “Very well.”

For IGE, this was the beginning of an age of gold. Literally: World of Warcraft was released in November 2004, and over the next year the platinum of EverQuest ‘s Norrath was replaced by the gold of WoW ‘s Azeroth as the most heavily traded virtual currency in the world. WoW ‘s growth rate was phenomenal—the game now has 11 million subscribers, 20 times as much as EverQuest ever had—and the RMT markets grew with it. But most important, WoW did something that made IGE’s decision to move to Hong Kong the year before look practically clairvoyant. It ushered in the era of the industrial Chinese gold farm.

According to industry lore, China’s first gold farms sprang up as early as 2002 just across the border from Korea. MMOs were huge in that country, and it was supposedly Korean player-entrepreneurs who hit upon the idea of hiring low-wage Chinese workers to farm the currency and equipment that other users craved.

But in the end it was the huge new market of Western WoW players that gave thousands of small-time Chinese capitalists a reason to set up gold farms of their own. And when they did, it was IGE that became the Wal-Mart moving all that product west to gold-starved players. The Hong Kong base made IGE uniquely suited for the job, and soon the company had a new Shanghai supply center and a Web site just for Chinese suppliers; they could see what the offering price for gold was on a particular server. “We had over 100 people working in Shanghai,” Debonneville says, and the investment was worth every cent, securing IGE a truly reliable supply chain—and the sweetened profits that went with it.

The source of those profits, ultimately, was operations like the one owned and operated by 26-year-old Liu Haibin in Jinhua, China, which I visited a few years ago. With about 30 workers on staff, Liu was able to keep a gold-farming setup running around the clock. While the night shift slept upstairs on plywood bunks, day-shift workers sat in the hot, dimly lit workshop, each tending three or four computers. They were “playing” World of Warcraft , farming gold at an impressive clip by hunting and looting monsters, their productivity greatly abetted by automated bots that allowed them to handle multiple characters with little effort. They worked 84-hour weeks, got a couple of days off per month, and earned about $4 a day, which even for China was not a stellar wage.

Liu’s income was better but not always by much. “Sometimes in a month you can lose all the profit you made in a year,” he said, admitting there were days he regretted getting into the business in the first place. Why bother? “We also love this game,” Liu told me.

Most American WoW players at the time knew little about how the farmers lived and worked. What they did know was that there seemed to be more and more of them in the game (broken English and repetitive playing patterns gave them away) and that WoW ‘s publisher, Blizzard Entertainment, did not look favorably on their presence. A Blizzard policy statement reads: “They spam advertisements, use bots that make it hard for players to find the resources they need, and raise the cost of items through inflation.” As the gold-farmer population grew, opponents flooded message boards with anti-Chinese invective and increasingly took note of the role a company called IGE seemed to play in the phenomenon.

The company was drawing more attention elsewhere, too. When Pierce and Debonneville returned to New York for the second State of Play conference, they came with an entourage. There was Yantis, now part of the team and looking not especially comfortable in the position. And there was a fiftysomething named Steve Salyer, a former Electronic Arts executive who had just been hired as IGE’s president—and who made the eye-popping announcement there that the RMT business was now an $880 million industry.

“There’s no question in my mind that in the future millions of people will make their living in cyberspace,” Salyer told me soon thereafter, doing his best to sell the significance of the virtual gold trade in general—and IGE in particular. His job, after all, was to get the company taken seriously. The IGE founders had built a successful business, and now they wanted to make it a legitimate one: IGE wanted deals with game publishers that would give it license to traffic in virtual items without violating the games’ terms of service. That sort of deal wasn’t likely to get cut with a couple of college-age unknowns. As Debonneville put it, “Brock and I were not adult faces.”

Listen to excerpts from an interview with IGE president Steve Salyer and a roundtable discussion with Salyer and Wired contributing editor Julian Dibbell.

Video courtesy of the New York Law School

In the months ahead, IGE hired more adults, a slew of VPs with decades of industry experience among them. The company also brought on a former Goldman Sachs investment banker named Stephen Bannon, whose mission was to land venture capital.

By spring 2005, Yantis was telling IGE affiliates that the company would be announcing limited licensing agreements permitting it to operate aboveboard in at least five North American MMOs. Yantis himself, however, wouldn’t be sticking around to see it happen. Pierce and Yantis had arrived at, as Pierce puts it, a “difference of opinion,” and in June, after months of negotiation, the terms of Yantis’ exit were finalized: For 22 monthly payments of $1 million each, the company would get Yantis’ stake back, along with his agreement not to set up a competing business for at least three years.

Goldman Sachs started making visits, inspecting the Asian operations and talking with Bannon and others about terms. Finally, on February 7, 2006, the deal was inked: Goldman Sachs, together with a consortium of private funds, made a reported $60 million investment in the company. Part of the money was used to buy Pierce, Salyer, and IGE’s general counsel, Randy Maslow, out of some of their stock in the company. Pierce walked away with $20 million and still retained the controlling share of a company that was doing more than a quarter of a billion dollars in sales a year. The only top IGE officer who failed to profit from the deal was Debonneville, who, for reasons that remain disputed, was excluded from selling any part of the 17 percent stake he’d built up. Two and a half months later, he left the company.

For Pierce, this was a moment to savor. But it was a short one. Even before the Goldman Sachs deal was sealed, profits had started declining, and by December 2005 IGE defaulted on its monthly payment to Yantis. The company was obliged to waive the noncompete agreement and let Yantis set up his own virtual currency site, which he made clear would be dedicated to crushing IGE.

Nor was Yantis the only new opposition IGE was facing. By mid 2006, Blizzard Entertainment was cracking down harder than ever on gold farmers and sellers, shutting accounts by the thousands. The moves cost IGE as much as $200,000 in inventory every month, to say nothing of the havoc it played with suppliers. By January 2007, the company’s RMT operation was losing more than half a million dollars a month.

At one time, Pierce might have shrugged off those losses, confident that any day the MMO industry would cave in to its customers’ unquenchable desire for loot and authorize IGE to provide it. But it had now been over a year since those big licensing deals were supposed to have been announced. And where were they? Nowadays, the few game companies that even admit to having had conversations with IGE deny they ever came close to a deal. “IGE approached us on several occasions,” says John Smedley, president of EverQuest ‘s parent, Sony Online Entertainment, “but we flat out turned them down.” As for Blizzard, one approach was plenty. David Christensen, then IGE’s VP of business development, wrangled a meeting with them, but the company wouldn’t even let him on the premises for it. “They took him to a ball game or something, and he got like 10 minutes with them,” a former IGE manager recalls. “‘They basically hate us’ was what he related afterward.”

Things weren’t all bad. The investment money allowed IGE to make some sound diversifying moves, acquiring the very profitable South Korean real-money exchange site Itemmania, a sort of player-to-player eBay for virtual items. But for IGE’s retail trading operations—long the core of the company and its main source of income—things didn’t look like they could possibly get worse.

And then they did.

On May 30, 2007, a 28-year-old gamer named Antonio Hernandez filed a multimillion-dollar class-action lawsuit against IGE in a US district court in Florida. Hernandez was a World of Warcraft diehard, averaging by his own description 35 to 40 hours a week of play, and it was on behalf of almost every other WoW player in the US that he was suing IGE for “substantially impairing” and “diminishing” their collective enjoyment of the game. Specifically, Hernandez held IGE responsible for every ill that could be attributed to RMT in general and gold farming in particular, and he was using the leverage of consumer-protection law to make the company answer for it. As Hernandez’s attorney, Richard Newsome, explained the case to a reporter: “Guys like Tony have paid their $15 for some entertainment, and IGE is polluting that entertainment. It’s kind of like if someone pays for a ticket to go see a movie and someone else comes in behind them and kicks their seat.”

Hernandez wanted IGE to stop selling virtual merchandise, but that was just the start of it. In addition to a court order enjoining IGE from selling World of Warcraft goods, he was asking the judge for monetary damages—compensation for millions of WoW account holders in the US, plus double that to make it hurt, and just in case that wasn’t pain enough, a further payout of every penny the company had ever earned through its “wrongful conduct,” which pretty much meant every penny it had ever earned. In effect, Hernandez was seeking not just to punish IGE but to extinguish it.

He might have even succeeded, except for one thing: You can’t kill something that’s already dead. Though neither Hernandez nor his lawyers could have known it, the Florida-based company he was suing, IGE US, was no longer what it used to be. Just two months before the suit was filed, Pierce had acceded to the inevitable and cut loose the company’s hemorrhaging retail operation, selling it at a deep discount (for a mid-seven-figure royalty agreement) to the only potential buyer capable of doing anything productive with it: Jonathan Yantis.

The business on which IGE was built was sold off, and the company shed its name, becoming Affinity Media and redefining itself as a marketer of the MMO community sites it once bought just to boost its own traffic. IGE US persisted, but only as a holding company with no holdings other than a minority stake in Affinity. It was empty now, a husk.

IGE.com persisted as well and remained, as it remains today, among the top virtual-currency sites. But it belonged to Yantis now, who owned it through a web of companies registered in places like Vanuatu and Australia and more resistant to lawsuits like Hernandez’s. It took Yantis a while to sort out the mess Pierce had left behind. Many suppliers had gone unpaid and were still harassing the former IGE Shanghai for payment. In May, according to a rumor that made the rounds of MMO blogs, a desperate gold-farm operator stormed the IGE Shanghai offices demanding 2 million yuan and using a “toy pistol” to hold employees hostage.

But accounts were settled in the end, and new practices stabilized the supply chain. “Basically,” says James Clarke, a veteran turnaround executive who replaced Debonneville as IGE’s COO (and left the company last January), “what happens now is that the risk has been pushed further up the supply chain. Retailers often don’t even touch the gold; they don’t even have accounts anymore. It’s the farmer that holds the gold and risks the banning.”

This was not a great way for Pierce to start the year—and the year never got much better. In June, he was forced out as CEO of Affinity and replaced by Stephen Bannon, the investment banker who had joined the board when the Goldman Sachs deal went through. That same month, Debonneville sued Pierce in Los Angeles federal court, seeking millions of dollars in damages for “breaches of fiduciary duty, breaches of contract, and fraud” related to Debonneville’s exclusion from the Goldman buyout—and dredging up questions of character that reached all the way back to the DEN days. A few months later, as if on cue, Collins-Rector made British tabloid news when he reportedly turned up in London consorting with teenage boys (“Tycoon Paedo on Prowl in UK” blared one headline). Debonneville’s court filings, meanwhile, revealed that the year before, Pierce had told him that Collins-Rector was blackmailing him, threatening to snarl IGE in litigation that would make it unattractive to investors. Debonneville’s suit was settled before it got to court. By the year’s end, it looked like Pierce might never really escape the shadows of his past.

But by then it was clear that Pierce’s undoing had also been the result of uncertainties about the nature of virtual goods in general. Who really owns them? Who determines their value? These are the kinds of questions that a case like Hernandez’s should have helped resolve. And as long as they remain unsettled, no game company will ever let any single independent entity control the amounts of virtual wealth that Pierce and IGE once did.

Not that Steve Salyer was wrong to suggest that one day “millions” would be earning a living in the markets IGE pioneered (already the number doing so in China has reached the hundreds of thousands). Or that Pierce was wrong to think that MMO publishers would one day accept the inevitability of RMT in some form or another. In the past year, there’s been accelerated movement toward publisher-sanctioned item sales: Funcom, makers of the new MMO Age of Conan , and Sony Online Entertainment have both announced partnerships with a startup called Live Gamer to provide player-to-player RMT exchange sites. At the same time, the so-called free-to-play model—no subscription fees, revenue derived entirely from direct sales of in-game items—has made inroads in the Asian MMO market and is being embraced by no less a gaming giant than Electronic Arts in the upcoming Battlefield Heroes . But both these models, in their blunt rejection of IGE’s third-party retail model, only underline what Pierce himself implicitly conceded when he sold out to Yantis: There is no future for his once-bright dream except in the dimness of what is plainly now a permanent gray market.

As for Pierce, whatever regrets he may have about the way things ended lie hidden behind that familiar smile and a steady stream of upbeat Facebook status updates (“Brock is having a super day!”). He’s back in the startup game, he says, working on a social network aimed at wine lovers like himself. But his IGE chapter is closed. Antonio Hernandez made sure of that much, however little else he achieved. When he and his legal team finally figured out the nature of what they were suing, they realized there was nothing to do but settle for the best terms they could get, and in August, finally, the deal was announced. In return for dismissal, the defendant agreed to Hernandez’s central demand: IGE US, already just a corporate ghost—a static afterimage of the vision Pierce had long ago wrested from the depths of his obsession with the game—was now legally barred from having anything to do with the sale of Azerothian gold for real money until the year 2013.

Contributing editor Julian Dibbell (julian@juliandibbell.com) wrote about griefers in issue 16.02.