'Stupidly Obvious' Flaw Led to Massive Xbox Fraud

Microsoft engineer was able to generate millions in fake gift-card codes and sell them
By John Johnson,  Newser Staff
Posted Jul 10, 2021 8:00 AM CDT
'Stupidly Obvious' Flaw Led to Massive Xbox Fraud
This Xbox logo.   (AP Photo/Kamil Zihnioglu)

The crime was audacious, lucrative, and relatively simple—and the mastermind might have gotten away with it had he not gotten too greedy, too fast. Last year, a Microsoft engineer was imprisoned over fraud related to Xbox gift cards, and Bloomberg now offers an in-depth look at Volodymyr Kvashuk's "nearly perfect" scheme. Kvashuk, a Ukraine native who first arrived in the US in 2015, was a junior engineer at Microsoft tasked with making sure the company's e-commerce system worked smoothly. The job required him to use a fake company credit card to make online purchases, but he soon discovered what Bloomberg's Austin Carr describes as a "stupidly obvious" flaw. If Kvashuk bought something physical, the system was smart enough to realize this was a test and not ship it. But if he bought gift cards, the system generated actual codes—worth real money.

Instead of reporting the flaw, Kvashuk began exploiting it in small ways. His first illicit transaction was to use a newly acquired code to download Microsoft Office for $165. Carr details how Kvashuk quickly ramped up his system to generate huge numbers of codes and sell them in an online marketplace in exchange for Bitcoin. In two years, investigators say he stole 152,000 Xbox gift cards worth $10.1 million. The massive spike in gift-card purchases raised red flags, and investigators were able to trace the transactions to Kvashuk despite his byzantine efforts to cover his tracks. His new Tesla, his $1.6 million house on Lake Washington, and a list titled "How I will manage my next 10 million" were some of the more obvious signs of his sudden wealth. When he's released from prison in 2027, Kvashuk will likely be deported to Ukraine and will have to pay restitution to the company. (Read the full story.)

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