6 ms·

The more interesting question is what is the source of all this money? Osterlund has a net worth of $400MM. His company, Xacti, geneated revenues of $75MM per

by n00b101 10y ago

The more interesting question is what is the source of all this money? Osterlund has a net worth of $400MM. His company, Xacti, geneated revenues of $75MM per year. The article explains that Xacti "sold banner ads, video games and various other kinds of software, including “toolbars” that promised to clean viruses off your computer or free up space on your hard drive." I don't think the article really explains how this malware could generate such huge amounts of wealth. The company's website [1] is nothing short of pathetic. The NYT article does mention that Xacti had legal troubles and was investigated for some deceptive marketing practices (like default opt-in credit card charges for trial software). At best, Osterlund is an Internet con artist. But this still leaves questions in my mind. Can a simplistic malware fraud generate half a billion dollars of wealth? This mystery is compounded with a maze of sophisticated offshore banking structures, which sounds like more than just a way to hide assets from his wife. For example, could these structures have been used for money laundering by organized crime? Was this malware used for criminal activities beyond simply asking customers to enter their credit card numbers and charging them a few dollars? His wife was allegedly involved in his business, and is trying to get a share of his assets in divorce proceedings. If this money had a darker story behind it, that she knew of, she would have an incentive to leave that out of this NYT story. [1] http://www.xacti.com http://www.xacti.com

cardine 10y ago
> Can a simplistic malware fraud generate half a billion dollars of wealth? Absolutely. Traffic Vance was a great example of this. They installed adware on users computers and advertisers could bid on what sites you wanted your popup ad to display on and their adware would display your popup and charge you the money. There are shady individuals who bid $10+ for a single popup on a site like StateFarm.com with a fake "rate comparison" and the infected user would assume that the ad was associated with State Farm despite the tiny disclaimer at the bottom. On a site like CNN a shady weight loss supplement company might have a popup with a fake news story that pushes a misleading negative option subscription that is setup in a way where the infected user assumes it is a CNN story. The adware itself is designed to be as subtle as possible so that the user is unaware that anything suspicious is going on and views these ads as legitimate. Traffic Vance has since been renamed several times due to this type of scrutiny, are well past their glory days, and don't push their adware anymore. Despite all of that they are still making millions[1] from all of the people who have downloaded their adware over the past 10 years that still haven't deleted the adware or gotten a new computer. [1] https://www.propelmedia.com/propel-media-reports-6-1-million-of-adjusted-ebitda-for-the-3rd-quarter-of-2016/ https://www.propelmedia.com/propel-media-reports-6-1-million...
- shostack 10y ago
  Man, haven't heard that name for years. Traffic Vance and others like them were all the rage when affiliates were big on "CPV" (cost per view) traffic where instead of paying on a CPM rate for pop-up and pop-under traffic, they would pay for each view. The CPMs were actually pretty high in many cases, but when you think about the computer savviness of the infected users, the shady tactics affiliates would use, and the potential payouts, the math definitely worked out for many of them.
- downandout 10y ago
  But even in Traffic Vance's case, I'm not sure that they have generated $400 million over the life of the company. Even at $6M/quarter in EBITDA, it would take ~16 years to get there. I'm not sure what else this guy was into, but I doubt he made it solely with malware. That said, nobody actually needs $400M, and there are plenty of people making $1M+/yr operating useless websites like viral news, quiz sites, etc. There is a ton of money in online advertising. Most goes to Google and Facebook, but there are still billions left over for the "little" guys. The rise of retargeting through Adsense has enabled even the most worthless of sites to show ads that generate reasonable RPM. If you can generate impressions, you can make quite a bit of money.
  - was_boring 10y ago
    Is there any literature on this? I always figured Google and Facebook dominated the market so heavily everyone else was left with scraps (twitter, for example).
    - hanginghyena 10y ago
      Actually, those guys make only a tiny slice of the value per click. Banner advertising is a low return game. Now...if you control the landing page and conversion funnel, basically delivering paid customers (vs. clicks) to a paying merchant, your value per visit goes up by a factor of 10 - 50. $.25/click vs. $10 - $30 (varies by product). Now imagine a company that launches dozens of offers with hundreds of variations and plows it's bankroll back into the best (most profitable) version (for years at a time). Yeah, $400MM is possible.
Demcox 10y ago
That is a rather interesting theory.
deleted 10y ago
[deleted]
dharma1 10y ago
https://en.wikipedia.org/wiki/Download_Valley https://en.wikipedia.org/wiki/Download_Valley
eonw 10y ago
the article states he had a number of other businesses. "Their earliest success was a direct-mail firm called Credit Key Express, which promised credit cards to people with bad credit. Later they started Columbia House-style online membership clubs that sold discounted movie posters, books, DVDs, even dietary supplements. Xacti, which came to enfold most of their ventures, sold banner ads, video games and various other kinds of software, including “toolbars” that promised to clean viruses off your computer or free up space on your hard drive." all the money wasn't made from malware, it just created a slush fund for other profitable(albeit questionable) businesses to be started.
hkmurakami 10y ago
Both meebo and bitorrent (the company) made tens of millions through toolbar installs (though their operations were much more legit than this)
baybal2 10y ago
>Can a simplistic malware fraud generate half "Surprise" billionaires are popping out of Eastern Europe/Israel/Russia/Russian concessions every year. The guy who ran ebanners/advmaker was said to have lost $1.3bn when Cyprus seized deposits. Before he filed the case against the bank, nobody ever knew of the guy. They are very good at hiding cash. All those dumb banking AML rules are kinda useless as the easiest way to launder money is to run your own bank. Just back in 2013, ads for sale of "1 day banks" in UK/Ireland/Delaware/Cyprus were openly published in Russia's number 1 business magazine.
- mistermann 10y ago
  "the easiest way to launder money is to run your own bank." What is this, I've never heard of it? Are there significant benefits?
  - baybal2 10y ago
    >What is this, I've never heard of it? Are there significant benefits? Nobody to block your transfer and freeze your accounts simply for the reason you look suspicious and you are suddenly transfering a 10 digit sum to a *stan country. And even if a higher tier bank with whom your own bank has a correspondent account will bother to intervene (which is highy, highly unlikely), you and your moneys will already be far away from the sphere of influence of the civilised world thanks to the fact that transaction settlement is nearly 100% automated and instantaneous for top tier banks.
phil21 10y ago
You severely and drastically underestimate the size of the "shady economy" on the Internet. I used to laugh a little 10 years ago even when people said spamming couldn't be profitable. Spammer could e-mail the same million people every single day, and still get 8-12 $30 commissions every single time for months. Expand that to even a low rate of 50M e-mails/day and you can see how profitable it can be. And the "web spam" made the e-mail spam market look pretty much trivial in comparison - before you even get into the outright illegal stuff like hacking boxes and doing drive-by installs.
erikb 10y ago
She would also have an incentive not to talk about it at all. Playing out the whole game so openly, especially with purely selfish interests, seems really strange to me, as well.
- dx034 10y ago
  Don't underestimate greed. She wanted to have the money at all costs. The article says that she didn't have any issues taking money from other people. What's disclosed in the article is already shady, I wouldn't be surprised if she also knew of more severe business practices.
  - erikb 10y ago
    Yeah, agreeing on that. But do you see how it makes sense to do it publicly in the NYT? In her position I would try to keep the shady business in the dark.
    - dx034 10y ago
      Money perhaps? She still didn't get anything from the settlement. Maybe she hopes to either speed up the process or she got some money for the interview.
- thehooplehead 10y ago
  Halfway through, I started thinking, this piece is incredible marketing for the wife's attorney, Fisher. He's the only one really likeable character (the wife didnt care about defrauded customers, the husband was always the villain). Given that the money might never materialize, pitching an interesting, detailed, already researched article to NYT lets Fisher salvage some marketing out of a potential loss.
anonu 10y ago
Matt Levine highlights [1] the discrepancy quite nicely: [...] let the wife's lawyer describe them: Oesterlund was “a highly successful internet swindler,” engaged in “internet scams, forgeries, tax fraud, bank fraud, HUD fraud, immigration fraud, fraudulent overseas transfers and other misconduct,” Fisher told a Florida judge. Or here's the wife's defense of the business: “Every time you click on an ad, someone gets money,” she told me, shrugging. “We were the people who got the money.” [1] https://www.bloomberg.com/view/articles/2016-12-01/mortgage-finance-and-taxing-wealth https://www.bloomberg.com/view/articles/2016-12-01/mortgage-...

by n00b101 10y ago

cardine 10y ago

> Can a simplistic malware fraud generate half a billion dollars of wealth? Absolutely. Traffic Vance was a great example of this. They installed adware on users computers and advertisers could bid on what sites you wanted your popup ad to display on and their adware would display your popup and charge you the money. There are shady individuals who bid $10+ for a single popup on a site like StateFarm.com with a fake "rate comparison" and the infected user would assume that the ad was associated with State Farm despite the tiny disclaimer at the bottom. On a site like CNN a shady weight loss supplement company might have a popup with a fake news story that pushes a misleading negative option subscription that is setup in a way where the infected user assumes it is a CNN story. The adware itself is designed to be as subtle as possible so that the user is unaware that anything suspicious is going on and views these ads as legitimate. Traffic Vance has since been renamed several times due to this type of scrutiny, are well past their glory days, and don't push their adware anymore. Despite all of that they are still making millions[1] from all of the people who have downloaded their adware over the past 10 years that still haven't deleted the adware or gotten a new computer. [1] https://www.propelmedia.com/propel-media-reports-6-1-million-of-adjusted-ebitda-for-the-3rd-quarter-of-2016/ https://www.propelmedia.com/propel-media-reports-6-1-million...

shostack 10y ago
Man, haven't heard that name for years. Traffic Vance and others like them were all the rage when affiliates were big on "CPV" (cost per view) traffic where instead of paying on a CPM rate for pop-up and pop-under traffic, they would pay for each view. The CPMs were actually pretty high in many cases, but when you think about the computer savviness of the infected users, the shady tactics affiliates would use, and the potential payouts, the math definitely worked out for many of them.
downandout 10y ago
But even in Traffic Vance's case, I'm not sure that they have generated $400 million over the life of the company. Even at $6M/quarter in EBITDA, it would take ~16 years to get there. I'm not sure what else this guy was into, but I doubt he made it solely with malware. That said, nobody actually needs $400M, and there are plenty of people making $1M+/yr operating useless websites like viral news, quiz sites, etc. There is a ton of money in online advertising. Most goes to Google and Facebook, but there are still billions left over for the "little" guys. The rise of retargeting through Adsense has enabled even the most worthless of sites to show ads that generate reasonable RPM. If you can generate impressions, you can make quite a bit of money.
- was_boring 10y ago
  Is there any literature on this? I always figured Google and Facebook dominated the market so heavily everyone else was left with scraps (twitter, for example).
  - hanginghyena 10y ago
    Actually, those guys make only a tiny slice of the value per click. Banner advertising is a low return game. Now...if you control the landing page and conversion funnel, basically delivering paid customers (vs. clicks) to a paying merchant, your value per visit goes up by a factor of 10 - 50. $.25/click vs. $10 - $30 (varies by product). Now imagine a company that launches dozens of offers with hundreds of variations and plows it's bankroll back into the best (most profitable) version (for years at a time). Yeah, $400MM is possible.

Demcox 10y ago

That is a rather interesting theory.

deleted 10y ago

[deleted]

dharma1 10y ago

https://en.wikipedia.org/wiki/Download_Valley https://en.wikipedia.org/wiki/Download_Valley

eonw 10y ago

the article states he had a number of other businesses. "Their earliest success was a direct-mail firm called Credit Key Express, which promised credit cards to people with bad credit. Later they started Columbia House-style online membership clubs that sold discounted movie posters, books, DVDs, even dietary supplements. Xacti, which came to enfold most of their ventures, sold banner ads, video games and various other kinds of software, including “toolbars” that promised to clean viruses off your computer or free up space on your hard drive." all the money wasn't made from malware, it just created a slush fund for other profitable(albeit questionable) businesses to be started.

hkmurakami 10y ago

Both meebo and bitorrent (the company) made tens of millions through toolbar installs (though their operations were much more legit than this)

baybal2 10y ago

>Can a simplistic malware fraud generate half "Surprise" billionaires are popping out of Eastern Europe/Israel/Russia/Russian concessions every year. The guy who ran ebanners/advmaker was said to have lost $1.3bn when Cyprus seized deposits. Before he filed the case against the bank, nobody ever knew of the guy. They are very good at hiding cash. All those dumb banking AML rules are kinda useless as the easiest way to launder money is to run your own bank. Just back in 2013, ads for sale of "1 day banks" in UK/Ireland/Delaware/Cyprus were openly published in Russia's number 1 business magazine.

mistermann 10y ago
"the easiest way to launder money is to run your own bank." What is this, I've never heard of it? Are there significant benefits?
- baybal2 10y ago
  >What is this, I've never heard of it? Are there significant benefits? Nobody to block your transfer and freeze your accounts simply for the reason you look suspicious and you are suddenly transfering a 10 digit sum to a *stan country. And even if a higher tier bank with whom your own bank has a correspondent account will bother to intervene (which is highy, highly unlikely), you and your moneys will already be far away from the sphere of influence of the civilised world thanks to the fact that transaction settlement is nearly 100% automated and instantaneous for top tier banks.

phil21 10y ago

You severely and drastically underestimate the size of the "shady economy" on the Internet. I used to laugh a little 10 years ago even when people said spamming couldn't be profitable. Spammer could e-mail the same million people every single day, and still get 8-12 $30 commissions every single time for months. Expand that to even a low rate of 50M e-mails/day and you can see how profitable it can be. And the "web spam" made the e-mail spam market look pretty much trivial in comparison - before you even get into the outright illegal stuff like hacking boxes and doing drive-by installs.

erikb 10y ago

She would also have an incentive not to talk about it at all. Playing out the whole game so openly, especially with purely selfish interests, seems really strange to me, as well.

dx034 10y ago
Don't underestimate greed. She wanted to have the money at all costs. The article says that she didn't have any issues taking money from other people. What's disclosed in the article is already shady, I wouldn't be surprised if she also knew of more severe business practices.
- erikb 10y ago
  Yeah, agreeing on that. But do you see how it makes sense to do it publicly in the NYT? In her position I would try to keep the shady business in the dark.
  - dx034 10y ago
    Money perhaps? She still didn't get anything from the settlement. Maybe she hopes to either speed up the process or she got some money for the interview.
thehooplehead 10y ago
Halfway through, I started thinking, this piece is incredible marketing for the wife's attorney, Fisher. He's the only one really likeable character (the wife didnt care about defrauded customers, the husband was always the villain). Given that the money might never materialize, pitching an interesting, detailed, already researched article to NYT lets Fisher salvage some marketing out of a potential loss.

anonu 10y ago

Matt Levine highlights [1] the discrepancy quite nicely: [...] let the wife's lawyer describe them: Oesterlund was “a highly successful internet swindler,” engaged in “internet scams, forgeries, tax fraud, bank fraud, HUD fraud, immigration fraud, fraudulent overseas transfers and other misconduct,” Fisher told a Florida judge. Or here's the wife's defense of the business: “Every time you click on an ad, someone gets money,” she told me, shrugging. “We were the people who got the money.” [1] https://www.bloomberg.com/view/articles/2016-12-01/mortgage-finance-and-taxing-wealth https://www.bloomberg.com/view/articles/2016-12-01/mortgage-...