How Hoolai Lost Half Their iOS Revenue By Virtual Currency Scams

Posted Feb 24, 2012

Last fall season Hoolai launched a game called Three Kingdoms on the iPhone. The game was on top of the charts and it was expected that the game would make about $600,000. However Apple ended up sending half of that amount. The rest of the expected revenue was lost by fraudulent virtual currency purchases originating from Taobao (eBay of China).

Hoolai had raised $20 million from Sequoia China, Greylock Capital, and Bertelsmann AG. Hoolai is one of several companies that has been victimized by virtual currency scams. Three Kingdoms had climbed to a rank of #5 on the U.S. grossing charts two weeks ago even though the game was entirely in Mandarin. What was strange about the whole thing was that the game had close to a half-dozen one star reviews from users who said that they were charged for virtual currency packs that they didn’t buy.

The scammers were falsifying credit card numbers and stealing them from real consumers. Then they wholesales them into China where they were used on Taobao to buy all sorts of items including virtual goods on games. When virtual goods in games are purchased, the ranking of the app increases. However the game doesn’t earn any revenue from the transactions because Apple discovers the fraud and refunds the transactions before paying it to developers.

“We are truly sorry about what happened to these people,” stated Hoolai’s overseas operations head Xiang Lin. “Our game is not yet even launched in English or Spanish but we do want to keep the door open there. We hope that U.S. audiences and the media can understand the truth.”