Ever since Activision Blizzard released the critically acclaimed and best-selling "Diablo III," the game has been the subject of various hacks and destabilizing network crashes only adding to the developer's notoriety at a time when it is frantically shedding users from its other popular title, "World of Warcraft." "Diablo III" players frequently reported stories of logging into the game one day to suddenly find all of their hard-earned virtual goods and money had simply vanished overnight.

This issue is not new to "Diablo III" by any means, what was new was the level of investment that Blizzard was asking players to make with a stringent always-online requirement and various other forms of restrictive digital rights management (DRM) and enabling players to access a virtual economy directly through real world financial platforms such as their personal credit cards, PayPal, and of course the ever-controversial real-money auction house.

Now, reports have begun to surface of an even more insidious form of hacking than users simply losing their virtual items. An article posted Monday on CNET details writer Joseph Hanlon's revelation that his PayPal account had been hijacked by Diablo III users. But they weren't just using his account to buy themselves virtual gold to get better loot in the game. "I wasn't talking to lovers of the game who had been fleeced of the gold they had worked so hard to accumulate, Hanlon writes. Rather, "these guys were scammers too, part of a network of people exploiting the game to earn money for nothing."

Like any game of its size, "Diablo III" has given rise to a number of "gold farms"-users who play the game, or set up several "bot" accounts to simultaneously play the game for them, in order to accumulate vast amounts of virtual wealth they can then sell to other users. For a good primer on the practice, take a look at this interview with a self-identified "Diablo III" botter. The practice has allegedly made some gold farmers a lot of money, but it introduces a number of legal and ethical dilemmas such as outsourcing labor to create "virtual sweatshops."

As far as Blizzard is concerned, the real problem with gold farming is that the more the practice spreads, the less legitimate their Battle.net server becomes. " A billion gold would take years to accrue at the rate I played the game, and it is only really possible with a farm of computers playing the game automatically, 24-hours a day," Hanlon continues. "Blizzard wouldn't help these guys [gold farmers or botters] because it was these guys who were destroying the economy underpinning Diablo III."

What's interesting about these news stories, however, is that gold farmers themselves are beginning to be defrauded. There have been stories about PayPal accounts being hacked since the RMAH first debuted several weeks after the game officially launched. But by now, scammers have discovered that they can hack into a user's PayPal account, dispense with the money in small installments to avoid arousing any suspicion, and use it to purchase virtual currency from other gold farmers. Once PayPal or the original defrauded user gets wind of the offense, however, the purchase does not go through. But in the meantime, the original scammer who circumvented the RMAH entirely has made off with the money.

"When you think about it, it is sort of like money laundering," Hanlon argues. "The dirty money is cleaned through the process of buying and then re-selling virtual currency." The stroke of brilliance for this new crop of thieves is choosing who to rob. By targeting other gold farmers as likely candidates that are willing to spend a lot of money to invest in virtual currency in the short term, they're picking out victims unable to run to the authorities (Blizzard) when they realize they've been grifted. It's sort of like Omar choosing only to rob from drug dealers in "The Wire."

Blizzard stands to lose even more from these increasingly elaborate forms of piracy as the massive influx of dirty money forces "Diablo 3's" internal economy to buckle. Like Weimar Germany or any other economy in rapid transition, Diablo III is now struggling through a period of massive hyperinflation. "I've read in Diablo III forums about a golden age, when 1 million gold coins was worth over US$20," Hanlon writes in a grim final note. "Today, it hovers at around US$2.50."

Blizzard is working on introducing gold sales to the auction house to prevent these third-party transaction from continuing (the very same kind of third-party transactions the RMAH was allegedly created to stop in the first place), but at the gold's current value, the move may not be strong enough to reverse the game's economic woes. During the first round of Diablo III's RMAH controversies, I argued that gamers needed more confidence in their virtual ownership that games usually give them for these economies to become truly successful. Rather than blaming "Diablo III" for costing the company "World of Warcraft" subscribers, Blizzard should focus on cultivating an hospitable environment for an increasing number of its users.

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