Man Charged With Creating, Selling More Than $1 Million in Counterfeit Coupons

A Louisiana man has been charged with conspiracy to commit wire fraud and conspiracy to commit trademark counterfeiting, in an alleged fraudulent coupon scheme that federal authorities say may have cost manufacturers more than a million dollars.

30-year-old Beau Wattigney of New Orleans, who authorities say was known to various online communities as “PurpleLotus” (or GoldenLotus, MoxDiamond, or NickMode) was charged today with creating counterfeit printable coupons and selling them on the shadowy Silk Road online marketplace.

Various online profiles identify Wattigney as a systems support technician at ITT Technical Institute. According to the U.S. Justice Department, Wattigney sold his coupons over a period of at least two and a half years, from May 2012 to November 2014. Most were made to look like legitimate printables from sites like Coupons.com, SmartSource, RedPlum and Hopster.

The DOJ says Wattigney made at least 2,152 sales – some as individual coupons, others as bundles – and made nearly $75,000. Authorities say one particular counterfeit allowed users to purchase $50 Visa gift cards for a penny apiece. Combined, investigators say, the coupons had a face value of more than a million dollars, resulting in a potential loss of at least that much, to more than 50 manufacturers.

The charges don’t mention it specifically, but the seller known as “PurpleLotus” also offered a guide called “The Art and Science of Coupon Creation”, which came complete with blank coupon templates, barcode-creating software and detailed instructions on how to create your very own, very authentic-looking counterfeit coupons. “The more you make, the faster you get,” the tutorial promised. “If you follow these lessons closely, you will have great success making all kinds of coupons.”

The charges are the latest to be leveled against individuals who have sold items on various incarnations of the Silk Road – including the founder, who was convicted on several drug and conspiracy counts earlier this year. The “dark web” site, which has been shut down by authorities only to rise again, is not easily accessible by the average internet user. It allows buyers and sellers to operate anonymously behind layers of encryption, which allows for the open exchange of all manner of illegal items – from drugs to weapons to, yes, counterfeit coupons.

Wattigney even allegedly offered advice along with his counterfeit creations. “Take it to Walmart and use the Self Checkout. That’s the reason I created that coupon,” reads one message Wattigney is accused of sending to a customer. “Try to catch the attendant when they are walking around or busy helping a customer and not staring down (at) their screen.”

Independent investigators with Brand Technologies – the same fraud investigation and consultancy company that spearheaded the recent mass deletions of Facebook “glitch groups” – first discovered the existence of counterfeit coupons being shared on the Silk Road. That led them to the “PurpleLotus” vendor store, where they made purchases as part of their investigation. And then the FBI got involved, before the investigation culminated with today’s two-count bill of information.

“The problem in his business plan was that he was selling digital files,” Brand Technologies president Jane Beauchamp told Coupons in the News. “Files that were printed and used at cash registers all over the country, at virtually every single store in the country.” So as anonymous as Wattigney had hoped to be on the Silk Road, it may have been only a matter of time before his digital fingerprints were discovered on his alleged handiwork.

“These people do leave tracks,” Coupon Information Corporation Executive Director Bud Miller told Coupons in the News. “It’s really not a wise career move to engage in any type of fraud on the internet.”

The case is the most notable of its kind, since the arrest and conviction of Lucas Henderson. Back in 2011, Henderson was similarly accused, and ultimately convicted, of wire fraud and trafficking in counterfeit goods, for selling a “how-to” guide on creating your very own legitimate-looking counterfeit coupons. But he used sites like 4chan, which allows for anonymity, but is still accessible to just about anyone on the internet. The Silk Road, in contrast, is more hidden, which leads users to believe that they can conduct their illicit activities with impunity.

Not so. “Anonymous online marketplaces have provided criminals with the ability to conduct illegal operations worldwide while seemingly insulating them from apprehension and prosecution,” Assistant U.S. Attorney General Leslie Caldwell said in a statement. “The Criminal Division is determined to peel back the veil of anonymity and prosecute criminals of all stripes who attempt to use the ‘dark web’ to cloak their illegal conduct.”

At least one company that was victimized, and that stands to receive compensation if Wattigney is convicted and ordered to pay restitution, is SmartSource publisher News America Marketing. “Coupon crime, in any form, is something that we take very seriously,” News America Marketing’s Senior Vice President of Operations Wayne Campanelli told Coupons in the News. “We are gratified to see that federal law enforcement officials have apprehended this individual and will be bringing him to justice.”

A potential sticking point, is that “The Art and Science of Coupon Creation” tutorial is already out there, and apparently still in use. So while PurpleLotus may be out of business, his handiwork lives on. But Beauchamp said the Wattigney case should put any other potential counterfeiters on notice as well. “It would be safe to surmise that any transactions done in the future, using the templates or software he created, could get the attention of the retail stores’ loss prevention team, local law enforcement as well as federal authorities,” she said. “This type of activity can only go under the radar for so long. Retail settings have sophisticated point-of-sale systems and video surveillance, and this new case has brought to light the dark underworld of counterfeit coupon fraud.”

Counterfeit coupons have always been a big business. But after today’s announcement, federal authorities, as well as the coupon industry, can only hope that booming business is slightly less so. “It’s a very good day for the coupon industry,” Miller said. “We’re very pleased, and we’re looking forward to justice being done.”