PayPal Fights Foreign Fraud

Joe Lonsdale shares a story about how PayPal fought against international fraud in its early days.

"At PayPal, we had a big challenge because Chinese and Russian mafia were stealing all our money. Here's how it worked: You go to 7-11 and the clerk there, maybe having a bad year and angry at capitalism, would secretly write down numbers from credit cards. They'd write down 500 of these numbers and could sell them online for $5 or $10 each to the Russian mafia.

Then suddenly you'd get a chargeback that says $200 on PayPal for something, and the customer would say 'I didn't do that.' PayPal would be left with the bill. This was costing PayPal several million dollars a month, and a lot of our competitors went bankrupt.

I ended up hanging out after work with these guys who were working on how to stop the bad guys. We got to know people in the Secret Service and FBI - they're the ones in charge of anti-fraud and arresting the mafia guys. These agents would come to us asking for advice on other things, and we started teaching them about cyber fraud in 2000-2001.

Then 9/11 happened, and the government started spending billions of dollars on supposed solutions to catching bad guys. We watched what they were spending money on and realized it was way behind Silicon Valley. That's actually what led us to eventually founding Palantir - we saw we could do this much better."