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THE SILICON SIEGE -- PAYPAL ANTI-FRAUD OPERATIONS
Operational window: October 2000 - July 2002. Internal codename: Project P. Deployed at PayPal, Palo Alto, California. Adversary: distributed Russian and Eastern European organized-crime fraud rings operating over IRC-coordinated mule networks.
Peak monthly chargeback volume attributable to the adversary reached
Counter-measures: Igor — a statistical behavioral classifier distinguishing scripted from human signups via mouse-trajectory, keystroke-distribution, and IP-geolocation features. Gausebeck-Levchin test — the first commercial deployment of what Carnegie Mellon would, in 2003, generalize and publish as CAPTCHA.
Outcome: chargeback rate fell from 4.7%% to under 0.28%% over the first six months of 2001. Company went public at $15.75 on Nasdaq 2002-02-15. eBay acquired at $1.5 billion valuation 2002-07-03.
Historical significance: first documented case of commercially deployed adversarial machine learning at consumer internet scale. The architecture generalized became the template for every high-trust consumer platform built since.
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