I might as well write a long post about Kwark's "controlling the markets." I need to make an EVE forum post eventually so I'll write the first draft here.

The EVE contract system allows people to buy and sell individual pieces of "faction" (high-end) equipment. It is an arcane labyrinth of scams and clunky interfaces. CCP seems to know this, which is why they released a patch in January of last year making it slightly less confusing and clunky than it was before. In the new contract system, there were multiple ways to sort contracts: Newest first (what I used in order to snipe sweet deals), Lowest first (the best option if you're shopping and looking for the cheapest price), and oldest first (there is absolutely no reason to sort by oldest first). CCP, in their wisdom, decided to make the "Oldest first" option the default.

The Hatchery makes most of their obscene wealth via the creation of faction items. A simplified version of the business model was: mission in Minmatar highsec or Caldari lowsec, convert the mission rewards (called LP) into faction items, and transport the finished faction goods to Jita, the main trade hub in EVE. Once there it was a pretty major pain to actually sell the faction items. However, salvation came in the form of a corporation called "West and Grey." This corp would buy our faction items at market price (sale price!) with no hassle. It was a really easy way to convert our items into cash without losing any value at all.

At the same time, a completely separate phenomenon was going on. When I was refreshing contracts, looking for deals to snipe, I was noticing a peculiar thing. Every once in a while, someone would put up many contracts (50-100) of the same item up all at once, at about 50% higher than market price. So if you were sorting the contracts by Newest First, you'd see a whole wall of contracts at a high price and presumably if you didn't know the true price of the item you'd be compelled to buy at that inflated price. The other people in Hatch that dealt in contracts were very confused about this practice and so was I. None of us could figure out why someone would do this. As far as we could tell, it was a lot of work for a very low chance that someone would fall for it. We called it the "false market."

Meanwhile, the Hatchery was happily selling to "West and Grey" with abandon, taking fair market price for our troubles and vaguely wondering how Mr. Grey and Mr. West kept their business afloat. Did they sell in bulk to 0.0 alliances? No one really knew how they were able to keep buying at such a high price. But we only really realized that something was wrong when we submitted a 26 billion isk sale to West and Grey. 26b is a massive amount of isk (in-game currency), about $975 in real money. We half-expected W&G to refuse to fill the order or be unable to. But they said, sure, we'll fill this order, give us about 3 days to do so. In the future, though, if you break your orders into smaller amounts, it'll be more convenient for you because we can buy them more quickly.

We were pretty floored by this. We couldn't understand how W&G could make such a purchase so effortlessly. If they were able to come up with 26b that quickly, they certainly weren't dealing with razor-thin margins. What was their secret?

Karah Serrigan was the person who found the answer. He realized that because the default EVE user's contract sort setting was Oldest First, contracts set at the maximum duration (two weeks) would eventually float to the top of those users' contract lists if no one bought them.

What did this mean? Well, first of all, it meant that it was finally obvious why the "false market" was happening. Users using the default option, Oldest First, to sort contracts would see a wall of artificially inflated prices. Well, how many of those inflated contracts got bought? I wanted to find out, so I bookmarked about 30 of the oldest contracts for a certain item. I checked back the next day. Sold, sold, sold, sold, sold... etc etc. Not a single contract had made it to its expiration date. All of them had been bought at 50% above market price. It was an absurd amount of profit.

So, at this point, the jig was up. We knew what the business model of W&G was and Kwark moved swiftly to get in on their business. He quickly got the hang of the business and even improved upon it, using disposable 51-day characters to post the massive amount of contracts required for the operation of this scam. He built a formidable army of suppliers of faction goods even though W&G had the advantage of being the established buyer of bulk faction goods. The list of Kwark's alts in November should give you a sense of the scale of his operation.

- Hide Spoiler -
[00:33:48] BillNyeTheEVEguy > kwark can you list your alts please
[00:34:02] X ATM092 > Angry Arachnids
[00:34:17] X ATM092 > Tester4384
[00:34:20] X ATM092 > Pangell
[00:34:22] X ATM092 > Rens Tradealt
[00:34:25] X ATM092 > Hek Tradealt
[00:34:30] X ATM092 > Wrathful Penguins
[00:34:33] X ATM092 > Speedy Penguins
[00:34:35] X ATM092 > Capiru Jonez
[00:34:44] X ATM092 > Bill Booley
[00:34:48] X ATM092 > KwarK uK
[00:34:54] X ATM092 > X ATM092
[00:35:05] X ATM092 > Quelpy B
[00:35:06] X ATM092 > Quelpy C
[00:35:08] X ATM092 > Booley B
[00:35:10] X ATM092 > Booley A
[00:35:13] X ATM092 > Quelpy D
[00:35:15] X ATM092 > Quelpy A
[00:35:22] X ATM092 > Booley C
[00:35:24] X ATM092 > Booley D
[00:35:29] X ATM092 > Booley A1
[00:35:31] X ATM092 > Booley A2
[00:35:33] X ATM092 > Booley A3
[00:35:35] X ATM092 > Booley B1
[00:35:38] X ATM092 > Booley B2
[00:35:40] X ATM092 > Booley B3
[00:35:42] X ATM092 > Booley C1
[00:35:44] X ATM092 > Booley C2
[00:35:47] X ATM092 > Booley C3
[00:36:05] X ATM092 > Caldari Citizen 20111024
[00:36:12] X ATM092 > FA 1
[00:36:15] X ATM092 > FA 3
[00:36:19] X ATM092 > I love FA
[00:36:22] X ATM092 > FA 2
[00:36:23] X ATM092 > FA 4
[00:36:33] X ATM092 > FA MakesMe Wet
[00:36:34] X ATM092 > FA C
[00:36:36] X ATM092 > FA 5
[00:36:52] X ATM092 > Goonfleet A1-C3
[00:36:57] X ATM092 > as in 9 accounts, A1 to C3
[00:37:00] X ATM092 > MoA A1
[00:37:06] X ATM092 > MoA A2
[00:37:08] X ATM092 > MoA B1
[00:37:12] X ATM092 > MoA B2
[00:37:15] X ATM092 > MoA C1
[00:37:18] X ATM092 > MoA C2
[00:38:27] X ATM092 > corps are The Booley Family
[00:38:29] X ATM092 > Space Investments
[00:38:31] X ATM092 > Quafe LP
[00:38:35] X ATM092 > GoonFleet Investments
[00:38:42] X ATM092 > Mordu's Angels Investment Corp


Eventually, W&G contacted Kwark and tried to set up a business arrangement with him. The results of this arrangement can be seen in the EVE mail below. W&G took its trillion isk and retired, ceding a monopoly in the business to Kwark.

- Hide Spoiler -
From: Kobian Westlink
Sent: 2011.12.21 16:55
To: Karah Serrigan, X ATM092,

You agree to
1) Make a 9bn payment once per week (Sat or Sun) to West and Grey.
First payment due by Sun 1st Jan.
2) Purchase of no less than 200 of the following modules per week
BCS - 98
Gyros - 78
HS - 55
Webs - 60
EANMs - 53

I will setup the contracts for these. They are to be accepted before they expire. The price is fixed

I agree to
1) Not sell these modules on 14 day contracts.
2) Refer my mailing list members to your mailing list (once you've bought the first 600 modules from me)
3) Not operate my mailing list for the purposes of purchasing these modules.
4) Not discuss this arrangement or the system with anyone.
5) Message you from each of my BCS accounts (of which there are 37). I consider this more a courtesy, no an absolute requirement and I'll do it as I get round to each char to clear them out. So you will get a 2-3 each day for a fortnight or so.

Kobian


So Kwark was poised to fully exploit the market in a way that W&G had never done. He had a monopoly on suppliers and on contracts. He was already making upwards of 20b per week, and that amount would surely only increase. He ramped up purchases, made lots of new accounts, got ready to exploit the EVE populace in a way that it had never been before... and then CCP changed the default contract setting to Lowest First. Game over.

tl;dr Kwark now has a lot of isk.