StockX Fraud & Authentication: The Global Battle

The Rise of Sneaker Authentication at StockX

As previously discussed, the sneaker market has undergone a significant transformation. What began as a niche hobby for collectors has blossomed into a global industry worth billions of dollars, with StockX playing a pivotal role in this expansion.

The increasing value of sneakers – with some pairs selling for over $100,000 – has unfortunately attracted the attention of criminal organizations. These groups seek to profit from the production and sale of counterfeit shoes.

The Ongoing Battle Against Counterfeits

StockX finds itself in a continuous struggle against international criminal networks. These entities are motivated by the substantial profits attainable through successfully introducing fraudulent items into the authentication system.

Each year, StockX refines its authentication procedures, while counterfeiters simultaneously enhance their techniques, striving for greater accuracy in their imitations. The scale of sneaker fraud is considerable; authorities recently seized millions of dollars worth of counterfeit footwear in a single operation.

Estimates suggest that the market for fake sneakers is expanding rapidly, now reaching well into the hundreds of millions of dollars.

Authentication: A Core Value for StockX

Maintaining the trust of the community and facilitating international growth are paramount for StockX. The company places its highest priority on the ongoing development and improvement of its authentication process.

Despite significant investment and expertise, achieving 100% accuracy in authentication remains a challenge.

Exploring the Evolution of StockX Authentication

This section will delve into the origins of authentication at StockX and trace its evolution over time.

We will also examine the complexities of competing with sophisticated counterfeiters and the consequences that arise when authentication decisions are incorrect.

Understanding these challenges is crucial to appreciating the ongoing efforts to protect both buyers and sellers within the StockX marketplace.

A Disheartening Discovery – The Experience of a Sneaker Collector

Blake Yarbrough, a dedicated sneaker enthusiast and relatively new content creator on YouTube, harbored a long-held desire for the Nike Tom Sachs Mars Yard sneakers. The particularly limited 2012 edition incorporated Vectran fabric sourced from the airbags of genuine Mars Excursion rovers.

Having previously worked in management at FinishLine, Yarbrough had established a personal principle against paying above retail price for footwear. This conviction initially shaped his approach to acquiring these coveted sneakers.

“The 2012 iteration remained my primary objective, and continues to be, but the escalating market price presented a significant barrier,” Yarbrough explained. “When the 2.0 version was released in 2017, I acknowledged the material alterations and slight color variations, yet my appreciation for the design persisted.”

In 2018, he successfully purchased a pair through StockX for $1,650 – a personal record for a footwear investment. He wore the shoes frequently, but with meticulous care, even replacing the original insoles to preserve the graphic details.

The packaging for the Tom Sachs Nike collaboration includes a statement: “These shoes are only valid if worn, and worn to death, by you. Poser need not apply.” Yarbrough embraced this philosophy, actively using the sneakers rather than storing them unworn, unlike many collectors and resellers.

By late 2020, the resale market value of his Tom Sachs Mars Yard sneakers had risen considerably, fluctuating between $2,400 and $4,500. Yarbrough then decided to sell them, believing it was a suitable time to realize a profit for other ventures.

He listed the used pair on GOAT, a competitor to StockX, for $3,000 and promptly received an offer of $2,600. Satisfied with the proposed price, he carefully packaged the shoes, including the accompanying booklet, and shipped them to GOAT for authentication and subsequent delivery to the buyer.

However, Yarbrough received a notification stating that the shoes were deemed inauthentic and would not be accepted. Consequently, the transaction was cancelled. “It was a crazy feeling — the worst,” he stated, recalling the significant disruption to his day and the subsequent two-week period of deliberation.

“Discovering the email’s declaration of replicas, and realizing I was left with the shoes and a financial loss, was a profoundly unpleasant experience. It was a sensation of being defrauded, unlike anything I had encountered before,” Yarbrough shared.

The Dual Nature of Black Friday at StockX

Prior to delving further into Yarbrough’s contributions, it’s beneficial to revisit the origins of StockX. Sadelle Moore vividly remembers the initial phase, characterized by anticipation for sneaker deliveries at the StockX Detroit facility. The platform was initially introduced in 2016 with a team of just four authenticators, and Moore was involved during the pre-launch beta phase.

“In the beginning, the volume was around 10 packages daily, and a standardized procedure was lacking. Each team member was responsible for preparing their own shipping containers upon UPS arrival. It was a slow process involving only a few individuals, requiring an entire day to inspect ten pairs of shoes,” Moore recounts.

As a nascent organization, operational workflows were not fully defined. “Authenticators were also responsible for order fulfillment. After verifying a shoe’s authenticity, I would repackage it and potentially ship it immediately, consuming the entire day,” he explains.

Greg Schwartz, the COO, identifies StockX’s inaugural Black Friday in November 2016 as a crucial moment in the company’s formative years. “The shift was immediate – from typical routines to having every employee, regardless of their usual role, working within the authentication center. This center was essentially the building’s basement, and the influx of packages quickly overwhelmed the loading dock’s capacity, preventing complete delivery by UPS.”

Schwartz acknowledges the cultural impact of this event. The subsequent all-hands-on-deck effort underscored the significant potential for growth. “For nearly a full day, sleep was minimal as we focused on processing orders. This experience also highlighted the necessity of preventing a similar situation from occurring in the future.”

Maintaining Authenticity Amidst Growing Demand

StockX has proactively worked to prevent a recurrence of past issues related to fraudulent products. The initial team of four authenticators has expanded significantly, now comprising nearly 300 professionals.

These authenticators are strategically positioned across nine global authentication centers – located in Detroit, New Jersey, Tempe, Atlanta, Portland, Hong Kong, Toronto, the Netherlands, and London – alongside a seller drop-off center in New York City offering on-site authentication. This expansion supports StockX’s increasing global reach.

The team consistently refines its authentication protocols and systems. A key component is a proprietary technological process designed to assess the complexity involved in verifying each item’s authenticity.

Expanding Beyond Sneakers

The authentication centers are the source of the signature green tag, signifying verified products. As StockX broadened its offerings beyond sneakers to include other sought-after items, the expertise of its authenticators needed to evolve as well.

Currently, the platform facilitates the exchange of sneakers, streetwear, electronics, collectibles (including art and trading cards), handbags, and watches.

“We employ specialists for each product category, providing targeted training. Some authenticators are cross-trained and proficient in multiple verticals, such as being able to authenticate both streetwear, sneakers, and electronics,” explains Moore.

Developing Internal Authentication Standards

StockX is actively creating its own comprehensive authentication guides for each category, independently of the original manufacturers. Initially, the team acquired both genuine products and their counterfeit counterparts to identify discrepancies.

However, as the marketplace grows, this method is becoming less feasible.

For instance, authenticating a single sneaker model in every colorway requires navigating a checklist exceeding 100 points. Moore emphasizes that verification extends beyond the box and the shoes themselves.

“We meticulously check for all accompanying accessories – the correct colors of extra laces and the lace bags. The quality of the lace bags is often a telltale sign, as counterfeits frequently feature cloudy or substandard bags.”

The Depth of Authentication Expertise

Each sneaker silhouette, in every available color, from every brand, demands thorough study and training. This applies to both re-released classic models, like the Adidas Superstar with Pharrell Williams’ designs, and exceptionally rare limited-edition releases, such as the Travis Scott Air Jordan 4 retro.

This same rigorous attention to detail is applied across all product categories as StockX continues to grow.

Due to the hands-on nature and specialized training required, authenticators receive substantial support from other teams within the authentication process.

“We have dedicated departments at each facility focused on tasks like seller payments, size verification, and invoice matching. There are even personnel assigned to unboxing and reboxing items for shipping.”

“Quality control teams assess the condition of shoes, identifying any signs of wear or damage, and communicate with both buyers and sellers to potentially cancel orders.”

Centralized Expertise and Training

Moore’s long tenure at StockX since its inception has positioned him as the primary contact for global sneaker authentication leads.

While he specializes in authenticating highly coveted and rare sneakers, he remains accessible to address questions regarding releases, catalog updates, and authentication procedures.

He is also deeply involved in the authentication training program.

“Prior to the pandemic, I personally traveled to each authentication site to train new hires during their intensive onboarding process. While this has transitioned to a virtual format, I remain heavily involved to ensure consistency in our practices across the entire company,” Moore states.

The Shadowy Side of Resale Markets

Reports from early 2020 indicated a $450 million valuation for the counterfeit sneaker market. Later that year, U.S. Customs officials in Los Angeles intercepted a shipment of fraudulent goods valued at $32 million, primarily consisting of imitation Dior Air Jordan 1s and numerous Yeezy replicas. As Yarbrough’s experience with his Nike Tom Sachs Mars Yard sneakers demonstrates, the prevalence of fakes within the market is considerable.

Moore notes that counterfeit items are identified on a daily basis, though the current volume remains lower than that observed in 2016 and 2017. Sellers have become more aware of the platform’s robust fraud detection capabilities and are, consequently, submitting fewer fakes.

Leveraging their data-driven approach, the company has identified evolving trends in counterfeiting. In 2016, the Adidas Yeezy Boost 350 in the Beluga colorway, Air Jordan 1 Retro Breds, and Air Jordan 11 Retro Space Jams were the most frequently counterfeited shoes encountered by StockX. Notably, these were also among the platform’s best-selling models.

However, by 2020, the most replicated sneakers were considerably rarer and not among the top sellers on StockX. These included the Virgil Abloh collaboration Air Jordan 1 Off-White Retro High in the Chicago colorway, Travis Scott’s Air Jordan 1 High featuring the reversed Nike check, and the women’s exclusive Off-White Air Jordan 4 in Sail.

Authentic Off-White Jordan 4 Sails are characterized by perfectly circular holes in designated areas on the box. Replicas often exhibit poorly constructed boxes with misaligned holes. Moore specifically highlights the charcoal gray panel on the rear of the genuine shoe. “Counterfeits frequently display this panel in greenish or alternative hues,” he explains, emphasizing that even subtle details can indicate a fraudulent item.

Jesse Einhorn, StockX’s Senior Economist, attributes this shift to the effectiveness of the platform’s authentication procedures. “Currently, fewer individuals attempt to deceive us, and the fakes that are submitted tend to be the rarest, most expensive sneakers, a trend reflected in our data.” He contrasts this with 2016, when counterfeiters targeted the most popular sneakers. “In 2020, the most attempted fakes were rare, limited-edition collaborations commanding four-digit resale prices.”

It appears counterfeiters are recognizing that more widespread familiarity exists with popular sneakers, while rarer models offer fewer opportunities for scrutiny and study.

The Challenge of Counterfeit Sneakers

Currently, StockX estimates a 99.95% success rate in identifying authentic products; however, instances of fraudulent items slipping through do occur, affecting approximately .05% of transactions. The company faced significant public criticism in 2018 when Sean Wotherspoon, a prominent figure in the vintage sneaker community and collaborator with major brands, voiced his concerns regarding the prevalence of fakes on the platform.

Wotherspoon expressed his dissatisfaction on Instagram, stating his frequent encounters with counterfeit shoes originating from StockX. He described them as a “plague” and directly criticized the company, urging them to address the issue. His statement read, “@stockx you suck! Hopefully someone on your mile-long payroll has the job of reading through your social media and sees this! Take your investors somewhere else.”

Wotherspoon’s critique carried substantial weight within the sneaker culture. Beyond his ownership of seven Round Two stores, he gained recognition for creating “The Show by Round Two,” a popular YouTube series with over a quarter of a million subscribers, launched in 2015. In 2017, he achieved victory in Nike’s Vote Forward Air Max Day contest, leading to the production and release of his reimagined Air Max 97. This corduroy-based design, inspired by Nike’s 1980s caps, debuted at $160 and later commanded prices between $1,600 and $6,000 on StockX three years later.

Josh Luber, then CEO of StockX, promptly responded to Wotherspoon’s claims via Instagram, confirming private communication between the two. However, similar to the impact of a negative review on an individual eBay seller’s reputation, such public criticism could permanently deter potential customers.

This public exchange mirrored the approach taken by Yarbrough after discovering his authenticated StockX purchase was, in fact, counterfeit. Initially, he hadn’t planned to create a YouTube video about selling his Mars Yards, but the situation prompted him to document his experience. He decided to create a video detailing how he received the fakes, identifying the specific flaws, and outlining his planned course of action.

He highlighted the increased difficulty in identifying fakes in 2018, contrasting it with his experience at FinishLine a decade prior. Back then, he could readily distinguish genuine shoes from counterfeits, even identifying attempts to return fakes for refunds. “I, kind of, could always tell like, ‘Oh, these are real or these are fake,’ but now it’s really difficult.”

Yarbrough recounted the anxiety he felt when submitting images to CheckCheck, a third-party authentication service, and receiving notification that his shoes failed authentication.

He explained, “I got them at StockX, I trusted StockX. There weren’t a whole lot of people calling them out at the time, not with evidence at least.” This sentiment likely contributed to the video’s success, garnering over 200,000 views as a detailed examination of how rare sneakers, those most frequently replicated, could bypass StockX’s authentication process.

Despite purchasing the shoes two years earlier, and despite StockX’s three-day complaint filing window, Yarbrough reported receiving exceptional customer service after falsely stating a recent purchase date to access the inquiry form. He initially filed a complaint regarding the damaged box, as StockX typically rejects items with any visible wear, but ultimately dropped it and kept the sneakers.

“Maybe that’s because they saw my video. I think once I contacted them, it already had 100,000 views,” he speculated, although neither he nor StockX explicitly acknowledged the video’s influence.

Following a series of emails, including proof of purchase, order details, and comparisons between his replicas and authentic shoes, StockX requested he return the items for inspection. In a subsequent video, he expressed initial hesitation but ultimately complied. Two years after the initial purchase, StockX issued a full refund of $1,650.

“I understand the skepticism [from YouTube viewers] like, ‘If you didn’t make the video, you would have never got a refund like this,’ but I think it’s possible that I would’ve.” While the experience impacted his trust in the platform’s authentication process, he now prioritizes personal diligence when acquiring sneakers.

His primary concern now centers on the platform’s future expansion. “Now they’re getting into trading cards and all this other stuff, and I still don’t think they’ve quite nailed down sneakers, their original thing.” The refund was processed on February 7, 2021, making his concerns particularly relevant.

“I don’t think it’s like greed really, but they aren’t trying to not miss out on any part of reselling.” Yarbrough believes that the rapid expansion into new categories is straining the authentication service’s ability to maintain consistent quality control.

The Pursuit of Flawless Verification

Both committed resellers and experienced sneaker enthusiasts demand absolute accuracy from any resale marketplace. Similar to the authenticators at StockX, who initially hone their skills through personal collecting and independent study before completing the brand’s formal training, they acknowledge the increasing sophistication of counterfeit products.

“The quality of reproductions is continually improving, and I actively stay informed about this trend through research,” explains Andrew Zachau, a 27-year-old reseller based in Chicago. He regularly watches replica sneaker reviews on YouTube to enhance his knowledge.

Having spent the last ten years in the sneaker resale market, Zachau has established a strong reputation on eBay, which is where he primarily conducts his sales. Like any astute businessperson, he remains current on all market dynamics, including the proliferation of fakes.

“While StockX employs authenticators, occasional counterfeit items still slip through the system. The advancements in replica technology are significant.” He further notes that he avoids selling shoes with a resale value exceeding $800 due to concerns about authenticity. “I don’t place complete faith in any platform, whether it’s StockX or eBay, as the risk is simply too high.”

Despite his reservations, Zachau occasionally utilizes StockX for sales, in addition to using it as a benchmark for pricing. “I feel secure selling on eBay due to my established positive feedback score, but StockX offers a quick sale option when needed.”

The ease of selling with a single click is a compelling advantage that even skeptical individuals find hard to resist. In contrast to platforms like eBay or Grailed, where user profiles are linked to an identity, StockX’s anonymity enables those dealing in counterfeit goods to continue their activities without damaging their personal reputation. The platform itself bears the consequences, which is why StockX prioritizes authentication.

While authentication inevitably extends the transaction timeline, its advantages are primarily realized by new participants in the sneaker market. For those unfamiliar with the intricacies of sneaker trading, the authentication process provides a crucial layer of security and confidence.

The Evolution of Authentication at StockX

A trend has emerged, mirroring past fashion statements, where StockX users, particularly from Gen Z, are intentionally leaving the authentication tags on their purchased sneakers. This practice serves as visible proof of the product’s legitimacy, functioning as a status symbol.

According to CEO Scott Cutler, this combination of a well-known brand and the StockX authentication tag fosters a heightened sense of confidence for consumers. Brands themselves have acknowledged that this pairing significantly boosts trust in their products.

Currently, among the ten global authentication centers operated by StockX, the New York facility uniquely functions as an in-person drop-off point. This model has proven valuable in accelerating payments for sellers and expediting delivery to customers.

Furthermore, the New York location provides StockX with insights into the in-person customer experience, distinct from conventional retail. It acts as a brand representation and a gateway to the broader network. Despite this success, the company has no plans for traditional retail stores, prioritizing its existing marketplace model and avoiding inventory management.

StockX has, however, been testing brick-and-mortar drop-off locations in cities like Los Angeles, Chicago, Atlanta, and London. These pop-up locations demonstrate a commitment to seller engagement and direct consumer interaction, always adhering to public health guidelines.

Looking ahead, Cutler emphasizes the importance of international expansion, focusing on tailoring the platform experience to local sellers and buyers around each authentication center. The platform currently supports six languages and nine currencies, with localization remaining a key priority as they grow.

Ultimately, like all successful marketplaces, StockX aims to achieve a balanced supply and demand dynamic, a subject explored further in the third installment of this EC-1 series.

StockX EC-1 Series Overview

• Part 1: The Founding Story
• Part 2: The Role of E-commerce Authentication
• Part 3: Analyzing the Competitive Landscape and Consumer Trends
• Part 4: Future Outlook and Industry Impact

Explore additional EC-1 reports on Extra Crunch.

Last updated April 5, 2021: Andrew Zachau’s name was corrected.
Updated April 6, 2021: Clarification regarding in-person authentication availability in New York City and confirmation that StockX does not operate an authentication center in Japan.