Three hours outside Bucharest, Romanian National Road 7 begins a gentle ascent into the foothills of the Transylvanian Alps. Meadowland gives way to crumbling houses with chickens in the front yard, laundry flapping on clotheslines. But you know you’ve arrived in the city of Râmnicu Vâlcea when you see the MercedesBenz dealership. It sits in the middle of a grassy field, shiny sedans on display behind glass walls. And right next door is another luxury car dealer, this one selling various other high-end European rides. It’s as if the sheer magic of wealth shimmered these glass-and-steel buildings into existence.

In fact, expensive cars choke the streets of Râmnicu Vâlcea’s bustling town center—top-of-the-line BMWs, Audis, and Mercedeses driven by twenty- and thirtysomething men sporting gold chains, fidgeting at red lights. I ask my cabdriver if these men all have high-paying jobs, and he laughs. He puts his hands in the air, palms down, and wiggles his fingers as if typing on an imaginary keyboard. “They steal money on the Internet,” he says.

Among law enforcement officials around the world, Râmnicu Vâlcea has a nickname: Hackerville. It’s something of a misnomer; only a small percentage of the fraudsters are actual hackers. But the town is indeed full of online crooks, from petty to large-scale, specializing mostly in commerce scams and malware attacks on banks and supported by an international network of money mules called arrows.

According to ballpark estimates from law-enforcement sources, these schemes have brought tens of millions of dollars into Râmnicu Vâlcea over the past decade, fueling the development of new apartments, nightclubs, and shopping centers. Râmnicu Vâlcea is a city whose main export is cybercrime, and business is booming.

I meet Bogdan Stoica and Alexandru Frunza, two of just four local cops on the digital beat, at an Italian restaurant in a neighborhood dotted with gated bungalows and apartment buildings. Stoica, 32, is square-shouldered and stocky, with a mustache and prominent stubble. His expression rarely changes. Frunza, 29, is tall and clean shaven. He’s the funny one. “My English will improve after I’ve had a few beers,” he says.

Stoica and Frunza grew up in Râmnicu Vâlcea. “The only cars on the streets were those made by Dacia,” Stoica says, referring to the venerable Romanian carmaker. “Guys from the Communist Party were allowed to own imported cars like Volvos and Volgas, bought from the Soviet Union.” Access to information was limited back then: Weekday television consisted of two hours of state-run programming, mostly devoted to covering the dictator, Nicoleau Ceausescu. “We had half an hour of cartoons on Sunday,” Stoica says.

In 1989, a revolution that began with anticommunist riots ended with the execution of Ceausescu and his wife, and the country switched to a free market economy. By 1998, when Stoica finished high school and went off to the police academy in Bucharest, another revolution was well under way: the Internet. The economy wasn’t under state control anymore, but the country was still poor. Râmnicu Vâlcea was better off than many Romanian towns, thanks to a decades-old chemical manufacturing company headquartered there and a modest tourism industry based on the surrounding mountains, historic churches, and a 17th-century monastery. But life was still tough for most of the city’s residents, and many young men and women struggled to find work.

By 2005, Romania had become a dirty word in the world of online commerce.

As buying and selling on the Internet took off, online scamming emerged as a new way to steal money. Râmnicu Vâlcea produced some of the pioneers in the business. Cybercafés enabled cheap, anonymous access to the Internet, and crooks in Râmnicu Vâlcea got busy, posting fake ads—on sites like Craigslist, AutoTrader, and eBay—that lured victims into remitting payments by wire transfer. Complaints about the town started in 2002.

In the early days, the suspects weren’t exactly geniuses. One of the first cases involved a guy posting ads for cell phones, with another man picking up the money. They had collected $2,000 from three victims in the United States, but they were so green that the guy receiving the cash hadn’t even bothered using a fake ID. “I found him sitting in an Internet café, chatting online,” says Costel Ion, a cop from the nearby town of Pitesti who was then working the cybercrime beat. “He just confessed.”

But most scammers got away with it because only a fraction of victims complained, and only a subset of the complaints triggered investigations. Soon dozens of youngsters in Râmnicu Vâlcea had entered the fray. The number of Internet-fraud victims in the United States began to climb dramatically: Official complaints—only the tip of the iceberg—went from 75,000 in 2002 to 337,000 in 2009, with total losses climbing to $560 million. FBI agents in the United States and Bucharest (the bureau posts agents at embassies to assist with international investigations) homed in on Râmnicu Vâlcea as a hub. The tip-off? Nearly $10 million was wired to the town in 2005.

The cops were onto them, but the scammers adapted. One early innovation was to ask victims to send the payment not to the seller directly but to an escrow service, a third party with a fake website resembling that of an established company. The stories that were used to con victims got better over the years. To demystify unbelievably low prices for used cars, for example, a common ruse involved a U.S. soldier stationed in Europe who had to sell a vehicle on short notice because he was getting transferred. As potential victims got savvier, the fake sellers began offering to send the car for inspection—asking for no payment except “shipping.”

Scammers refined their tricks, hiring native English speakers to draft e-mails to targets in the United States. Specialists emerged: designers of fake websites and phone workers with reassuring voices.

By 2005, Romania had become a dirty word in the world of online commerce, and buyers became wary of sending money to Râmnicu Vâlcea and other Romanian towns. The thieves adapted again. They arranged for payments to be picked up by accomplices in other European countries.

This proved to be a turning point, elevating the industry from that of a small-scale criminal activity to an international organized crime. The crooks in Râmnicu Vâlcea began linking up with a global network of confederates, people who would act as couriers and money launderers for a cut of the take. Many of these so-called arrows were Romanians living in Western Europe and the United States; some were youngsters from Râmnicu Vâlcea who had moved overseas expressly for this purpose. An arrow’s job was to go to wire-transfer offices to collect remittances wired by victims, then turn around and wire that money—minus his commission—directly to the scammers.

A little after 11 p.m., Stoica hushes our conversation and tells me to turn around and check out a table across the courtyard, where a small group of flashily dressed young men has just arrived with two blonde women who seem barely out of their teens. The men are all under investigation. “It’s a small city,” he says.

Defining Râmnicu Vâlcea’s city center is a tower shopping mall that looks like a giant glass igloo. The streets around it are lined with gleaming storefronts—leather accessories, Italian fashion. Driving past a block of low-rise buildings with neatly trimmed hedges, Stoica glances at the license plates of vehicles parked on the street, then points at a BMW SUV owned by a guy whom his team charged last year. “I don’t know if the people of Râmnicu Vâlcea are too smart or too stupid,” Stoica says grimly. “They talk a lot to each other. One guy learns the job from another. They ask their high school friends, ‘Hey, do you want to make some money? I want to use you as an arrow.’ Then the arrow learns to do the scams himself.”

Michael Macy, a professor of sociology at Cornell University who studies social networks, says Râmnicu Vâlcea’s development as a nerve center of cyberfraud may have been driven by the same kinds of factors that drive cities—or areas within cities, like the fashion district in New York—to specialize in a certain industry. “To the extent that there is some expertise required, friends and family members of the original entrepreneurs are more likely to have access to those resources than they would if they were in an isolated location,” Macy says.

Money-transfer centers are where the business of digital fraud gets done.

Gary Dickson, a supervisory agent with the FBI, points out that the public’s sympathies, at least in some of the cases that have gone to trial, now seem to lie with the defendants. The argument is “Uh, he was just ripping off Americans,” Dickson says.

Amid new construction on what seems like every block, what really stands out in Râmnicu Vâlcea are the money-transfer offices. Some 100,000 people live here, but at least two dozen Western Union storefronts lie within a four-block area downtown. The transfer centers are to Râmnicu Vâlcea what diamond-cutting mills are to Antwerp: They are where the moneymaking business gets done.

Over the past few years, Stoica and Frunza have tapped their own social networks to identify suspects and keep tabs on them. It’s not uncommon for the two to find themselves investigating a childhood acquaintance or, conversely, to run into known criminals in social situations. Frunza plays on the same soccer team as a suspect who is under surveillance. Stoica and Frunza both complain that they’re fighting an unstoppable tide with limited resources. But they haven’t been entirely unsuccessful—in fact, the 2008 case that first revealed the anatomy of Râmnicu Vâlcea’s fraud networks stemmed from Stoica’s investigation of a young entrepreneur named Romeo Chita.

Chita started out as an arrow in the United Kingdom, and he was good. He moved up the ranks and eventually hired a few friends to start his own fraud ring. The Romanian authorities started looking into him in 2005, when he began flashing his cash and buying a new car every few months without any obvious source of income, says Stoica. The next year, Chita launched an Internet service provider called NetOne. It was both a money-laundering operation and a way to shield fraudulent activity from investigators, authorities say.

In January 2008, an informer gave Stoica the cell numbers of two men suspected to be working for Chita. The police tapped the phones, and the next day, one of the men sent Chita a text message with money control transfer numbers—unique sequences of digits that the receiver of any wire transfer must provide to pick up cash. Stoica and his team followed up with surveillance of Chita and his associates, establishing what Stoica calls “the money circuit,” the route through which the money flowed from victims in the United States to Chita and others.

The tattooed man leans in ominously and says, “Were you sent by Obama?”

The group turned out to be a little more sophisticated than the usual Râmnicu scammers. They worked a con known as spear fishing—sending U.S. companies, for example, e-mails that spoofed messages from the IRS, the Department of Justice, or another agency. Leaving behind a Trojan horse computer virus, Chita’s group would then obtain the companies’ bank account numbers and passwords. They allegedly hired homeless people in Las Vegas to open fake corporate bank accounts that could receive the stolen money.

The same month that Stoica began pursuing Chita, a police officer stopped a car for speeding in the Westlake suburb of Cleveland, Ohio. As he was about to write up the ticket, the cop happened to glance into the back, where he saw a half-dozen cell phones, two computers, several passports, and two dozen receipts for money transfers. He arrested the two young men in the car, who turned out to be Romanian; they were also carrying $63,000. The two men eventually confessed to being arrows for Chita. They had spent most of that winter driving around the Midwest, picking up money from various Western Union and Money- Gram locations. Their confessions led to more wiretaps and surveillance in the United States and Romania, uncovering a network of two dozen accomplices.

That summer, Romanian authorities and FBI agents conducted a series of raids on both sides of the Atlantic to mop up the gang. Chita spent 14 months in prison before he was granted a provisional release, pending the completion of his trial. He is still free, but his photo remains in the top spot on an organizational chart filed in Stoica’s office. Against the wishes of the two cops, I went looking for this young kingpin. It was a small city, as Stoica said.

A man in Bermuda shorts, canvas shoes, and a white T-shirt introduces himself as Chita’s brother, Marian. He licks his lips nervously and fidgets with an iPhone. “Chita’s coming,” he says, “but he’s a little drunk.” While we wait in a downtown café, I look out the window at Marian’s new Jaguar and ask him how he was able to afford it. He laughs. “You know how much a Jaguar costs in Romania? Only 2,000 euros for someone with connections. You give me the money, I give it to you right now.”

A few minutes later, Chita walks around the corner and ambles into the café. Boyishly handsome, dressed in shorts, a light blue polo shirt, and flip-flops, he looks more like a college student than a criminal mastermind. At his side is a muscular young man in dark glasses, with a large tattoo on his arm. He slams a beer bottle down on the table and flexes his hand, as if he’s getting ready for a boxing match.

Chita shakes my hand dourly and sits down next to me, looking away. Two other men join our group. A young couple from a corner table come over to greet Chita with fawning smiles and handshakes. The café owner walks by and looks at me gravely. “Good luck,” he says.

The tattooed man leans in toward me ominously. “Were you sent by Barack Obama?” he asks. I say that I wasn’t, and everyone but me lights cigarettes. Chita asks the couple to join Marian as translators, and they agree to stay. The young man tells me to stand, and the bodyguard pats me down, asking if I’m wearing a wire.

“What do you say to the charges against you?” I ask.

“They are fake,” Chita says in English.

Chita continues with his defense, and the couple translate enthusiastically. “He doesn’t even know how to speak English, so it is impossible for him to post ads or exchange e-mail with buyers,” the young woman says. She continues: “He doesn’t even have an e-mail address. How can he do fraud on the Internet?” This is hardly a serious defense, but the anonymity afforded by the Web gives it a semblance of credence. And that’s exactly what has made it so challenging for law enforcement to track down cybercrooks and prosecute them.

I press Chita about the wiretapped conversations, but the bodyguard interrupts us. Then Chita takes a final drag from his cigarette and rises from his chair. “This interview is over,” Marian says.

I am left with the young couple. The young man, Alex Negru, says he has heard about Chita from his friends, has seen his name in the papers. He tells me that he’s just received a diploma in engineering from an institution in Bucharest. He’s been looking for a job here in Râmnicu Vâlcea, his hometown. “I haven’t found anything yet,” he says. If this goes on, it seems certain that Chita’s network will start to look like a pretty good option.

The cops are trying—there were 188 arrests in Romania in 2010—but it’s an endless task. I am reminded of something Frunza told me at the Italian restaurant, about how hopeless it seems to try to clean up Râmnicu Vâlcea for good. “You arrest two of them, and 20 new ones take their place,” he said. “We are two police officers, and they are 2,000.”