You use this exploit to prevent a red player from exchanging items with another player, which allows you to kill the red player and get his drops.
1) Get the person to go red...
2) Spam trade requests to the red player.
3) This locks up the red player's inventory. He cannot move anything in his inventory. He's screwd.
4) Tell your friends or log on to your alt and hunt him down.
This exploit prevents moving someone's inventory items, which is extremely useful if you want to get drops from a red.
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