Tag Archives: prison

Operators of Pirate Streaming Site Pelispedia Sentenced to Prison

Post Syndicated from Ernesto original https://torrentfreak.com/operators-of-pirate-streaming-site-pelispedia-sentenced-to-prison-190729/

With over a million visitors per day, Pelispedia.tv was one of the most popular streaming sites in Latin America.

While users saw the site as an ideal service to enjoy free entertainment, the movie industry approached it as a major threat.

Following a referral from Hollywood’s MPAA, it also appeared on the radar of the US Trade Representative, which branded Pelispedia a notorious pirate site in April.

By then, rightsholders and enforcement authorities already had their eyes focused on the site’s alleged operators, a couple from Uruguay. The two, who are referred to by their initials J.A.G.R. and M.J.H.G., were tracked for weeks and eventually, the curtain fell.

Following collaborative efforts from Interpol, rightsholders, and Uruguayan authorities, the two were arrested in May. The alleged operators are charged with copyright-related crimes as well as money laundering. Soon after, Pelispedia went offline.

The case in question was referred to an Uruguayan court specialized in organized crime, which handed down its verdict a few days ago. The
couple was sentenced to three years and four months of jail time.

In addition, roughly US$500,000 worth of previously-seized assets will be transferred to the Government, as is customary under local money laundering law.

Pelispedia

The investigation into the site was launched after complaints from the Motion Picture Association and several Hollywood studios. Anti-piracy coalition ACE and MPAA Chairman Charles Rivkin are very happy with the swiftly resolved case.

“We applaud the work of our partners at Interpol and law enforcement agencies in Uruguay for the successful legal action against a major Latin American piracy organization, and thank the court for acting swiftly to stop this criminal network,” Rivkin comments.

Virginia Cervieri, the lawyer who represents the Motion Picture Association and the other complainants, previously said that domain name WHOIS data was the starting point of their investigation. While the registrant details were later updated, an earlier version has already put them on the right track.

“In these cases, information is not widely available, but it was discovered that, according to the domain WHOIS, an Uruguayan national was the holder of the Pelispedia domain. We then began to investigate if the person was real and if the data provided coincided with reality, which it did,” Cervieri told Redaccion.

The details led to a 35-year-old man, J.A.G.R., who launched Pelispedia after another popular streaming site, Cuevana, went down in 2014. Together with his wife M.J.H.G (34), he reportedly earned between $4,000 and $10,000 per month.

While Pelispedia is not coming back, the site’s demise has left a gaping hole that other pirate sites are eager to fill. Following the shutdown earlier this year, sites such as pelisplus.co, pelisplus.to and repelisgo.com have seen a healthy boost in traffic.

Source: TF, for the latest info on copyright, file-sharing, torrent sites and more. We also have VPN reviews, discounts, offers and coupons.

Hong Kong Customs Arrest Pirate Streaming Device Vendors

Post Syndicated from Andy original https://torrentfreak.com/hong-kong-customs-arrest-pirate-streaming-device-vendors-180529/

As Internet-capable set-top boxes pour into homes across all populated continents, authorities seem almost powerless to come up with a significant response to the growing threat.

In standard form these devices, which are often Android-based, are entirely legal. However, when configured with specialist software they become piracy powerhouses providing access to all content imaginable, often at copyright holders’ expense.

A large proportion of these devices come from Asia, China in particular, but it’s relatively rare to hear of enforcement action in that part of the world. That changed this week with an announcement from Hong Kong customs detailing a series of raids in the areas of Sham Shui Po and Wan Chai.

After conducting an in-depth investigation with the assistance of copyright holders, on May 25 and 26 Customs and Excise officers launched Operation Trojan Horse, carrying out a series of raids on four premises selling suspected piracy-configured set-top boxes.

During the operation, officers arrested seven men and one woman aged between 18 and 45. Four of them were shop owners and the other four were salespeople. Around 354 suspected ‘pirate’ boxes were seized with an estimated market value of HK$320,000 (US$40,700).

“In the past few months, the department has stepped up inspections of hotspots for TV set-top boxes,” a statement from authorities reads.

“We have discovered that some shops have sold suspected illegal set-top boxes that bypass the copyright protection measures imposed by copyright holders of pay television programs allowing people to watch pay television programs for free.”

Some of the devices seized by Hong Kong Customs

During a press conference yesterday, a representative from the Customs Copyright and Trademark Investigations (Action) Division said that in the run up to the World Cup in 2018, measures against copyright infringement will be strengthened both on and online.

The announcement was welcomed by the Cable and Satellite Broadcasting Association of Asia’s (CASBAA) Coalition Against Piracy, which is back by industry heavyweights including Disney, Fox, HBO Asia, NBCUniversal, Premier League, Turner Asia-Pacific, A&E Networks, Astro, BBC Worldwide, National Basketball Association, TV5MONDE, Viacom International, and others.

“We commend the great work of Hong Kong Customs in clamping down on syndicates who profit from the sale of Illicit Streaming Devices,” said General Manager Neil Gane.

“The prevalence of ISDs in Hong Kong and across South East Asia is staggering. The criminals who sell ISDs, as well as those who operate the ISD networks and pirate websites, are profiting from the hard work of talented creators, seriously damaging the legitimate content ecosystem as well as exposing consumers to dangerous malware.”

Malware warnings are very prevalent these days but it’s not something the majority of set-top box owners have a problem with. Indeed, a study carried by Sycamore Research found that pirates aren’t easily deterred by such warnings.

Nevertheless, there are definite risks for individuals selling devices when they’re configured for piracy.

Recent cases, particularly in the UK, have shown that hefty jail sentences can hit offenders while over in the United States (1,2,3), lawsuits filed by the Alliance for Creativity and Entertainment (ACE) have the potential to end in unfavorable rulings for multiple defendants.

Although rarely reported, offenders in Hong Kong also face stiff sentences for this kind of infringement including large fines and custodial sentences of up to four years.

Source: TF, for the latest info on copyright, file-sharing, torrent sites and more. We also have VPN reviews, discounts, offers and coupons.

Fully-Loaded Kodi Box Sellers Receive Hefty Jail Sentences

Post Syndicated from Andy original https://torrentfreak.com/fully-loaded-kodi-box-sellers-receive-hefty-jail-sentences-180524/

While users of older peer-to-peer based file-sharing systems have to work relatively hard to obtain content, users of the Kodi media player have things an awful lot easier.

As standard, Kodi is perfectly legal. However, when augmented with third-party add-ons it becomes a media discovery powerhouse, providing most of the content anyone could desire. A system like this can be set up by the user but for many, buying a so-called “fully-loaded” box from a seller is the easier option.

As a result, hundreds – probably thousands – of cottage industries have sprung up to service this hungry market in the UK, with regular people making a business out of setting up and selling such devices. Until three years ago, that’s what Michael Jarman and Natalie Forber of Colwyn Bay, Wales, found themselves doing.

According to reports in local media, Jarman was arrested in January 2015 when police were called to a disturbance at Jarman and Forber’s home. A large number of devices were spotted and an investigation was launched by Trading Standards officers. The pair were later arrested and charged with fraud offenses.

While 37-year-old Jarman pleaded guilty, 36-year-old Forber initially denied the charges and was due to stand trial. However, she later changed her mind and like Jarman, pleaded guilty to participating in a fraudulent business. Forber also pleaded guilty to transferring criminal property by shifting cash from the scheme through various bank accounts.

The pair attended a sentencing hearing before Judge Niclas Parry at Caernarfon Crown Court yesterday. According to local reporter Eryl Crump, the Court heard that the couple had run their business for about two years, selling around 1,000 fully-loaded Kodi-enabled devices for £100 each via social media.

According to David Birrell for the prosecution, the operation wasn’t particularly sophisticated but it involved Forber programming the devices as well as handling customer service. Forber claimed she was forced into the scheme by Jarman but that claim was rejected by the prosecution.

Between February 2013 and January 2015 the pair banked £105,000 from the business, money that was transferred between bank accounts in an effort to launder the takings.

Reporting from Court via Twitter, Crump said that Jarman’s defense lawyer accepted that a prison sentence was inevitable for his client but asked for the most lenient sentence possible.

Forber’s lawyer pointed out she had no previous convictions. The mother-of-two broke up with Jarman following her arrest and is now back in work and studying at college.

Sentencing the pair, Judge Niclas Parry described the offenses as a “relatively sophisticated fraud” carried out over a significant period. He jailed Jarman for 21 months and Forber for 16 months, suspended for two years. She must also carry out 200 hours of unpaid work.

The pair will also face a Proceeds of Crime investigation which could see them paying large sums to the state, should any assets be recoverable.

Source: TF, for the latest info on copyright, file-sharing, torrent sites and more. We also have VPN reviews, discounts, offers and coupons.

Maliciously Changing Someone’s Address

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2018/05/maliciously_cha.html

Someone changed the address of UPS corporate headquarters to his own apartment in Chicago. The company discovered it three months later.

The problem, of course, is that there isn’t any authentication of change-of-address submissions:

According to the Postal Service, nearly 37 million change-of-address requests ­ known as PS Form 3575 ­ were submitted in 2017. The form, which can be filled out in person or online, includes a warning below the signature line that “anyone submitting false or inaccurate information” could be subject to fines and imprisonment.

To cut down on possible fraud, post offices send a validation letter to both an old and new address when a change is filed. The letter includes a toll-free number to call to report anything suspicious.

Each year, only a tiny fraction of the requests are ever referred to postal inspectors for investigation. A spokeswoman for the U.S. Postal Inspection Service could not provide a specific number to the Tribune, but officials have previously said that the number of change-of-address investigations in a given year totals 1,000 or fewer typically.

While fraud involving change-of-address forms has long been linked to identity thieves, the targets are usually unsuspecting individuals, not massive corporations.

Infamous ‘Kodi Box’ Case Sees Man Pay Back Just £1 to the State

Post Syndicated from Andy original https://torrentfreak.com/infamous-kodi-box-case-sees-man-pay-back-just-1-to-the-state-180507/

In 2015, Middlesbrough-based shopkeeper Brian ‘Tomo’ Thompson shot into the headlines after being raided by police and Trading Standards in the UK.

Thompson had been selling “fully-loaded” piracy-configured Kodi boxes from his shop but didn’t think he’d done anything wrong.

“All I want to know is whether I am doing anything illegal. I know it’s a gray area but I want it in black and white,” he said.

Thompson started out with a particularly brave tone. He insisted he’d take the case to Crown Court and even to the European Court. His mission was show what was legal and what wasn’t, he said.

Very quickly, Thompson’s case took on great importance, with observers everywhere reporting on a potential David versus Goliath copyright battle for the ages. But Thompson’s case wasn’t straightforward.

The shopkeeper wasn’t charged with basic “making available” under the Copyrights, Designs and Patents Acts that would have found him guilty under the earlier BREIN v Filmspeler case. Instead, he stood accused of two offenses under section 296ZB of the Copyright, Designs and Patents Act, which deals with devices and services designed to “circumvent technological measures”.

In the end it was all moot. After entering his official ‘not guilty’ plea, last year Thompson suddenly changed his tune. He accepted the prosecution’s version of events, throwing himself at the mercy of the court with a guilty plea.

In October 2017, Teeside Crown Court heard that Thompson cost Sky around £200,000 in lost subscriptions while the shopkeeper made around £38,500 from selling the devices. But despite the fairly big numbers, Judge Peter Armstrong decided to go reasonably light on the 55-year-old, handing him an 18-month prison term, suspended for two years.

“I’ve come to the conclusion that in all the circumstances an immediate custodial sentence is not called for. But as a warning to others in future, they may not be so lucky,” the Judge said.

But things wouldn’t end there for Thompson.

In the UK, people who make money or obtain assets from criminal activity can be forced to pay back their profits, which are then confiscated by the state under the Proceeds of Crime Act (pdf). Almost anything can be taken, from straight cash to cars, jewellery and houses.

However, it appears that whatever cash Thompson earned from Kodi Box activities has long since gone.

During a Proceeds of Crime hearing reported on by Gazette Live, the Court heard that Thompson has no assets whatsoever so any confiscation order would have to be a small one.

In the end, Judge Simon Hickey decided that Thompson should forfeit a single pound, an amount that could increase if the businessman got lucky moving forward.

“If anything changes in the future, for instance if you win the lottery, it might come back,” the Judge said.

With that seeming particularly unlikely, perhaps this will be the end for Thompson. Considering the gravity and importance placed on his case, zero jail time and just a £1 to pay back will probably be acceptable to the 55-year-old and also a lesson to the authorities, who have gotten very little out of this expensive case.

Who knows, perhaps they might sum up the outcome using the same eight-letter word that Thompson can be seen half-covering in this photograph.

Source: TF, for the latest info on copyright, file-sharing, torrent sites and more. We also have VPN reviews, discounts, offers and coupons.

What John Oliver gets wrong about Bitcoin

Post Syndicated from Robert Graham original http://blog.erratasec.com/2018/03/what-john-oliver-gets-wrong-about.html

John Oliver covered bitcoin/cryptocurrencies last night. I thought I’d describe a bunch of things he gets wrong.

How Bitcoin works

Nowhere in the show does it describe what Bitcoin is and how it works.
Discussions should always start with Satoshi Nakamoto’s original paper. The thing Satoshi points out is that there is an important cost to normal transactions, namely, the entire legal system designed to protect you against fraud, such as the way you can reverse the transactions on your credit card if it gets stolen. The point of Bitcoin is that there is no way to reverse a charge. A transaction is done via cryptography: to transfer money to me, you decrypt it with your secret key and encrypt it with mine, handing ownership over to me with no third party involved that can reverse the transaction, and essentially no overhead.
All the rest of the stuff, like the decentralized blockchain and mining, is all about making that work.
Bitcoin crazies forget about the original genesis of Bitcoin. For example, they talk about adding features to stop fraud, reversing transactions, and having a central authority that manages that. This misses the point, because the existing electronic banking system already does that, and does a better job at it than cryptocurrencies ever can. If you want to mock cryptocurrencies, talk about the “DAO”, which did exactly that — and collapsed in a big fraudulent scheme where insiders made money and outsiders didn’t.
Sticking to Satoshi’s original ideas are a lot better than trying to repeat how the crazy fringe activists define Bitcoin.

How does any money have value?

Oliver’s answer is currencies have value because people agree that they have value, like how they agree a Beanie Baby is worth $15,000.
This is wrong. A better way of asking the question why the value of money changes. The dollar has been losing roughly 2% of its value each year for decades. This is called “inflation”, as the dollar loses value, it takes more dollars to buy things, which means the price of things (in dollars) goes up, and employers have to pay us more dollars so that we can buy the same amount of things.
The reason the value of the dollar changes is largely because the Federal Reserve manages the supply of dollars, using the same law of Supply and Demand. As you know, if a supply decreases (like oil), then the price goes up, or if the supply of something increases, the price goes down. The Fed manages money the same way: when prices rise (the dollar is worth less), the Fed reduces the supply of dollars, causing it to be worth more. Conversely, if prices fall (or don’t rise fast enough), the Fed increases supply, so that the dollar is worth less.
The reason money follows the law of Supply and Demand is because people use money, they consume it like they do other goods and services, like gasoline, tax preparation, food, dance lessons, and so forth. It’s not like a fine art painting, a stamp collection or a Beanie Baby — money is a product. It’s just that people have a hard time thinking of it as a consumer product since, in their experience, money is what they use to buy consumer products. But it’s a symmetric operation: when you buy gasoline with dollars, you are actually selling dollars in exchange for gasoline. That you call one side in this transaction “money” and the other “goods” is purely arbitrary, you call gasoline money and dollars the good that is being bought and sold for gasoline.
The reason dollars is a product is because trying to use gasoline as money is a pain in the neck. Storing it and exchanging it is difficult. Goods like this do become money, such as famously how prisons often use cigarettes as a medium of exchange, even for non-smokers, but it has to be a good that is fungible, storable, and easily exchanged. Dollars are the most fungible, the most storable, and the easiest exchanged, so has the most value as “money”. Sure, the mechanic can fix the farmers car for three chickens instead, but most of the time, both parties in the transaction would rather exchange the same value using dollars than chickens.
So the value of dollars is not like the value of Beanie Babies, which people might buy for $15,000, which changes purely on the whims of investors. Instead, a dollar is like gasoline, which obey the law of Supply and Demand.
This brings us back to the question of where Bitcoin gets its value. While Bitcoin is indeed used like dollars to buy things, that’s only a tiny use of the currency, so therefore it’s value isn’t determined by Supply and Demand. Instead, the value of Bitcoin is a lot like Beanie Babies, obeying the laws of investments. So in this respect, Oliver is right about where the value of Bitcoin comes, but wrong about where the value of dollars comes from.

Why Bitcoin conference didn’t take Bitcoin

John Oliver points out the irony of a Bitcoin conference that stopped accepting payments in Bitcoin for tickets.
The biggest reason for this is because Bitcoin has become so popular that transaction fees have gone up. Instead of being proof of failure, it’s proof of popularity. What John Oliver is saying is the old joke that nobody goes to that popular restaurant anymore because it’s too crowded and you can’t get a reservation.
Moreover, the point of Bitcoin is not to replace everyday currencies for everyday transactions. If you read Satoshi Nakamoto’s whitepaper, it’s only goal is to replace certain types of transactions, like purely electronic transactions where electronic goods and services are being exchanged. Where real-life goods/services are being exchanged, existing currencies work just fine. It’s only the crazy activists who claim Bitcoin will eventually replace real world currencies — the saner people see it co-existing with real-world currencies, each with a different value to consumers.

Turning a McNugget back into a chicken

John Oliver uses the metaphor of turning a that while you can process a chicken into McNuggets, you can’t reverse the process. It’s a funny metaphor.
But it’s not clear what the heck this metaphor is trying explain. That’s not a metaphor for the blockchain, but a metaphor for a “cryptographic hash”, where each block is a chicken, and the McNugget is the signature for the block (well, the block plus the signature of the last block, forming a chain).
Even then that metaphor as problems. The McNugget produced from each chicken must be unique to that chicken, for the metaphor to accurately describe a cryptographic hash. You can therefore identify the original chicken simply by looking at the McNugget. A slight change in the original chicken, like losing a feather, results in a completely different McNugget. Thus, nuggets can be used to tell if the original chicken has changed.
This then leads to the key property of the blockchain, it is unalterable. You can’t go back and change any of the blocks of data, because the fingerprints, the nuggets, will also change, and break the nugget chain.
The point is that while John Oliver is laughing at a silly metaphor to explain the blockchain becuase he totally misses the point of the metaphor.
Oliver rightly says “don’t worry if you don’t understand it — most people don’t”, but that includes the big companies that John Oliver name. Some companies do get it, and are producing reasonable things (like JP Morgan, by all accounts), but some don’t. IBM and other big consultancies are charging companies millions of dollars to consult with them on block chain products where nobody involved, the customer or the consultancy, actually understand any of it. That doesn’t stop them from happily charging customers on one side and happily spending money on the other.
Thus, rather than Oliver explaining the problem, he’s just being part of the problem. His explanation of blockchain left you dumber than before.

ICO’s

John Oliver mocks the Brave ICO ($35 million in 30 seconds), claiming it’s all driven by YouTube personalities and people who aren’t looking at the fundamentals.
And while this is true, most ICOs are bunk, the  Brave ICO actually had a business model behind it. Brave is a Chrome-like web-browser whose distinguishing feature is that it protects your privacy from advertisers. If you don’t use Brave or a browser with an ad block extension, you have no idea how bad things are for you. However, this presents a problem for websites that fund themselves via advertisements, which is most of them, because visitors no longer see ads. Brave has a fix for this. Most people wouldn’t mind supporting the websites they visit often, like the New York Times. That’s where the Brave ICO “token” comes in: it’s not simply stock in Brave, but a token for micropayments to websites. Users buy tokens, then use them for micropayments to websites like New York Times. The New York Times then sells the tokens back to the market for dollars. The buying and selling of tokens happens without a centralized middleman.
This is still all speculative, of course, and it remains to be seen how successful Brave will be, but it’s a serious effort. It has well respected VC behind the company, a well-respected founder (despite the fact he invented JavaScript), and well-respected employees. It’s not a scam, it’s a legitimate venture.

How to you make money from Bitcoin?

The last part of the show is dedicated to describing all the scam out there, advising people to be careful, and to be “responsible”. This is garbage.
It’s like my simple two step process to making lots of money via Bitcoin: (1) buy when the price is low, and (2) sell when the price is high. My advice is correct, of course, but useless. Same as “be careful” and “invest responsibly”.
The truth about investing in cryptocurrencies is “don’t”. The only responsible way to invest is to buy low-overhead market index funds and hold for retirement. No, you won’t get super rich doing this, but anything other than this is irresponsible gambling.
It’s a hard lesson to learn, because everyone is telling you the opposite. The entire channel CNBC is devoted to day traders, who buy and sell stocks at a high rate based on the same principle as a ponzi scheme, basing their judgment not on the fundamentals (like long term dividends) but animal spirits of whatever stock is hot or cold at the moment. This is the same reason people buy or sell Bitcoin, not because they can describe the fundamental value, but because they believe in a bigger fool down the road who will buy it for even more.
For things like Bitcoin, the trick to making money is to have bought it over 7 years ago when it was essentially worthless, except to nerds who were into that sort of thing. It’s the same tick to making a lot of money in Magic: The Gathering trading cards, which nerds bought decades ago which are worth a ton of money now. Or, to have bought Apple stock back in 2009 when the iPhone was new, when nerds could understand the potential of real Internet access and apps that Wall Street could not.
That was my strategy: be a nerd, who gets into things. I’ve made a good amount of money on all these things because as a nerd, I was into Magic: The Gathering, Bitcoin, and the iPhone before anybody else was, and bought in at the point where these things were essentially valueless.
At this point with cryptocurrencies, with the non-nerds now flooding the market, there little chance of making it rich. The lottery is probably a better bet. Instead, if you want to make money, become a nerd, obsess about a thing, understand a thing when its new, and cash out once the rest of the market figures it out. That might be Brave, for example, but buy into it because you’ve spent the last year studying the browser advertisement ecosystem, the market’s willingness to pay for content, and how their Basic Attention Token delivers value to websites — not because you want in on the ICO craze.

Conclusion

John Oliver spends 25 minutes explaining Bitcoin, Cryptocurrencies, and the Blockchain to you. Sure, it’s funny, but it leaves you worse off than when it started. It admits they “simplify” the explanation, but they simplified it so much to the point where they removed all useful information.

The deal with Bitcoin

Post Syndicated from Michal Zalewski original http://lcamtuf.blogspot.com/2017/12/the-deal-with-bitcoin.html

♪ Used to have a little now I have a lot
I’m still, I’m still Jenny from the block
          chain ♪

For all that has been written about Bitcoin and its ilk, it is curious that the focus is almost solely what the cryptocurrencies are supposed to be. Technologists wax lyrical about the potential for blockchains to change almost every aspect of our lives. Libertarians and paleoconservatives ache for the return to “sound money” that can’t be conjured up at the whim of a bureaucrat. Mainstream economists wag their fingers, proclaiming that a proper currency can’t be deflationary, that it must maintain a particular velocity, or that the government must be able to nip crises of confidence in the bud. And so on.

Much of this may be true, but the proponents of cryptocurrencies should recognize that an appeal to consequences is not a guarantee of good results. The critics, on the other hand, would be best served to remember that they are drawing far-reaching conclusions about the effects of modern monetary policies based on a very short and tumultuous period in history.

In this post, my goal is to ditch most of the dogma, talk a bit about the origins of money – and then see how “crypto” fits the bill.

1. The prehistory of currencies

The emergence of money is usually explained in a very straightforward way. You know the story: a farmer raised a pig, a cobbler made a shoe. The cobbler needed to feed his family while the farmer wanted to keep his feet warm – and so they met to exchange the goods on mutually beneficial terms. But as the tale goes, the barter system had a fatal flaw: sometimes, a farmer wanted a cooking pot, a potter wanted a knife, and a blacksmith wanted a pair of pants. To facilitate increasingly complex, multi-step exchanges without requiring dozens of people to meet face to face, we came up with an abstract way to represent value – a shiny coin guaranteed to be accepted by every tradesman.

It is a nice parable, but it probably isn’t very true. It seems far more plausible that early societies relied on the concept of debt long before the advent of currencies: an informal tally or a formal ledger would be used to keep track of who owes what to whom. The concept of debt, closely associated with one’s trustworthiness and standing in the community, would have enabled a wide range of economic activities: debts could be paid back over time, transferred, renegotiated, or forgotten – all without having to engage in spot barter or to mint a single coin. In fact, such non-monetary, trust-based, reciprocal economies are still common in closely-knit communities: among families, neighbors, coworkers, or friends.

In such a setting, primitive currencies probably emerged simply as a consequence of having a system of prices: a cow being worth a particular number of chickens, a chicken being worth a particular number of beaver pelts, and so forth. Formalizing such relationships by settling on a single, widely-known unit of account – say, one chicken – would make it more convenient to transfer, combine, or split debts; or to settle them in alternative goods.

Contrary to popular belief, for communal ledgers, the unit of account probably did not have to be particularly desirable, durable, or easy to carry; it was simply an accounting tool. And indeed, we sometimes run into fairly unusual units of account even in modern times: for example, cigarettes can be the basis of a bustling prison economy even when most inmates don’t smoke and there are not that many packs to go around.

2. The age of commodity money

In the end, the development of coinage might have had relatively little to do with communal trade – and far more with the desire to exchange goods with strangers. When dealing with a unfamiliar or hostile tribe, the concept of a chicken-denominated ledger does not hold up: the other side might be disinclined to honor its obligations – and get away with it, too. To settle such problematic trades, we needed a “spot” medium of exchange that would be easy to carry and authenticate, had a well-defined value, and a near-universal appeal. Throughout much of the recorded history, precious metals – predominantly gold and silver – proved to fit the bill.

In the most basic sense, such commodities could be seen as a tool to reconcile debts across societal boundaries, without necessarily replacing any local units of account. An obligation, denominated in some local currency, would be created on buyer’s side in order to procure the metal for the trade. The proceeds of the completed transaction would in turn allow the seller to settle their own local obligations that arose from having to source the traded goods. In other words, our wondrous chicken-denominated ledgers could coexist peacefully with gold – and when commodity coinage finally took hold, it’s likely that in everyday trade, precious metals served more as a useful abstraction than a precise store of value. A “silver chicken” of sorts.

Still, the emergence of commodity money had one interesting side effect: it decoupled the unit of debt – a “claim on the society”, in a sense – from any moral judgment about its origin. A piece of silver would buy the same amount of food, whether earned through hard labor or won in a drunken bet. This disconnect remains a central theme in many of the debates about social justice and unfairly earned wealth.

3. The State enters the game

If there is one advantage of chicken ledgers over precious metals, it’s that all chickens look and cluck roughly the same – something that can’t be said of every nugget of silver or gold. To cope with this problem, we needed to shape raw commodities into pieces of a more predictable shape and weight; a trusted party could then stamp them with a mark to indicate the value and the quality of the coin.

At first, the task of standardizing coinage rested with private parties – but the responsibility was soon assumed by the State. The advantages of this transition seemed clear: a single, widely-accepted and easily-recognizable currency could be now used to settle virtually all private and official debts.

Alas, in what deserves the dubious distinction of being one of the earliest examples of monetary tomfoolery, some States succumbed to the temptation of fiddling with the coinage to accomplish anything from feeding the poor to waging wars. In particular, it would be common to stamp coins with the same face value but a progressively lower content of silver and gold. Perhaps surprisingly, the strategy worked remarkably well; at least in the times of peace, most people cared about the value stamped on the coin, not its precise composition or weight.

And so, over time, representative money was born: sooner or later, most States opted to mint coins from nearly-worthless metals, or print banknotes on paper and cloth. This radically new currency was accompanied with a simple pledge: the State offered to redeem it at any time for its nominal value in gold.

Of course, the promise was largely illusory: the State did not have enough gold to honor all the promises it had made. Still, as long as people had faith in their rulers and the redemption requests stayed low, the fundamental mechanics of this new representative currency remained roughly the same as before – and in some ways, were an improvement in that they lessened the insatiable demand for a rare commodity. Just as importantly, the new money still enabled international trade – using the underlying gold exchange rate as a reference point.

4. Fractional reserve banking and fiat money

For much of the recorded history, banking was an exceptionally dull affair, not much different from running a communal chicken
ledger of the old. But then, something truly marvelous happened in the 17th century: around that time, many European countries have witnessed
the emergence of fractional-reserve banks.

These private ventures operated according to a simple scheme: they accepted people’s coin
for safekeeping, promising to pay a premium on every deposit made. To meet these obligations and to make a profit, the banks then
used the pooled deposits to make high-interest loans to other folks. The financiers figured out that under normal circumstances
and when operating at a sufficient scale, they needed only a very modest reserve – well under 10% of all deposited money – to be
able to service the usual volume and size of withdrawals requested by their customers. The rest could be loaned out.

The very curious consequence of fractional-reserve banking was that it pulled new money out of thin air.
The funds were simultaneously accounted for in the statements shown to the depositor, evidently available for withdrawal or
transfer at any time; and given to third-party borrowers, who could spend them on just about anything. Heck, the borrowers could
deposit the proceeds in another bank, creating even more money along the way! Whatever they did, the sum of all funds in the monetary
system now appeared much higher than the value of all coins and banknotes issued by the government – let alone the amount of gold
sitting in any vault.

Of course, no new money was being created in any physical sense: all that banks were doing was engaging in a bit of creative accounting – the sort of which would probably land you in jail if you attempted it today in any other comparably vital field of enterprise. If too many depositors were to ask for their money back, or if too many loans were to go bad, the banking system would fold. Fortunes would evaporate in a puff of accounting smoke, and with the disappearance of vast quantities of quasi-fictitious (“broad”) money, the wealth of the entire nation would shrink.

In the early 20th century, the world kept witnessing just that; a series of bank runs and economic contractions forced the governments around the globe to act. At that stage, outlawing fractional-reserve banking was no longer politically or economically tenable; a simpler alternative was to let go of gold and move to fiat money – a currency implemented as an abstract social construct, with no predefined connection to the physical realm. A new breed of economists saw the role of the government not in trying to peg the value of money to an inflexible commodity, but in manipulating its supply to smooth out economic hiccups or to stimulate growth.

(Contrary to popular beliefs, such manipulation is usually not done by printing new banknotes; more sophisticated methods, such as lowering reserve requirements for bank deposits or enticing banks to invest its deposits into government-issued securities, are the preferred route.)

The obvious peril of fiat money is that in the long haul, its value is determined strictly by people’s willingness to accept a piece of paper in exchange for their trouble; that willingness, in turn, is conditioned solely on their belief that the same piece of paper would buy them something nice a week, a month, or a year from now. It follows that a simple crisis of confidence could make a currency nearly worthless overnight. A prolonged period of hyperinflation and subsequent austerity in Germany and Austria was one of the precipitating factors that led to World War II. In more recent times, dramatic episodes of hyperinflation plagued the fiat currencies of Israel (1984), Mexico (1988), Poland (1990), Yugoslavia (1994), Bulgaria (1996), Turkey (2002), Zimbabwe (2009), Venezuela (2016), and several other nations around the globe.

For the United States, the switch to fiat money came relatively late, in 1971. To stop the dollar from plunging like a rock, the Nixon administration employed a clever trick: they ordered the freeze of wages and prices for the 90 days that immediately followed the move. People went on about their lives and paid the usual for eggs or milk – and by the time the freeze ended, they were accustomed to the idea that the “new”, free-floating dollar is worth about the same as the old, gold-backed one. A robust economy and favorable geopolitics did the rest, and so far, the American adventure with fiat currency has been rather uneventful – perhaps except for the fact that the price of gold itself skyrocketed from $35 per troy ounce in 1971 to $850 in 1980 (or, from $210 to $2,500 in today’s dollars).

Well, one thing did change: now better positioned to freely tamper with the supply of money, the regulators in accord with the bankers adopted a policy of creating it at a rate that slightly outstripped the organic growth in economic activity. They did this to induce a small, steady degree of inflation, believing that doing so would discourage people from hoarding cash and force them to reinvest it for the betterment of the society. Some critics like to point out that such a policy functions as a “backdoor” tax on savings that happens to align with the regulators’ less noble interests; still, either way: in the US and most other developed nations, the purchasing power of any money kept under a mattress will drop at a rate of somewhere between 2 to 10% a year.

5. So what’s up with Bitcoin?

Well… countless tomes have been written about the nature and the optimal characteristics of government-issued fiat currencies. Some heterodox economists, notably including Murray Rothbard, have also explored the topic of privately-issued, decentralized, commodity-backed currencies. But Bitcoin is a wholly different animal.

In essence, BTC is a global, decentralized fiat currency: it has no (recoverable) intrinsic value, no central authority to issue it or define its exchange rate, and it has no anchoring to any historical reference point – a combination that until recently seemed nonsensical and escaped any serious scrutiny. It does the unthinkable by employing three clever tricks:

  1. It allows anyone to create new coins, but only by solving brute-force computational challenges that get more difficult as the time goes by,

  2. It prevents unauthorized transfer of coins by employing public key cryptography to sign off transactions, with only the authorized holder of a coin knowing the correct key,

  3. It prevents double-spending by using a distributed public ledger (“blockchain”), recording the chain of custody for coins in a tamper-proof way.

The blockchain is often described as the most important feature of Bitcoin, but in some ways, its importance is overstated. The idea of a currency that does not rely on a centralized transaction clearinghouse is what helped propel the platform into the limelight – mostly because of its novelty and the perception that it is less vulnerable to government meddling (although the government is still free to track down, tax, fine, or arrest any participants). On the flip side, the everyday mechanics of BTC would not be fundamentally different if all the transactions had to go through Bitcoin Bank, LLC.

A more striking feature of the new currency is the incentive structure surrounding the creation of new coins. The underlying design democratized the creation of new coins early on: all you had to do is leave your computer running for a while to acquire a number of tokens. The tokens had no practical value, but obtaining them involved no substantial expense or risk. Just as importantly, because the difficulty of the puzzles would only increase over time, the hope was that if Bitcoin caught on, latecomers would find it easier to purchase BTC on a secondary market than mine their own – paying with a more established currency at a mutually beneficial exchange rate.

The persistent publicity surrounding Bitcoin and other cryptocurrencies did the rest – and today, with the growing scarcity of coins and the rapidly increasing demand, the price of a single token hovers somewhere south of $15,000.

6. So… is it bad money?

Predicting is hard – especially the future. In some sense, a coin that represents a cryptographic proof of wasted CPU cycles is no better or worse than a currency that relies on cotton decorated with pictures of dead presidents. It is true that Bitcoin suffers from many implementation problems – long transaction processing times, high fees, frequent security breaches of major exchanges – but in principle, such problems can be overcome.

That said, currencies live and die by the lasting willingness of others to accept them in exchange for services or goods – and in that sense, the jury is still out. The use of Bitcoin to settle bona fide purchases is negligible, both in absolute terms and in function of the overall volume of transactions. In fact, because of the technical challenges and limited practical utility, some companies that embraced the currency early on are now backing out.

When the value of an asset is derived almost entirely from its appeal as an ever-appreciating investment vehicle, the situation has all the telltale signs of a speculative bubble. But that does not prove that the asset is destined to collapse, or that a collapse would be its end. Still, the built-in deflationary mechanism of Bitcoin – the increasing difficulty of producing new coins – is probably both a blessing and a curse.

It’s going to go one way or the other; and when it’s all said and done, we’re going to celebrate the people who made the right guess. Because future is actually pretty darn easy to predict — in retrospect.

What We’re Thankful For

Post Syndicated from Roderick Bauer original https://www.backblaze.com/blog/what-were-thankful-for/

All of us at Backblaze hope you have a wonderful Thanksgiving, and that you can enjoy it with family and friends. We asked everyone at Backblaze to express what they are thankful for. Here are their responses.

Fall leaves

What We’re Thankful For

Aside from friends, family, hobbies, health, etc. I’m thankful for my home. It’s not much, but it’s mine, and allows me to indulge in everything listed above. Or not, if I so choose. And coffee.

— Tony

I’m thankful for my wife Jen, and my other friends. I’m thankful that I like my coworkers and can call them friends too. I’m thankful for my health. I’m thankful that I was born into a middle class family in the US and that I have been very, very lucky because of that.

— Adam

Besides the most important things which are being thankful for my family, my health and my friends, I am very thankful for Backblaze. This is the first job I’ve ever had where I truly feel like I have a great work/life balance. With having 3 kids ages 8, 6 and 4, a husband that works crazy hours and my tennis career on the rise (kidding but I am on 4 teams) it’s really nice to feel like I have balance in my life. So cheers to Backblaze – where a girl can have it all!

— Shelby

I am thankful to work at a high-tech company that recognizes the contributions of engineers in their 40s and 50s.

— Jeannine

I am thankful for the music, the songs I’m singing. Thankful for all the joy they’re bringing. Who can live without it, I ask in all honesty? What would life be? Without a song or a dance what are we? So I say thank you for the music. For giving it to me!

— Yev

I’m thankful that I don’t look anything like the portrait my son draws of me…seriously.

— Natalie

I am thankful to work for a company that puts its people and product ahead of profits.

— James

I am thankful that even in the middle of disasters, turmoil, and violence, there are always people who commit amazing acts of generosity, courage, and kindness that restore my faith in mankind.

— Roderick

The future.

— Ahin

The Future

I am thankful for the current state of modern inexpensive broadband networking that allows me to stay in touch with friends and family that are far away, allows Backblaze to exist and pay my salary so I can live comfortably, and allows me to watch cat videos for free. The internet makes this an amazing time to be alive.

— Brian

Other than being thankful for family & good health, I’m quite thankful through the years I’ve avoided losing any of my 12+TB photo archive. 20 years of photoshoots, family photos and cell phone photos kept safe through changing storage media (floppy drives, flopticals, ZIP, JAZ, DVD-RAM, CD, DVD and hard drives), not to mention various technology/software solutions. It’s a data minefield out there, especially in the long run with changing media formats.

— Jim

I am thankful for non-profit organizations and their volunteers, such as IMAlive. Possibly the greatest gift you can give someone is empowerment, and an opportunity for them to recognize their own resilience and strength.

— Emily

I am thankful for my loving family, friends who make me laugh, a cool company to work for, talented co-workers who make me a better engineer, and beautiful Fall days in Wisconsin!

— Marjorie

Marjorie Wisconsin

I’m thankful for preschool drawings about thankfulness.

— Adam

I am thankful for new friends and working for a company that allows us to be ourselves.

— Annalisa

I’m thankful for my dog as I always find a reason to smile at him everyday. Yes, he still smells from his skunkin’ last week and he tracks mud in my house, but he came from the San Quentin puppy-prisoner program and I’m thankful I found him and that he found me! My vet is thankful as well.

— Terry

I’m thankful that my colleagues are also my friends outside of the office and that the rain season has started in California.

— Aaron

I’m thankful for family, friends, and beer. Mostly for family and friends, but beer is really nice too!

— Ken

There are so many amazing blessings that make up my daily life that I thank God for, so here I go – my basic needs of food, water and shelter, my husband and 2 daughters and the rest of the family (here and abroad) — their love, support, health, and safety, waking up to a new day every day, friends, music, my job, funny things, hugs and more hugs (who does not like hugs?).

— Cecilia

I am thankful to be blessed with a close-knit extended family, and for everything they do for my new, growing family. With a toddler and a second child on the way, it helps having so many extra sets of hands around to help with the kids!

— Zack

I’m thankful for family and friends, the opportunities my parents gave me by moving the U.S., and that all of us together at Backblaze have built a place to be proud of.

— Gleb

Aside for being thankful for family and friends, I am also thankful I live in a place with such natural beauty. Being so close to mountains and the ocean, and everything in between, is something that I don’t take for granted!

— Sona

I’m thankful for my wonderful wife, family, friends, and co-workers. I’m thankful for having a happy and healthy son, and the chance to watch him grow on a daily basis.

— Ariel

I am thankful for a dog-friendly workplace.

— LeAnn

I’m thankful for my amazing new wife and that she’s as much of a nerd as I am.

— Troy

I am thankful for every reunion with my siblings and families.

— Cecilia

I am thankful for my funny, strong-willed, happy daughter, my awesome husband, my family, and amazing friends. I am also thankful for the USA and all the opportunities that come with living here. Finally, I am thankful for Backblaze, a truly great place to work and for all of my co-workers/friends here.

— Natasha

I am thankful that I do not need to hunt and gather everyday to put food on the table but at the same time I feel that I don’t appreciate the food the sits before me as much as I should. So I use Thanksgiving to think about the people and the animals that put food on my family’s table.

— KC

I am thankful for my cat, Catnip. She’s been with me for 18 years and seen me through so many ups and downs. She’s been along my side through two long-term relationships, several moves, and one marriage. I know we don’t have much time together and feel blessed every day she’s here.

— JC

I am thankful for imperfection and misshapen candies. The imperceptible romance of sunsets through bus windows. The dream that family, friends, co-workers, and strangers are connected by love. I am thankful to my ancestors for enduring so much hardship so that I could be here enjoying Bay Area burritos.

— Damon

Autumn leaves

The post What We’re Thankful For appeared first on Backblaze Blog | Cloud Storage & Cloud Backup.

Inmates Secretly Build and Network Computers while in Prison

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2017/05/inmates_secretl.html

This is kind of amazing:

Inmates at a medium-security Ohio prison secretly assembled two functioning computers, hid them in the ceiling, and connected them to the Marion Correctional Institution’s network. The hard drives were loaded with pornography, a Windows proxy server, VPN, VOIP and anti-virus software, the Tor browser, password hacking and e-mail spamming tools, and the open source packet analyzer Wireshark.

Another article.

Clearly there’s a lot about prison security, or the lack thereof, that I don’t know. This article reveals some of it.

Who Are the Shadow Brokers?

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2017/05/who_are_the_sha.html

In 2013, a mysterious group of hackers that calls itself the Shadow Brokers stole a few disks full of NSA secrets. Since last summer, they’ve been dumping these secrets on the Internet. They have publicly embarrassed the NSA and damaged its intelligence-gathering capabilities, while at the same time have put sophisticated cyberweapons in the hands of anyone who wants them. They have exposed major vulnerabilities in Cisco routers, Microsoft Windows, and Linux mail servers, forcing those companies and their customers to scramble. And they gave the authors of the WannaCry ransomware the exploit they needed to infect hundreds of thousands of computer worldwide this month.

After the WannaCry outbreak, the Shadow Brokers threatened to release more NSA secrets every month, giving cybercriminals and other governments worldwide even more exploits and hacking tools.

Who are these guys? And how did they steal this information? The short answer is: we don’t know. But we can make some educated guesses based on the material they’ve published.

The Shadow Brokers suddenly appeared last August, when they published a series of hacking tools and computer exploits­ — vulnerabilities in common software — ­from the NSA. The material was from autumn 2013, and seems to have been collected from an external NSA staging server, a machine that is owned, leased, or otherwise controlled by the US, but with no connection to the agency. NSA hackers find obscure corners of the Internet to hide the tools they need as they go about their work, and it seems the Shadow Brokers successfully hacked one of those caches.

In total, the group has published four sets of NSA material: a set of exploits and hacking tools against routers, the devices that direct data throughout computer networks; a similar collection against mail servers; another collection against Microsoft Windows; and a working directory of an NSA analyst breaking into the SWIFT banking network. Looking at the time stamps on the files and other material, they all come from around 2013. The Windows attack tools, published last month, might be a year or so older, based on which versions of Windows the tools support.

The releases are so different that they’re almost certainly from multiple sources at the NSA. The SWIFT files seem to come from an internal NSA computer, albeit one connected to the Internet. The Microsoft files seem different, too; they don’t have the same identifying information that the router and mail server files do. The Shadow Brokers have released all the material unredacted, without the care journalists took with the Snowden documents or even the care WikiLeaks has taken with the CIA secrets it’s publishing. They also posted anonymous messages in bad English but with American cultural references.

Given all of this, I don’t think the agent responsible is a whistleblower. While possible, it seems like a whistleblower wouldn’t sit on attack tools for three years before publishing. They would act more like Edward Snowden or Chelsea Manning, collecting for a time and then publishing immediately­ — and publishing documents that discuss what the US is doing to whom. That’s not what we’re seeing here; it’s simply a bunch of exploit code, which doesn’t have the political or ethical implications that a whistleblower would want to highlight. The SWIFT documents are records of an NSA operation, and the other posted files demonstrate that the NSA is hoarding vulnerabilities for attack rather than helping fix them and improve all of our security.

I also don’t think that it’s random hackers who stumbled on these tools and are just trying to harm the NSA or the US. Again, the three-year wait makes no sense. These documents and tools are cyber-Kryptonite; anyone who is secretly hoarding them is in danger from half the intelligence agencies in the world. Additionally, the publication schedule doesn’t make sense for the leakers to be cybercriminals. Criminals would use the hacking tools for themselves, incorporating the exploits into worms and viruses, and generally profiting from the theft.

That leaves a nation state. Whoever got this information years before and is leaking it now has to be both capable of hacking the NSA and willing to publish it all. Countries like Israel and France are capable, but would never publish, because they wouldn’t want to incur the wrath of the US. Country like North Korea or Iran probably aren’t capable. (Additionally, North Korea is suspected of being behind WannaCry, which was written after the Shadow Brokers released that vulnerability to the public.) As I’ve written previously, the obvious list of countries who fit my two criteria is small: Russia, China, and­ — I’m out of ideas. And China is currently trying to make nice with the US.

It was generally believed last August, when the first documents were released and before it became politically controversial to say so, that the Russians were behind the leak, and that it was a warning message to President Barack Obama not to retaliate for the Democratic National Committee hacks. Edward Snowden guessed Russia, too. But the problem with the Russia theory is, why? These leaked tools are much more valuable if kept secret. Russia could use the knowledge to detect NSA hacking in its own country and to attack other countries. By publishing the tools, the Shadow Brokers are signaling that they don’t care if the US knows the tools were stolen.

Sure, there’s a chance the attackers knew that the US knew that the attackers knew — ­and round and round we go. But the “we don’t give a damn” nature of the releases points to an attacker who isn’t thinking strategically: a lone hacker or hacking group, which clashes with the nation-state theory.

This is all speculation on my part, based on discussion with others who don’t have access to the classified forensic and intelligence analysis. Inside the NSA, they have a lot more information. Many of the files published include operational notes and identifying information. NSA researchers know exactly which servers were compromised, and through that know what other information the attackers would have access to. As with the Snowden documents, though, they only know what the attackers could have taken and not what they did take. But they did alert Microsoft about the Windows vulnerability the Shadow Brokers released months in advance. Did they have eavesdropping capability inside whoever stole the files, as they claimed to when the Russians attacked the State Department? We have no idea.

So, how did the Shadow Brokers do it? Did someone inside the NSA accidentally mount the wrong server on some external network? That’s possible, but seems very unlikely for the organization to make that kind of rookie mistake. Did someone hack the NSA itself? Could there be a mole inside the NSA?

If it is a mole, my guess is that the person was arrested before the Shadow Brokers released anything. No country would burn a mole working for it by publishing what that person delivered while he or she was still in danger. Intelligence agencies know that if they betray a source this severely, they’ll never get another one.

That points to two possibilities. The first is that the files came from Hal Martin. He’s the NSA contractor who was arrested in August for hoarding agency secrets in his house for two years. He can’t be the publisher, because the Shadow Brokers are in business even though he is in prison. But maybe the leaker got the documents from his stash, either because Martin gave the documents to them or because he himself was hacked. The dates line up, so it’s theoretically possible. There’s nothing in the public indictment against Martin that speaks to his selling secrets to a foreign power, but that’s just the sort of thing that would be left out. It’s not needed for a conviction.

If the source of the documents is Hal Martin, then we can speculate that a random hacker did in fact stumble on it — ­no need for nation-state cyberattack skills.

The other option is a mysterious second NSA leaker of cyberattack tools. Could this be the person who stole the NSA documents and passed them on to someone else? The only time I have ever heard about this was from a Washington Post story about Martin:

There was a second, previously undisclosed breach of cybertools, discovered in the summer of 2015, which was also carried out by a TAO employee [a worker in the Office of Tailored Access Operations], one official said. That individual also has been arrested, but his case has not been made public. The individual is not thought to have shared the material with another country, the official said.

Of course, “not thought to have” is not the same as not having done so.

It is interesting that there have been no public arrests of anyone in connection with these hacks. If the NSA knows where the files came from, it knows who had access to them — ­and it’s long since questioned everyone involved and should know if someone deliberately or accidentally lost control of them. I know that many people, both inside the government and out, think there is some sort of domestic involvement; things may be more complicated than I realize.

It’s also not over. Last week, the Shadow Brokers were back, with a rambling and taunting message announcing a “Data Dump of the Month” service. They’re offering to sell unreleased NSA attack tools­ — something they also tried last August­ — with the threat to publish them if no one pays. The group has made good on their previous boasts: In the coming months, we might see new exploits against web browsers, networking equipment, smartphones, and operating systems — Windows in particular. Even scarier, they’re threatening to release raw NSA intercepts: data from the SWIFT network and banks, and “compromised data from Russian, Chinese, Iranian, or North Korean nukes and missile programs.”

Whoever the Shadow Brokers are, however they stole these disks full of NSA secrets, and for whatever reason they’re releasing them, it’s going to be a long summer inside of Fort Meade­ — as it will be for the rest of us.

This essay previously appeared in the Atlantic, and is an update of this essay from Lawfare.

Who is Publishing NSA and CIA Secrets, and Why?

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2017/05/who_is_publishi.html

There’s something going on inside the intelligence communities in at least two countries, and we have no idea what it is.

Consider these three data points. One: someone, probably a country’s intelligence organization, is dumping massive amounts of cyberattack tools belonging to the NSA onto the Internet. Two: someone else, or maybe the same someone, is doing the same thing to the CIA.

Three: in March, NSA Deputy Director Richard Ledgett described how the NSA penetrated the computer networks of a Russian intelligence agency and was able to monitor them as they attacked the US State Department in 2014. Even more explicitly, a US ally­ — my guess is the UK — ­was not only hacking the Russian intelligence agency’s computers, but also the surveillance cameras inside their building. “They [the US ally] monitored the [Russian] hackers as they maneuvered inside the U.S. systems and as they walked in and out of the workspace, and were able to see faces, the officials said.”

Countries don’t often reveal intelligence capabilities: “sources and methods.” Because it gives their adversaries important information about what to fix, it’s a deliberate decision done with good reason. And it’s not just the target country who learns from a reveal. When the US announces that it can see through the cameras inside the buildings of Russia’s cyber warriors, other countries immediately check the security of their own cameras.

With all this in mind, let’s talk about the recent leaks at NSA and the CIA.

Last year, a previously unknown group called the Shadow Brokers started releasing NSA hacking tools and documents from about three years ago. They continued to do so this year — ­five sets of files in all­ — and have implied that more classified documents are to come. We don’t know how they got the files. When the Shadow Brokers first emerged, the general consensus was that someone had found and hacked an external NSA staging server. These are third-party computers that the NSA’s TAO hackers use to launch attacks from. Those servers are necessarily stocked with TAO attack tools. This matched the leaks, which included a “script” directory and working attack notes. We’re not sure if someone inside the NSA made a mistake that left these files exposed, or if the hackers that found the cache got lucky.

That explanation stopped making sense after the latest Shadow Brokers release, which included attack tools against Windows, PowerPoint presentations, and operational notes — ­documents that are definitely not going to be on an external NSA staging server. A credible theory, which I first heard from Nicholas Weaver, is that the Shadow Brokers are publishing NSA data from multiple sources. The first leaks were from an external staging server, but the more recent leaks are from inside the NSA itself.

So what happened? Did someone inside the NSA accidentally mount the wrong server on some external network? That’s possible, but seems very unlikely. Did someone hack the NSA itself? Could there be a mole inside the NSA, as Kevin Poulsen speculated?

If it is a mole, my guess is that he’s already been arrested. There are enough individualities in the files to pinpoint exactly where and when they came from. Surely the NSA knows who could have taken the files. No country would burn a mole working for it by publishing what he delivered. Intelligence agencies know that if they betray a source this severely, they’ll never get another one.

That points to two options. The first is that the files came from Hal Martin. He’s the NSA contractor who was arrested in August for hoarding agency secrets in his house for two years. He can’t be the publisher, because the Shadow Brokers are in business even though he is in prison. But maybe the leaker got the documents from his stash: either because Martin gave the documents to them or because he himself was hacked. The dates line up, so it’s theoretically possible, but the contents of the documents speak to someone with a different sort of access. There’s also nothing in the public indictment against Martin that speaks to his selling secrets to a foreign power, and I think it’s exactly the sort of thing that the NSA would leak. But maybe I’m wrong about all of this; Occam’s Razor suggests that it’s him.

The other option is a mysterious second NSA leak of cyberattack tools. The only thing I have ever heard about this is from a Washington Post story about Martin: “But there was a second, previously undisclosed breach of cybertools, discovered in the summer of 2015, which was also carried out by a TAO employee, one official said. That individual also has been arrested, but his case has not been made public. The individual is not thought to have shared the material with another country, the official said.” But “not thought to have” is not the same as not having done so.

On the other hand, it’s possible that someone penetrated the internal NSA network. We’ve already seen NSA tools that can do that kind of thing to other networks. That would be huge, and explain why there were calls to fire NSA Director Mike Rogers last year.

The CIA leak is both similar and different. It consists of a series of attack tools from about a year ago. The most educated guess amongst people who know stuff is that the data is from an almost-certainly air-gapped internal development wiki­a Confluence server­ — and either someone on the inside was somehow coerced into giving up a copy of it, or someone on the outside hacked into the CIA and got themselves a copy. They turned the documents over to WikiLeaks, which continues to publish it.

This is also a really big deal, and hugely damaging for the CIA. Those tools were new, and they’re impressive. I have been told that the CIA is desperately trying to hire coders to replace what was lost.

For both of these leaks, one big question is attribution: who did this? A whistleblower wouldn’t sit on attack tools for years before publishing. A whistleblower would act more like Snowden or Manning, publishing immediately — ­and publishing documents that discuss what the US is doing to whom, not simply a bunch of attack tools. It just doesn’t make sense. Neither does random hackers. Or cybercriminals. I think it’s being done by a country or countries.

My guess was, and is still, Russia in both cases. Here’s my reasoning. Whoever got this information years before and is leaking it now has to 1) be capable of hacking the NSA and/or the CIA, and 2) willing to publish it all. Countries like Israel and France are certainly capable, but wouldn’t ever publish. Countries like North Korea or Iran probably aren’t capable. The list of countries who fit both criteria is small: Russia, China, and…and…and I’m out of ideas. And China is currently trying to make nice with the US.

Last August, Edward Snowden guessed Russia, too.

So Russia — ­or someone else­ — steals these secrets, and presumably uses them to both defend its own networks and hack other countries while deflecting blame for a couple of years. For it to publish now means that the intelligence value of the information is now lower than the embarrassment value to the NSA and CIA. This could be because the US figured out that its tools were hacked, and maybe even by whom; which would make the tools less valuable against US government targets, although still valuable against third parties.

The message that comes with publishing seems clear to me: “We are so deep into your business that we don’t care if we burn these few-years-old capabilities, as well as the fact that we have them. There’s just nothing you can do about it.” It’s bragging.

Which is exactly the same thing Ledgett is doing to the Russians. Maybe the capabilities he talked about are long gone, so there’s nothing lost in exposing sources and methods. Or maybe he too is bragging: saying to the Russians that he doesn’t care if they know. He’s certainly bragging to every other country that is paying attention to his remarks. (He may be bluffing, of course, hoping to convince others that the US has intelligence capabilities it doesn’t.)

What happens when intelligence agencies go to war with each other and don’t tell the rest of us? I think there’s something going on between the US and Russia that the public is just seeing pieces of. We have no idea why, or where it will go next, and can only speculate.

This essay previously appeared on Lawfare.com.

Prisoners Hack Prison From Inside Prison

Post Syndicated from Darknet original http://feedproxy.google.com/~r/darknethackers/~3/YTDOBPW2iiM/

Prisoners Hack Prison! Sounds exciting right? This time it’s actually pretty entertaining with the prisoners managing to hack a prison network from INSIDE the prison using scavenged PC parts from a rehabilitation class. Some pretty resourceful guys managing to build 2 functional PCs from scrapped parts AND connect to the prison network AND try and…

Read the full post at darknet.org.uk