Surge in bit­coin value alarms de­fense, in­tel­li­gence agen­cies

Crim­i­nals ex­change cur­rency in ‘dark web’

The Washington Times Daily - - FRONT PAGE - BY DAN BOY­LAN

The value of the shad­owy dig­i­tal cur­rency known as bit­coin has jumped to record highs this month, send­ing shock waves through Amer­ica’s de­fense and in­tel­li­gence agen­cies, which fear its growth sig­nals a surge in use by ter­ror­ists, drug king­pins, white-col­lar crim­i­nals and Rus­sian cy­ber­crim­i­nals who don’t want to be tracked by the world’s gov­ern­ments.

This sum­mer, the U.S. Trea­sury’s Fi­nan­cial Crimes En­force­ment Net­work (FinCEN), the De­part­ment of Jus­tice and scores of Euro­pean il­licit fi­nance law en­force­ment of­fi­cials have fought back with a wave of op­er­a­tions against Rus­sian cy­ber­crim­i­nals. Late last month, they shut­tered Al­phaBay and Hansa — two of

the big­gest “dark web” con­tra­band mar­ket­places rife with the il­le­gal sale of guns, drugs and other for­bid­den mer­chan­dise.

In an even more star­tling sign of the bat­tle rag­ing around bit­coin, a FinCENled in­ter­na­tional il­licit fi­nanc­ing task force ar­rested a Rus­sian “mastermind of or­ga­nized crime” on a small beach­side vil­lage in north­ern Greece less than two weeks ago.

Alexan­der Vin­nik, who is ac­cused of laun­der­ing more than $4 bil­lion worth of il­le­gal funds us­ing bit­coin ac­counts, op­er­ated BTC-e, one of the world’s old­est bit­coin ex­changes.

U.S. au­thor­i­ties ac­cuse Mr. Vin­nik of fa­cil­i­tat­ing crimes in­clud­ing drug traf­fick­ing, pub­lic cor­rup­tion, hack­ing, fraud, iden­tity theft and tax re­fund fraud.

“Just as new com­puter tech­nolo­gies con­tinue to change the way we en­gage each other and ex­pe­ri­ence the world, so too will crim­i­nals sub­vert th­ese new tech­nolo­gies to serve their own ne­far­i­ous pur­poses,” Brian Stretch, U.S. at­tor­ney for the North­ern District of Cal­i­for­nia, said about BTC-e.

Mr. Vin­nik was ar­rested amid world­wide cy­ber­havoc trig­gered by mas­sive Wan­naCry’s Bit­coin ran­somware at­tacks in May and June. The at­tacks forced a pro­duc­tion shut­down at Re­nault auto plans, crashed com­put­ers at Bri­tain’s Na­tional Health Ser­vice and tar­geted In­dia’s ATM net­work.

In Bri­tain, screen­shots on so­cial me­dia showed Na­tional Health Ser­vice com­puter screens with mes­sages de­mand­ing $300 worth of Bit­coin to re­gain ac­cess to files.

While cy­ber­at­tacks have in­creas­ingly tar­geted busi­nesses around the world, bit­coin ran­som at­tacks, es­pe­cially in the U.S., are sky­rock­et­ing. The FBI’s In­ter­net Crime Com­plaint Cen­ter re­ported it re­ceived 2,673 ran­somware in­ci­dents last year — nearly dou­ble the fig­ure from 2014.

De­spite Moscow’s de­nials of med­dling in the U.S. pres­i­den­tial elec­tion, ma­jor in­ves­ti­ga­tions also con­tinue into Rus­sian hack­ers sus­pected of us­ing cy­ber­at­tacks to un­der­mine or in­flu­ence the vote.

A lit­tle-no­ticed pro­vi­sion of the law passed by Congress and signed by Pres­i­dent Trump this month im­pos­ing new sanc­tions for North Korea, Iran and Rus­sia man­dated the for­mu­la­tion of a na­tional se­cu­rity strat­egy to com­bat “the fi­nanc­ing of ter­ror­ism and re­lated forms of il­licit fi­nance.” Among those forms, ac­cord­ing to the text of the law, were “so-called cryp­tocur­ren­cies [and] other meth­ods that are com­puter, telecom­mu­ni­ca­tions, or in­ter­net-based” for cy­ber­crime.

Bit­coin’s wild rise

A creation of the dig­i­tal age that re­flects the lib­er­tar­ian im­pulses of much of the on­line com­mu­nity, bit­coins were launched in 2009 by a shad­owy fig­ure named Satoshi Nakamoto, who has never pub­licly come for­ward. Many an­a­lysts have sug­gested that he never ex­isted.

The cur­rency’s unique power comes from its in­de­pen­dency and lack of re­liance on any sin­gle gov­ern­ment for its le­git­i­macy. Un­like reg­u­lar money, dig­i­tal or cryp­tocur­ren­cies are not con­nected to banks or gov­ern­ments and al­low anony­mous pur­chases or money ex­changes com­pletely out­side the realm of banks, credit card firms or other third par­ties. In­stead, the coins ex­ist be­cause users “mine” them by lend­ing their com­put­ing power to ver­ify other users’ trans­ac­tions.

This anonymity has brought in­sta­bil­ity to bit­coin val­ues. Over the past month, how­ever, prices are up more than 30 per­cent. Ac­cord­ing to the CoinDesk Bit­coin Price In­dex, a bit­coin traded for more than $3,000 — a record high — this past week­end.

The surge fol­lows a spinoff an­other cryp­tocur­rency, Bit­coin Cash.

An­tic­i­pa­tion of the spinoff sent bit­coin val­ues spi­ral­ing last month as mar­ket an­a­lysts pre­dicted a “civil war” with the ri­val. The op­po­site ap­pears to have oc­curred with the spinoff driv­ing up bit­coin’s value.

Mar­ket an­a­lysts say the value surge demon­strated bit­coin’s re­siliency in ad­di­tion to a grow­ing pub­lic ap­petite for cryp­tocur­ren­cies.

On Thurs­day, bit­coins traded at $3,439.55 per coin, driv­ing the over­all mar­ket value of all ex­ist­ing bit­coins to $56 bil­lion.

Adding bit­coin’s over­all value to other cryp­tocur­ren­cies such as Ethereum and Lite­coin and the to­tal mar­ket cap­i­tal­iza­tion of such dig­i­tal cash is roughly $120 bil­lion.

Amer­ica’s de­fense and in­tel­li­gence agen­cies, FinCEN in par­tic­u­lar, pride them­selves on the U.S. gov­ern­ment’s abil­ity to track and dis­rupt the il­licit fi­nan­cial net­works that work through tra­di­tional banks and fi­nance chan­nels.

This sum­mer’s crack­downs on il­licit bit­coin ac­tiv­ity has been con­sid­er­able, but the dra­matic surge in the cur­rency’s over­all value poses even more chal­lenges.

Yaya Fanusie, a for­mer coun­tert­er­ror­ism an­a­lyst for the CIA, is cred­ited with iden­ti­fy­ing the first ver­i­fi­able in­stance of a ter­ror­ist or­ga­ni­za­tion at­tempt­ing to use bit­coin to raise funds. He now runs anal­y­sis for the Cen­ter on Sanc­tions and Il­licit Fi­nance at the Foun­da­tion for De­fense of Democ­ra­cies and told The Wash­ing­ton Times in an in­ter­view that the in­creased vol­ume of bit­coin trad­ing in it­self is not the con­cern.

“The na­tional se­cu­rity con­cern is not that crim­i­nals will use this type of tech­nol­ogy — they use all tech­nolo­gies,” Mr. Fanusie said. “The pol­icy ques­tion is: How do you deal with some­thing that gov­ern­ments can’t con­trol?”

He said the U.S. needs to en­gage with the cryp­tocur­ren­cies as much as pos­si­ble and pointed to De­fense De­part­ment pro­cure­ment ex­per­i­ments al­ready un­der­way.

“Bit­coin is like a re­bel­lious teenager,” he said. “It wants to do its own thing. So what do you do? Do you ban it? No, you want to have a good re­la­tion­ship with it and in­flu­ence how it de­vel­ops.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.