Recently, more than a few law firms -along with other small businesses- have been hit with ransomware and other forms of cyberattacks. Over the past few months, the WannaCrypt, WannaCry and other encryption-based ransomware have plagued businesses across Oakland County.

Ransomware is a form of malware that worms its way into a set of networked computers, corrupts or encrypts a set of files with a virus, then notifies the user of the attack, often demanding a payment. Lately, payment is demanded in Bitcoin, the anonymous block-chain cryptocurrency.

Even big law firms touting cybersecurity compliance and cyberattack damage control have been hacked. The lawyers at DLA Piper, for example, arrived to the firm on Monday of this week to discover they had been hit with the Petya or Petwrap virus. They were treated to the following message:

Nice. Great way to start the work week. At least payment is "guaranteed".

An even more ominous aspect to recent attacks involves evidence that hackers known as the Shadow Brokers have infiltrated the NSA, co-opted some of their most effective cyberweapons, and have unleashed them world-wide. Any cybersecurity expert will tell you that the best hackers in the world are employed at the NSA.

In New York City, the Shadow Brokers are now believed to be behind a recent ransomeware attack that was merely a smokescreen. The ransomeware feint was designed to distract the IT cybersecurity crew of the targeted business, while the virus secretly obtained employee credentials.

Once the hackers obtain mission-critical data from the business, it can disrupt and control the enterprise. Until that time, the virus operates undetected, even by the most advanced cybersecurity products.

One of the best defenses to this form of corruption is to diligently back-up your data: both off-site in the cloud, and on-site with a disk drive.

Hopefully, good will prevail over evil in this cyberbattle.

Post #596
www.clarkstonlegal.com

The mysterious Satoshi Nakamoto released Bitcoin software in late 2008. The actual identity of the code founder, who promptly disassociated himself, or itself, with Bitcoin, has never been proved, remaining a matter of conjecture.

Bitcoin was designed as an electronic cryptocurrency traded on a decentralized network as a way to move and hold money.

One of the unique features of Bitcoin as a traded currency is that its encryption algorithms allow a holder to remain anonymous. Because of this, the electronic currency has been associated with a growing number of illegal transactions in the sale of arms and illegal drugs; think of the now-defunct Silk Road.

Prior to its Silk Road notoriety, Bitcoin was largely unknown until 2013 when, due to the high volume of bitcoin trades in China, its price began to spike, reaching $1000 for a single Bitcoin. There is wide-spread speculation that Chinese investors are using Bitcoin to evade the capital controls of the Chinese government.

Bitcoin was designed to be traded on a closed network of tightly controlled servers. One of the issues that has cropped-up with the cryptocurrency as it approaches its ten-year mark is whether the network should be expanded. With a network purposely limited to conducting only 7 transactions per second, there is a significant and growing backlog of transactions.

Publicity of this price spike fostered another interesting aspect of cryptocurrency: Bitcoin mining. Bitcoin mining is where a network of dedicated computers perform calculations designed to seek out and acquire the newly released Bitcoins. The activity has become organized into mining pools; the largest ones are in China.

Bitcoin mining pools are acquiring clout as well as Bitcoins. These mining pools, consistent with the software design of the cryptocurrency, get votes on software changes and other administrative decisions affecting the currency.

Estimates predict that all Bitcoins will be "mined" within the next 10-years, lessening the reward for conducting such energy and time-consuming activity until such reward reaches zero. When this happens, the costs of Bitcoin transactions will increase.

In recent years, companies that have attempted to manage a Bitcoin exchange have been burned. Mt. Gox, a Japanese Bitcoin exchange, was hacked in 2014 and lost the equivalent of $350 million in Bitcoins; it promptly filed for bankruptcy.

On the other hand, processing fees for Bitcoin transactions are relatively low; about 15 cents. Transfers of the currency across boarders is done without the typical banking delays [3-5 business days] and higher fees associated with wire transfers and credit card purchases.

The terrorist group ISIS has posted requests for its financial supporters to send Bitcoins to pro-ISIS websites. It is unlikely, however, that such a cash of Bitcoin would be converted to hard currency.

Unlike cash, Bitcoin does still leave a digital trace that can be unraveled given sufficient time and resources. The undoing of the Silk Road, for example, took a specialized FBI and U.S. Treasury joint task force 18-months. As a result, the FBI is currently holding one of the largest cashes of Bitcoin in the world; estimated to be worth over $28 million.

Despite the stigma of criminal activity associated with cryptocurrencies, retailers such as Amazon and eBay have started to accept Bitcoin payments. Locally, the Bronx Deli in Pontiac has a sign in their door pronouncing Bitcoin as an accepted as a medium of exchange.

In a recent decision coming out of Miami, a trial court judge ruled that Bitcoin had a long way to go before it could be considered the equivalent of money. The criminal case involved allegations of money laundering and was dismissed because the judge concluded Bitcoin was not money therefore there could be no money laundering.

Thus, while Bitcoin may have attributes as a medium of exchange, it is not as solid as a unit of account; folks don't always know what the value of a Bitcoin is due to its tendency for flux. This makes the currency less attractive.

Will Bitcoin be as ubiquitous as Facebook, or as functional and accepted as the U.S. Dollar? Only time will tell.

We here at the Law Blogger will continue to monitor its development, advising our readers along the way.

Post Script: A week after this post, Bitcoin plunged in value relative to the U.S. Dollar because an exchange in Hong Kong was hacked; here is the NYT article detailing same.

Post #548

www.clarkstonlegal.com
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Dread Pirate Roberts?

Ross Ulbricht, whose nom de guerre is "Dread Pirate Roberts", infamous for being the mastermind behind the now-defunct dark web site Silk Road according to the FBI, was jury-convicted last year and sentenced to life in prison without parole. He filed his 174-page appeal brief in January with the United States Second Circuit Court of Appeals in New York.

The Silk Road web site proved difficult for the feds to deconstruct; it's progenitor was elusive. It took an innovative IRS task-force agent familiar with the shady world of bitcoin to put 2 and 2 together, locate and arrest Ulbricht.

This is a fascinating cyber-crime tale. Ulbricht's appeals brief, the best money can buy, tells the story of a month-long jury trial gone wrong. Appellant's brief raises several legal arguments and asserts the federal district judge in Manhattan repeatedly abused his discretion and got several evidentiary and legal rulings wrong.

For those unfamiliar, Silk Road was a dark web site that offered many illegal items for sale including computer hacking equipment, false documents, and an assortment of illegal controlled substances. Bitcoin was the currency used for these transactions. As a currency, bitcoin was perfect for the Silk Road enterprise: it is electronic currency; and it allows sellers and purchasers to remain anonymous.

We here at the Law Blogger realize that few of our readers will take the time to read the Appellant's brief linked above; a veritable legal tomb. The brief nevertheless reads like a cyber-crime thriller that only a defense lawyer could love.

Basically, Mr. Ulbricht denies that he was Dread Pirate Roberts; claims that he was framed by the real DPR; and says he was denied a fair trial due to the "vulnerabilities inherent to the internet and digital data such as fabrication and manipulation of files and hacking," and that these vulnerabilities invalidated most of the government's evidence.

In a very well-written brief, the Pirate raises the following issues:

• a key DEA agent involved in the Silk Road investigation was himself under investigation and evidence of this corruption was precluded from being introduced in Ulbricht's defense; 
• the trial court severely curtailed Ulbrecht's cross-examination of key special agent witnesses relative to the accused's "alternate perpetrator" defense;
• the trial court erred by disallowing two defense expert witnesses from testifying;
• the "unlimited" searches and seizure of Ulbrecht's lap top, GMail account and Facebook account violated the Fourth Amendment's search and seizure clause; and 
• Ulbrecht's life sentence was both procedurally and substantively unreasonable.

Often tasked with mining federal jury trial transcripts for error and writing-up the issues in appellate briefs, we here at the Law Blogger love this brief; a masterpiece that raises wide-ranging evidentiary and constitutional issues in a very unique and significant case.

With the usual extensions, the United States' appellee's brief will be filed in Manhattan sometime in June or July; we will keep you posted on this one as we will be tracking the Pirate's path.

Post #528

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