As its name suggests, generative AI is designed to generate material in response to prompts by drawing on its probabilistic database built up through analyzing huge quantities of training input. But it can draw on those patterns to analyze other files, and that’s also a widely used application. Writing in The Argument, Kelsey Piper encountered an interesting variant of that approach:
Recently, Anthropic released a new version of Claude, Opus 4.7. I did what I usually do when a new AI model is released by Google, OpenAI, or Anthropic and ran a bunch of tests on it to see what it can do. One of those tests is to paste in some text from unpublished drafts of mine and ask it to guess the author.
…
From only the above text [not shown here], 125 words, Claude Opus 4.7 informed me that the likeliest author is Kelsey Piper. This is an Opus 4.7-specific power; ChatGPT guessed Yglesias, and Gemini guessed Scott Alexander. I did not have memory enabled, nor did I have information about me associated with my account; I did these tests in Incognito Mode.
As Piper admits:
this is far from an impossible feat of style identification — a lot of my writing is public on the internet, and this is clearly the start of a political column, narrowing the possible authors down dramatically.
She went on to input less obvious material. For example, an “unpublished draft of a school progress report in a completely different register”:
An unpublished fantasy novel produced a similar result, although:
in that case it took more like 500 words for Claude to inform me that it’s the work of Kelsey Piper (whereas ChatGPT flattered me by guessing that I’m real fantasy novelist K.J. Parker).
And finally, “a college application essay I wrote 15 years ago, when my prose style was vastly worse and frankly embarrassing to reread”:
“Kelsey Piper,” said Claude, and in this case, also ChatGPT.
Piper comments:
Right now, today’s AI tools probably can be used to deanonymize any writer who has a large public corpus of writing under their real name and also writes anonymously, unless they have been extremely careful, for years, to make sure that nothing written under their secondary account has the stylistic fingerprints of their primary one. Many academics and industry researchers, for instance, have reported being identified from a draft or in the middle of a chat.
And she concludes:
Whatever goods anonymity ever offered us, we will have to do without them. I don’t want the anonymous posters to all go away and for everyone to frantically delete all their old internet presence before it surfaces, but more than anything, I don’t want them to be surprised.
Those links to other cases of unpublished material being recognized by AI show that Piper’s experience was not a one-off, although the results remain in the realm of anecdata. But even if imperfect, the ability of generative AI to carry out this kind of analysis quickly and often accurately represents an important new option for the well-established field of stylometry. Wikipedia explains:
Stylometry may be used to unmask pseudonymous or anonymous authors, or to reveal some information about the author short of a full identification. Authors may use adversarial stylometry to resist this identification by eliminating their own stylistic characteristics without changing the meaningful content of their communications. It can defeat analyses that do not account for its possibility, but the ultimate effectiveness of stylometry in an adversarial environment is uncertain: stylometric identification may not be reliable, but nor can non-identification be guaranteed; adversarial stylometry’s practice itself may be detectable.
The limitations of stylometry were demonstrated in John Carreyrou’s attempt to reveal the true identity of Bitcoin’s pseudonymous creator, Satoshi Nakamoto, published in The New York Times a few weeks ago. Carreyrou concluded that various real-world coincidences plus linguistic evidence indicated that Bitcoin was created by the 55-year-old British computer scientist Adam Back, something Back denies. Carreyrou’s attempts to use computerized stylometry (not the AI services Piper drew on) were unsatisfactory, and he eventually adopted a more hands-on approach to text analysis, which involved looking at Satoshi’s vocabulary, grammatical hyphenation mistakes and the use of British spellings.
Despite Carreyrou’s lack of success, stylometric analysis by generative AI is likely to become more common in many disciplines for the simple reason it is so quick, easy and cheap to carry out. Even if its results are unreliable, people may find it useful as a stimulus for further investigations. And as we know, the fact that generative AI systems can churn out nonsense hasn’t stopped hundreds of millions of people from using and trusting them anyway.
Days into President Donald Trump’s second term in the White House, a cryptocurrency billionaire posted a video on X to his hundreds of thousands of followers. “Please Donald Trump, I need your help,” he said, wearing a flag pin askew and seated awkwardly in an armchair. “I am an American. … Help me come home.”
The speaker, 46-year-old Roger Ver, was in fact no longer a U.S. citizen. Nicknamed “Bitcoin Jesus” for his early evangelism for digital currency, Ver had renounced his citizenship more than a decade earlier. At the time of his video, Ver was under criminal indictment for millions in tax evasion and living on the Spanish island of Mallorca. His top-flight legal defense team had failed around half a dozen times to persuade the Justice Department to back down. The U.S., considering him a fugitive, was seeking his extradition from Spain, and he was likely looking at prison.
Once, prosecutors hoped to make Ver a marquee example amid concerns about widespread cryptocurrency tax evasion. They had spent eight painstaking years working the case. Just nine months after his direct-to-camera appeal, however, Ver and Trump’s new Justice Department leadership cut a remarkable deal to end his prosecution. Ver wouldn’t have to plead guilty or spend a day in prison. Instead, the government accepted a payout of $49.9 million — roughly the size of the tax bill prosecutors said he dodged in the first place — and allowed him to walk away.
Ver was able to pull off this coup by taking advantage of a new dynamic inside of Trump’s Department of Justice. A cottage industry of lawyers, lobbyists and consultants with close ties to Trump has sprung up to help people and companies seek leniency, often by arguing they had been victims of political persecution by the Biden administration. In his first year, Trump issued pardons or clemency to dozens of people who were convicted of various forms of white-collar crime, including major donors and political allies. Investigations have been halted. Cases have been dropped.
Within the Justice Department, a select club of Trump’s former personal attorneys have easy access to the top appointees, some of whom also previously represented Trump. It has become a dark joke among career prosecutors to refer to these lawyers as the “Friends of Trump.”
The Ver episode, reported in detail here for the first time, reveals the extent to which white-collar criminal enforcement has eroded under the Trump administration. The account is based on interviews with current and former Justice Department officials, case records and conversations with people familiar with his case.
The Trump administration has particularly upended the way tax law violators are handled. Late last year, the administration essentially dissolved the team dedicated to criminal tax enforcement, dividing responsibility among a number of other offices and divisions. Tax prosecutions fell by more than a quarter, and more than a third of the 80 experienced prosecutors working on criminal tax cases have quit.
But even amid this turmoil, Ver’s case stands out. After Ver added several of these new power brokers to his team — most importantly, former Trump attorney Chris Kise — Trump appointees commandeered the case from career prosecutors. One newly installed Justice Department leader who had previously represented Trump’s family questioned his new subordinates on whether tax evasion should be a criminal offense. Ver’s team wielded unusual control over the final deal, down to dictating that the agreement would not include the word “fraud.”
It remains the only tax prosecution the administration has killed outright.
Ver did not reply to an extensive list of questions from ProPublica. In court filings and dealings with the Justice Department, Ver had always denied dodging his tax bill intentionally — a key distinction between a criminal and civil tax violation — and claimed to have relied on the advice of accountants and tax attorneys.
“Roger Ver took full responsibility for his gross financial misconduct to the tune of $50 million because this Department of Justice did not shy away from exposing those who cheat the system. The notion that any defendant can buy their way out of accountability under this administration is not founded in reality,” said Natalie Baldassarre, a Justice Department spokesperson.
In response to a list of detailed questions, the White House referred ProPublica to the Justice Department.“I know of no cases like this,” said Scott Schumacher, a former tax prosecutor and the director of the graduate program in taxation at the University of Washington. It is nearly unheard of for the department to abandon an indicted criminal case years in the making. “They’re basically saying you can buy your way out of a tax evasion prosecution.”
Roger Ver is not a longtime ally of Trump’s or a MAGA loyalist. He renounced his U.S. citizenship in 2014, a day he once called “the happiest day of my entire life.” In the early days of bitcoin, he controlled about 1% of the world’s supply.
Ver is clean-cut and fit — he has a black belt in Brazilian jujitsu. In his early 20s, while he was a libertarian activist in California, Ver was sentenced to 10 months in prison for illegally selling explosives on eBay. He’s often characterized that first brush with the law as political persecution by the state. After his release, he left the U.S. for Japan.
Ver became a fixture in the 2010s on the budding cryptocurrency conference circuit, where he got a kick out of needling government authority and arguing that crypto was the building block of a libertarian utopia. At a 2017 blockchain conference in Aspen, Colorado, Ver announced he had raised $100 million and was seeking a location to create a new “non-country” without any central government. For years, Ver has recommended other wealthy people consider citizenship in the small Caribbean nation of Saint Kitts and Nevis, which has no individual income tax.
“Bitcoin completely undermines the power of every single government on the entire planet to control the money supply, to tax people’s income to control them in any way,” he told a gathering of anarcho-capitalists in Acapulco, Mexico, in 2016. “It makes it so incredibly easy for people to hide their income or evade taxes.” More than one friend, he said with a smirk, had asked him how to do so: They “say, ‘Roger, I need your help. How do I use bitcoins to avoid paying taxes on it?’”
Renouncing U.S. citizenship isn’t a magic get-out-of-tax-free technique. Since 2008, the U.S. has required expatriates with assets above $2 million pay a steep “exit tax” on the appreciation of all their property.
In 2024, the Justice Department indicted Ver in one of the largest-ever cryptocurrency tax fraud cases. The government accused Ver of lying to the IRS twice. After Ver renounced his citizenship in 2014, he claimed to the IRS that he personally did not own any bitcoin. He would later admit in his deal with the government to owning at least 130,664 bitcoin worth approximately $73.7 million at the time. Then in 2017, the government alleged, Ver tried to conceal the transfer of roughly $240 million in bitcoin from U.S. companies to his personal accounts. In all, the government said he had evaded nearly $50 million in taxes.
Ver’s defense was that his failure to pay taxes arose from a lack of clarity as to how tax law treated emerging cryptocurrency, good-faith accounting errors and reliance on his advisors’ advice. He claimed it was difficult to distinguish between his personal assets and his companies’ holdings and pinpoint what the bitcoin was actually worth.
The Biden administration’s Justice Department dismissed this legal argument. Prosecutors had troves of emails that they said showed Ver misleading his own attorneys and tax preparers about the extent of his bitcoin holdings. (Ver’s team accused the government of taking his statements out of context.) The asset tracing in the case was “rock solid,” according to a person familiar with the investigation who spoke on the condition of anonymity for fear of retaliation. A jury, prosecutors maintained, was unlikely to buy Ver’s defense that he made a good-faith error.
By the time of Trump’s election, Ver had been arrested in Spain and was fighting extradition. He was also the new owner of a sleek $70 million yacht that some law enforcement officials worried he might use to escape on the high seas.
In Trump, Ver saw a possible way out. After the 2024 election, he was “barking up every tree,” said his friend Brock Pierce, a fellow ultrawealthy crypto investor who tried to gin up sympathy for Ver in Trump’s orbit.
Ver had initially gone the orthodox route of hiring tax attorneys from a prestigious law firm, Steptoe. Like many wealthy people in legal jeopardy, Ver now also launched a media blitz seeking a pardon from the incoming president. “If anybody knows what it’s like to be the victim of lawfare it’s Trump, so I think he’ll be able to see it in this case as well,” Ver said in a December 2024 appearance on Tucker Carlson’s show. On Charlie Kirk’s show, Ver appeared with tape over his mouth with the word “censored” written in red ink. Laura Loomer, the Trump-friendly influencer, began posting that Ver’s prosecution was unfair. Ver paid Trump insider Roger Stone $600,000 to lobby Congress for an end to the tax provision he was accused of violating.
Ver’s pardon campaign fizzled. His public pressure campaign — in which he kept comparing himself to Trump — was not landing, according to Pierce. “You aren’t doing yourself any favors — shut up,” his friend recalled saying.
One objection in the White House, according to a person who works on pardons, may have been Ver’s flamboyant rejection of his American citizenship. Less than a week after Trump was inaugurated, Elon Musk weighed in, posting on X, “Roger Ver gave up his US citizenship. No pardon for Ver. Membership has its privileges.”
But inside the Justice Department, Ver found an opening. The skeleton key proved to be one of the “Friends of Trump,” a seasoned defense lawyer named Christopher Kise. Kise is a longtime Florida Republican power player who served as the state’s solicitor general and has argued before the U.S. Supreme Court. He earned a place in Trump’s inner circle as one of the first experienced criminal defenders willing to represent the president after his 2020 election loss. Kise defended Trump in the Justice Department investigation stemming from the Jan. 6, 2021, attack on the U.S. Capitol and against charges that Trump mishandled classified documents when leaving the White House.
Kise had worked shoulder-to-shoulder on Trump’s cases with two lawyers who were now leaders in the Trump 2.0 Justice Department: Todd Blanche, who runs day-to-day operations at the department as deputy attorney general, and his associate deputy attorney general, Ketan Bhirud, who oversaw the criminal tax division prosecuting Ver. Kise reportedly helped select Blanche to join Trump’s legal team in the documents case, and he and Bhirud had both worked for Trump’s family as they fought civil fraud charges brought by New York Attorney General Letitia James in 2022.
On Ver’s legal team, Kise worked the phones, pressing his old colleagues to rethink their prosecution against Ver.
Kise scored the legal team’s first big victory in years: a meeting with Bhirud that cut out the career attorneys most familiar with the merits of the case.
In that meeting, however, it wasn’t clear that the new Justice Department leadership would be willing to interfere with the trajectory of Ver’s case. While the Trump administration had backed off aggressive enforcement of white-collar crimes writ large, the administration said it was still pursuing most criminal cases that had already been charged.
Bhirudinitiallyexpressed skepticism that Ver accidentally underpaid his taxes. It was “hard to believe” that a man going by “Bitcoin Jesus” would have no idea how much bitcoin he owned, Bhirud said, according to a person familiar with the case.
Bhirud and Blanche did not respond to detailed questions from ProPublica.
The Justice Department stuck to its position that either Ver would plead guilty to a crime, or the case would go to trial.
But Kise would not stop lobbying his former colleagues to reconsider. Blanche and Bhirud had already demanded that career officials justify the case again and again. Over the course of the summer, Kise wore down the Trump appointees’ zeal for pursuing Ver on criminal charges.
Kise and the law firm of Steptoe did not respond to questions.
“While there were meetings and conversations with DOJ, that is not uncommon. The line attorneys remained engaged throughout the process, and the case was ultimately resolved based on the strength of the evidence,” said Bryan Skarlatos, one of Ver’s tax attorneys and a partner at Kostelanetz.
It was a chaotic moment at the Justice Department, an institution that Trump had incessantly accused of being “weaponized” against him and his supporters. After Trump took office, the department was flooded with requests to reconsider prosecutions, with defendants claiming the Biden administration had singled them out for political persecution, too.
While many cases failed to grab the administration’s attention, Kise got results. Last week, Kise’s client Julio Herrera Velutini, a Venezuelan-Italian billionaire accused of trying to bribe the former governor of Puerto Rico, received a pardon from Trump.
“Every defense attorney is running the ‘weaponization’ play. This guy gets an audience because of who he is, because his name is Chris Kise,” said a person who recently attended a high-level meeting Kise secured to talk the Justice Department down from prosecuting a client.
As Kise stepped up the pressure, Ver’s case ate up a significant share of Bhirud’s time, despite his job overseeing more than 1,000 Justice Department attorneys, according to people familiar with the matter. Ordinarily, it would be rare for a political appointee to be so involved, especially to the exclusion of career prosecutors who could weigh in on the merits.
Bhirud began to muse to coworkers about whether failure to pay one’s taxes should really be considered a crime. Wasn’t it more of a civil matter? It seemed to a colleague that Bhirud was aware Ver’s advocates could try to elevate the case to the White House.
The government ceded ground and offered to take prison time off the table. Eventually, Ver’s team and Bhirud hit on the deal that would baffle criminal tax experts. They agreed on a deferred prosecution agreement that would allow Ver to avoid criminal charges and prison in exchange for a payout and an agreement not to violate any more laws. The government usually reserves such an agreement for lawbreaking corporations to avoid putting large employers out of business — not for fugitive billionaires.
By the time fall approached, Kise and Bhirud, with Blanche’s blessing, were negotiating Ver’s extraordinary deal line by line. Once more, career prosecutors were cut out from the negotiations.
Ver’s team enjoyed a remarkable ability to dictate terms. They rejected the text of the government’s supposed final offer because it required him to admit to “fraud,” according to a person familiar with the negotiations. In the end, Ver agreed to admit only to a “willful” failure to report and pay taxes on all his bitcoin and turned over the $50 million.
The government arrived at that figure in a roundabout manner. It dropped its claim that Ver had lied on his 2017 tax return. The $50 million figure was based on how much he had evaded in taxes in 2014 alone, plus what the government asserted were interest and penalties. In the end, the deal amounted to the sum he allegedly owed in the first place. He never even had to leave Mallorca to appear in a U.S. court.
Under any previous administration, convincing the leadership of the tax division to drop an indicted criminal case and accept a monetary penalty instead would be a nonstarter. While the Justice Department settles most tax matters civilly through fines, when prosecutors do charge criminal fraud, their conviction rate is over 90%.
People “always ask you, ‘Can’t I just pay the taxes and it’ll go away?’” said Jack Townsend, a former DOJ tax attorney. “The common answer that everybody gave — until the Trump administration — was that, no, you can’t do that.”
When the Justice Department announced the resolution in October, it touted it as a victory.
“We are pleased that Mr. Ver has taken responsibility for his past misconduct and satisfied his obligations to the American public,” Bhirud said in the Justice Department’s press release announcing the deferred prosecution agreement. “This resolution sends a clear message: whether you deal in dollars or digital assets, you must file accurate tax returns and pay what you owe.”
Inside the Justice Department, the resolution was demoralizing: “He’s admitted he owes money, and we get money, but everything else about it stinks to high heaven,” said a current DOJ official familiar with the case. “We shouldn’t negotiate with people who are fugitives, as if they have power over us.”
Among the wealthy targets of white-collar criminal investigations, the Ver affair sent a different message. Lawyers who specialize in that kind of work told ProPublica that more and more clients are asking which of the “Friends of Trump” they should hire. One prominent criminal tax defense lawyer said he would give his clients a copy of Ver’s agreement and tell them, “These are the guys who got this done.”
The only one of Ver’s many lawyers to sign it was Christopher Kise.
It’s been a while since we last mentioned Craig Wright here on Techdirt. We’ve been pretty clear all along, like pretty much everyone else, that Wright was so obviously full of shit in claiming to be Satoshi Nakamoto, and then trying to claim patents and copyrights over all kinds of Bitcoin/cryptocurrency related things.
Over the last few years, Wright has been continuing to make a pest of himself with lawsuits. In 2021 he sued a bunch of core Bitcoin developers, claiming that he lost encrypted keys to billions of dollars’ worth of Bitcoin when he was hacked, and demanding that the Bitcoin developers patch Bitcoin code to give him back the money.
All of this seemed utterly ridiculous for all sorts of reasons, but it was awful for those developers in particular who were just trying to develop Bitcoin. Suddenly, they faced the prospect of a full trial after a judge allowed the case to move forward last year, positioning it for a full trial. With some funding help from Jack Dorsey, the developers were able to fight back somewhat, allowing the Crypto Open Patent Alliance (COPA) to go even further in challenging Wright’s claims.
The last few months have not gone well for Wright in court (to put it mildly).
The legal challenge from COPA put Wright in a position of having to prove that he was Satoshi or basically to fuck off. That trial did not go well. In March, the judge declared that Wright clearly was not Satoshi and did not write the original Bitcoin whitepaper. This was hardly a surprise to anyone, but given how the case against the Bitcoin developers had progressed, there was real nervousness about how the court would rule here. But the judge was pretty explicit on this point:
“Dr Wright is not the author of the Bitcoin White Paper. Second, Dr Wright is not the person who adopted or operated under the pseudonym Satoshi Nakamoto in the period 2008 to 2011. Third, Dr Wright is not the person who created the Bitcoin System. And, fourth, he is not the author of the initial versions of the Bitcoin software.”
Now, a month after that, we have a follow-up judgment in that original case that goes beyond just what Wright is not. Now the judge is calling out Wright for apparently lying and forging documents to make his case. The ruling and its related appendix are brutal. The ruling itself is well over 200 pages of fascinating detail. But the summary and the conclusions are all you really need to know.
From the summary:
Dr Craig Steven Wright (‘Dr Wright’) claims to be Satoshi Nakamoto i.e. he claims to be the person who adopted that pseudonym, who wrote and published the first version of the Bitcoin White Paper on 31 October 2008, who wrote and released the first version of the Bitcoin Source Code and who created the Bitcoin system. Dr Wright also claims to be a person with a unique intellect, with numerous degrees and PhDs in a wide range of subjects, the unique combination of which led him (so it is said) to devise the Bitcoin system.
Thus, Dr Wright presents himself as an extremely clever person. However, in my judgment, he is not nearly as clever as he thinks he is. In both his written evidence and in days of oral evidence under cross-examination, I am entirely satisfied that Dr Wright lied to the Court extensively and repeatedly. Most of his lies related to the documents he had forged which purported to support his claim. All his lies and forged documents were in support of his biggest lie: his claim to be Satoshi Nakamoto.
Many of Dr Wright’s lies contained a grain of truth (which is sometimes said to be the mark of an accomplished liar), but there were many which did not and were outright lies. As soon as one lie was exposed, Dr Wright resorted to further lies and evasions. The final destination frequently turned out to be either Dr Wright blaming some other (often unidentified) person for his predicament or what can only be described as technobabble delivered by him in the witness box. Although as a person with expertise in IT security, Dr Wright must have thought his forgeries would provide convincing evidence to support his claim to be Satoshi or some other point of detail and would go undetected, the evidence shows, as I explain below and in the Appendix, that most of his forgeries turned out to be clumsy. Indeed, certain of Dr Wright’s responses in cross-examination effectively acknowledged that point: from my recollection at least twice he indicated if he had wanted to forge a document, he would have done a much better job.
If Dr Wright’s evidence was true, he would be a uniquely unfortunate individual, the victim of a very large number of unfortunate coincidences, all of which went against him, and/or the victim of a number of conspiracies against him.
The true position is far simpler. It is, however, far from simple because Dr Wright has lied so much over so many years that, on certain points, it can be difficult to pinpoint what actually happened. Those difficulties do not detract from the fact that there is a very considerable body of evidence against Dr Wright being Satoshi. To the extent that it is said there is evidence supporting his claim, it is at best questionable or of very dubious relevance or entirely circumstantial and at worst, it is fabricated and/or based on documents I am satisfied have been forged on a grand scale by Dr Wright. These fabrications and forgeries were exposed in the evidence which I received during the Trial. For that reason, this Judgment contains considerable technical and other detail which is required to expose the true scale of his mendacious campaign to prove he was/is Satoshi Nakamoto. This detail was set out in the extensive Written Closing Submissions prepared by COPA and the Developers and further points drawn out in their oral closing arguments.
And from the conclusion:
Overall, in my judgment, (and whether that distinction is maintained or not), Dr Wright’s attempts to prove he was/is Satoshi Nakamoto represent a most serious abuse of this Court’s process. The same point applies to other jurisdictions as well: Norway in particular. Although whether Dr Wright was Satoshi was not actually in issue in Kleiman, that litigation would not have occurred but for his claim to be Satoshi. In all three jurisdictions, it is clear that Dr Wright engaged in the deliberate production of false documents to support false claims and use the Courts as a vehicle for fraud. Despite acknowledging in this Trial that a few documents were inauthentic (generally blamed on others), he steadfastly refused to acknowledge any of the forged documents. Instead, he lied repeatedly and extensively in his attempts to deflect the allegations of forgery.
Also, there’s this:
I tried to identify whether there was any reliable evidence to support Dr Wright’s claim and concluded there was none. That was why I concluded the evidence was overwhelming
That one had the emphasis in the original.
Wright has already said he’ll appeal, and we’ve seen over the years that this guy thrives off of the media coverage (I’d been debating over the past year whether to cover any part of this case, but finally figured now was the time to highlight just this brutal decision).
No one has seriously believed that Wright had any connection to Satoshi. His years-long campaign of bullying and nonsense should fade into the ugly dustbin of history. It should be seen as an example of brazen mendacity in pursuit of great wealth, without a care in the world for who he would run over and destroy in the process.
I hope we can retire the Craig Wright tag with this story, though I fear he’ll still be causing a nuisance somewhere.
Last month we highlighted what seemed like a fairly silly Wall Street Journal op-ed arguing that banning cryptocurrency was the best way to stop ransomware, in response (mainly) to the well publicized ransomware attack on Colonial Pipeline, which resulted in the company shutting down the flow of oil while it sorted things out. As we pointed out, not only was the idea of banning cryptocurrency unworkable, it was unlikely to do much to stop ransomware. Unfortunately, it appears that a number of other cryptocurrency haters jumped on this moment to push the idea even further, claiming that “society has a Bitcoin problem.”
Of course, part of the key narrative in all of these pieces is that cryptocurrency and Bitcoin in particular, somehow make it easier for criminals to “get away” with these kinds of ransom demands, highlighting that it is somewhat easier to move around large values of Bitcoin than cash. However, as we noted in our original piece, the idea that cryptocurrency allows criminals to “get away” seemed extremely overblown, as we’ve seen plenty of cases where criminals using cryptocurrency were caught. And, as if to put an exclamation point on all of this, soon after the huge moral panic, the FBI announced that it had recovered over half of the money Colonial Pipeline had paid.
And, as the FBI special agent’s affidavit showed, this was done in part by tracking how the money flowed across the public ledger. The NY Times ran an article noting that the FBI’s recovery of the money here “upends the idea that Bitcoin is untraceable.” A bunch of long time Bitcoin/cryptocurrency followers scoffed at the NY Times article, because they’ve long known that Bitcoin’s public ledger has always made it so that transactions are traceable. But it’s actually important for people not deeply in the Bitcoin space to understand this as well. And the problem with so many of the “ransomware is really a cryptocurrency problem” articles, was that they implied otherwise — that cryptocurrency was somehow totally and completely untraceable.
As the NY Times article explains, what’s important here is that it demonstrates that for all the hand wringing about cryptocurrencies and ransomware, the reality is that law enforcement is evolving with the times, and using the same kind of law enforcement detective work it’s supposed to use to solve crimes.
Yet for the growing community of cryptocurrency enthusiasts and investors, the fact that federal investigators had tracked the ransom as it moved through at least 23 different electronic accounts belonging to DarkSide, the hacking collective, before accessing one account showed that law enforcement was growing along with the industry.
That?s because the same properties that make cryptocurrencies attractive to cybercriminals ? the ability to transfer money instantaneously without a bank?s permission ? can be leveraged by law enforcement to track and seize criminals? funds at the speed of the internet.
That’s an important point and one that often gets lost in the FUD surrounding new technologies (such as encryption) that might make law enforcement’s job slightly more complex in the short run. But, at the same time, law enforcement needs to learn to adapt, not by undermining these technologies, but understanding how they work, and understanding how to do the actual legwork to trace those abusing the technology for criminal purposes.
So rather than jumping to the conclusion that we need to ban this or that technology because it makes it slightly more challenging for law enforcement, this is actually an example showing how if law enforcement does their job properly, the technology is not the problem.
If you hadn’t noticed yet, the internet of things is a security and privacy shit show. Millions of poorly secured internet-connected devices are now being sold annually, introducing massive new attack vectors and vulnerabilities into home and business networks nationwide. Thanks to IOT companies and evangelists that prioritize gee-whizzery and profits over privacy and security, your refrigerator can now leak your gmail credentials, your kids’ Barbie doll can now be used as a surveillance tool, and your “smart” tea kettle can now open your wireless network to attack.
So of course this kind of security and privacy apathy has extended to more creative uses of internet-connected devices. Case in point: last October, security researchers found that the makers of an IOT chastity cage — a device used to prevent men from being able to have sex — (this Amazon link has the details) had left an API exposed, giving hackers the ability to take remote control of the devices. And guess what: that’s exactly what wound up happening. One victim and device user say he was contacted by a hacker who stated he wouldn’t be able to free his genitals from the device unless he ponied up a bitcoin ransom.
Luckily his genitals weren’t in the device at the time, though it’s not clear other users were as lucky:
“A victim who asked to be identified only as Robert said that he received a message from a hacker demanding a payment of 0.02 Bitcoin (around $750 today) to unlock the device. He realized his cage was definitely “locked,” and he “could not gain access to it.”
“Fortunately I didn?t have this locked on myself while this happened,” Robert said in an online chat.”
Given the often nonexistent security on internet of things devices, such problems aren’t particularly uncommon in devices like not-so-smart thermostats. It’s also a major problem in many hospitals where big medical conglomerates haven’t been willing to pony up the money necessary to keep lifesaving technology private and secure. That said, “I had to pay some kid in the Ukraine $750 so I could access my own genitals” is a new wrinkle many hadn’t seen coming.
It’s just yet another reminder that you shouldn’t connect everything to the internet just because you can. And you shouldn’t endeavor to engage in such innovation unless you’re willing to spend the money and take the time to ensure you’re adhering to basic security and privacy standards. Whether a heart monitor or a sex toy, most companies still aren’t after ten years of headlines like this. And despite some promising headway being made in policy, our response to the security dumpster fire that is the IOT remains a pretty hot, discordant mess.
I was tempted to start this post with just a series of head-smashing-into-desk emojis, but I thought that might come off as a bit weird. Remember Craig Wright? He’s the somewhat controversial guy who has claimed to have really been Satoshi Nakamoto, the creator of Bitcoin. Suffice it to say, there are a lot of people who do not believe Craig Wright, and have highlighted how Wright has failed to provide any of the fairly straightforward methods the original Satoshi could use to prove who he was, and instead used complicated methods that suggest gamesmanship, rather than actual proof.
As we’ve highlighted in our posts, Wright seems most focused on patenting everything he can with regards to Bitcoin and cryptocurrency — which, at the very least, seems to go against the open, sharing nature that was a key part of the early cryptocurrency community that Satoshi Nakamoto supported.
And now comes the somewhat hilarious report that Wright has tried to register the copyright on the original Bitcoin whitepaper that Satoshi Nakamoto published. This is basically a troll move. Registering the copyright is meaningless. The Copyright Office does not review carefully if you are the actual creator. It’s mostly a rubber stamp process — and it’s rarely an issue because in most cases if someone tried to fraudulently register someone else’s copyright, that would come out pretty quickly and it would not take long to sort out what’s real. But in this case, when you have an anonymous secret author, it gets a little more complicated.
As CoinCenter’s Jerry Brito notes this is sort of a bug of the system, but he also notes that someone else could also register the copyright and see if Wright would actually sue over it (in which case, he’d have to establish to a court that he actually held the copyright):
Someone else could today also register themselves as the author of the white paper, thus inviting a suit from Wright and letting a court decide on the validity of the claim. I volunteer @petermccormack.
The situation is getting so much attention, that even the Copyright Office has decided to weigh in, highlighting (as we note above) that it doesn’t have any methodology for reviewing these registrations, or for anyone to contest them, and that any such situation would have to happen in federal court (most likely if anyone tried to enforce the copyright).
As a general rule, when the Copyright Office receives an application for registration, the claimant certifies as to the truth of the statements made in the submitted materials. The Copyright Office does not investigate the truth of any statement made.
A registration represents a claim to an interest in a work protected by copyright law, not a determination of the truth of the claims therein. It is possible for multiple, adverse claims to be registered at the Copyright Office. The Copyright Office does not have an opposition procedure for copyright registrations, such as the procedures available at the Patent and Trademark Office for patents and trademark registrations. Disputes over the claims in a registration may be heard before federal courts, including disputes over authorship of a work. Someone who intentionally includes false information in an application may be subject to penalties.
The Copyright Office also points out that it merely asks the applicant to state that they are the author of a pseudonymous piece of content.
In a case in which a work is registered under a pseudonym, the Copyright Office does not investigate whether there is a provable connection between the claimant and the pseudonymous author.
In the case of the two registrations issued to Mr. Wright, during the examination process, the Office took note of the well-known pseudonym ?Satoshi Nakamoto,? and asked the applicant to confirm that Craig Steven Wright was the author and claimant of the works being registered. Mr. Wright made that confirmation. This correspondence is part of the public registration record.
So, this probably doesn’t matter, because if Wright actually wants to enforce the copyright, then he’d have to go to court and prove that he was the legitimate holder of the copyright (and the registration by itself won’t cut it). But, as a purely dickish way to try to game the system to pretend you have proof of being “Satoshi Nakamoto,” it seems to fit in with a pattern of past behavior by Wright. Though not by Nakamoto. Still, it will be interesting to see if this copyright ever ends up in court.
For those of you who have been desperate for a crazy copyright case since the end of the monkey selfie case, I would nominate this potential lawsuit as a worthy followup.
The continuous block mining cycle incentivizes people all over the world to mine Bitcoin. As mining can provide a solid stream of revenue, people are very willing to run power-hungry machines to get a piece of it. Over the years this has caused the total energy consumption of the Bitcoin network to grow to epic proportions, as the price of the currency reached new highs. The entire Bitcoin network now consumes more energy than a number of countries, based on a report published by the International Energy Agency.
When Bitcoin launched in 2009, each block came with a 50-bitcoin reward for the miner who created it. This figure is scheduled to fall by half every four years. It fell to 25 bitcoins in 2012 and 12.5 bitcoins in 2016. The reward will fall again to 6.25 bitcoins in 2020. When the mining industry’s revenue falls by half, its energy consumption should fall by the same proportion, since, if it didn’t fall, mining would become an unprofitable activity.
In any case, a new article in the Guardian reminds us that Bitcoin is just one part of a much larger energy consumption problem that the digital world needs to address:
The communications industry could use 20% of all the world’s electricity by 2025, hampering attempts to meet climate change targets and straining grids as demand by power-hungry server farms storing digital data from billions of smartphones, tablets and internet-connected devices grows exponentially.
It doesn’t really matter which of Bitcoin and the server farms will consume the most power in years to come — clearly both will be large, and both will require efforts to increase the availability of low-cost renewable energy so as to minimize their environmental damage. But there’s a fundamental way in which the two sectors differ.
Bitcoin is burning up the tera-watts to carry out meaningless calculations in order to win the prize of the next cryptocurrency block. Server farms need power in order to store detailed records of everything we do online, or with our connected devices, alongside masses of Internet of Things data streams. Whatever it is doing, Bitcoin is certainly not threatening our privacy, and arguably is enhancing it. But loss of privacy is exactly the risk arising from the use of massive server farms around the world.
The main reason why they are being built is to hold unprecedented quantities of personal data that can be analyzed and the results sold in some way — whether for advertising, or for other purposes. We constantly see stories about sensitive information being leaked on a massive scale, or legally acquired and then used in troubling ways. Alongside worthy concerns about the way that Bitcoin mining can degrade our physical world, we should worry more about how data mining can degrade our more personal space.
As you may recall, there was a giant fuss last year, when an Australian guy named Craig Wright not only claimed that he was “Satoshi Nakamoto” — the pseudonymous creator of Bitcoin — but had convined key Bitcoin developer Gavin Andresen that he was Nakomoto. That was a big deal because Andresen was one of the first developers on Bitcoin and regularly corresponded with Nakamoto (Andresen’s own name sometimes popped up in rumors about who Nakamoto might be). Even with Andresen being convinced, plenty of others soon picked apart the claims and found the claims severely lacking in proof.
Then, last summer, Andrew O’Hagan published an absolutely massive profile of Wright that only served to raise a lot more questions about Wright, his businesses, his claims to having created Bitcoin, and a variety of other things. However, as we noted at the time, buried in that massive article was a bizarre tidbit about how Wright was actively trying to patent a ton of Bitcoin related ideas. As we noted, the article stated that Wright’s plan was to patent tons of Bitcoin stuff, reveal himself as Nakamoto and then sell his patents for a billion dollars.
Of course, part of that plan fizzled because basically no one believes Wright was Nakamoto. But, apparently the patenting has continued. Earlier this months, Reuters released a big “investigation” showing that Wright is rushing to get as many Bitcoin-related patents as possible, and has partnered with an online gambling mogul who’s a fugitive because of his business dealings (add this to the long list of sketchy connections between Wright and other businesses):
Craig Wright, the Australian computer scientist who made the Satoshi claim, has the backing of Calvin Ayre, a wealthy Canadian entrepreneur, according to people close to Wright and documents reviewed by Reuters. Ayre has been indicted in the United States on charges of running online gambling operations that are illegal in many U.S. states ? an accusation he rejects.
Wright?s expertise combined with Ayre?s support make a potentially formidable force in shaping the future of bitcoin and blockchain, the ledger technology that underlies digital currencies. Wright and his associates have lodged more than 70 patent applications in Britain and have plans to file many more, according to documents and emails reviewed by Reuters and sources with knowledge of Wright?s business. The patents range from the storage of medical documents to WiFi security, and reflect Wright’s deep knowledge of how bitcoin and blockchain work.
Their total compares with 63 blockchain-related patents filed globally last year and 27 so far this year by multinationals from credit card companies to chipmakers, according to Thomson Innovation.
And, because it’s patents we’re talking about, there’s a shell company here, because shell companies are quite popular in the patent trolling world. But Reuters claims that Ayre and Wright are behind this particular shell company and point to lots of close connections between the two. The report further notes that there are plans to file 150 patent applications, and maybe up to 400, and again repeats the claim from last year about the “ONE BILLLLLLLLLION DOLLARS!” sales plan:
The range of patent applications lodged by Wright and colleagues is wide. Five, registered on Dec. 14, were made by EITC Holdings with the bland description ?computer-implemented method and system,? public filings show. One, registered on Dec. 28, was described as ?Determining a common secret for two blockchain nodes for the secure exchange of information? – apparently a way to use the blockchain to exchange encrypted data. Other applications by Wright and his associates relate to sports betting and a blockchain-based operating system for simple electronic devices.
Emails from Wright to Ayre?s associate Matthews, reviewed by Reuters, set out plans to file 150 patents. A person with direct knowledge of Wright?s businesses said he and associates ultimately aim to file closer to 400. None has been approved so far and it?s not clear whether the patents would be enforceable if granted, but Wright?s associates have been quoted as saying the patents could be sold ?for upwards of a billion dollars.?
The Reuters article argues that this “rush to patent applications poses a threat to the original conception of bitcoin as a technology available to all.” Of course, that also seems like a pretty big strike against the idea that Wright is Nakamoto.
But it also seems like a misunderstanding about patents themselves. First off, just because you file for a ton of patents, it doesn’t mean you’re going to get them. And, thankfully, lately the USPTO has actually gotten much, much better at rejecting really bad patents. These things may be worth talking about if he’s actually granted these patents — and, even then, it may only really matter if he (or any later holder of the patents) seeks to enforce them. The really crazy thing, though, is that this once again demonstrates the sheer silliness of our patent system. Rather than actually trying to build a viable business by leveraging the useful features of Bitcoin/blockchain, you have someone trying to lock it up by putting tollbooths wherever possible. Tons of work is being done to advance Bitcoin and blockchain these days, because of all the opportunities it will create… not because of patents. And, once again, it shows the folly of believing that patents are a key incentive for innovation. That’s rarely the case. Often, they’re a key incentive for putting hurdles in the way of actual innovations, so that you can shake the actual innovators down for cash.
A couple weeks back, we wrote about a ridiculous and massively overbroad demand from the IRS that virtual currency exchange/online wallet host Coinbase turn over basically all info on basically all Coinbase users. They did this because they saw evidence of a single person using Bitcoin to avoid paying taxes. Coinbase expressed concern over this, but Judge Jacqueline Scott Corley didn’t seem too concerned, and has granted the IRS’s request by literally rubber stamping the DOJ’s request. I know it’s not all that uncommon for judges to accept “proposed orders” but it’s still a bit disturbing to see it happen on something with potentially massive consequences.
Coinbase has indicated that they’re going to push back on this legally, but it’s still quite unfortunate that the judge didn’t seem all that concerned about this. While Coinbase says it expected the court to grant this order, and that “we look forward to opposing the DOJ’s request in court,” it’s unfortunate how quick judges are to agree to these kinds of orders. Either way, this is going to be a case to follow.
There have always been questions about the tax implications of cryptocurrencies like Bitcoin. A few years ago, the IRS came out with some guidelines, declaring cryptocurrencies to be property, rather than currency, and then taxed more like equity. But late last week, the IRS went to court to basically demand Coinbase turn over all info it has on everyone. Coinbase is one of, if not the, leading online cryptocurrency exchanges and places where many people store their cryptocurrency in an online wallet. It’s a company that has bent over backwards to comply with the laws. But, no matter, the IRS basically thinks everyone who uses it is a tax cheat. Here’s what the IRS demanded:
All records of account/wallet/vault activity including transaction logs or other records identifying the date, amount, and type of transaction (purchase/sale/exchange), the post transaction balance, the names or other identifiers of counterparties to the transaction; requests or instructions to send or receive bitcoin; and, where counterparties transact through their own Coinbase accounts/wallets/vaults, all available information identifying the users of such accounts and their contact information.
Uh, yeah, that’s not very limited. It’s not limited at all. The IRS literally wants everything. Why? Because, according to the IRS, it’s investigating one single tax cheat. In a declaration, IRS agent David Utzke, talks about a single tax cheat, and says this gives him a basis for requesting all info.
After using a traditional abusive offshore arrangement for approximately 5 years,
Taxpayer 1 became fatigued with the effort required to manage his offshore accounts, attorneys, and
applicable regulations, and discovered virtual currency while conducting internet research on the topic.
Taxpayer 1 began testing the use of virtual currency and eventually abandoned the use of his offshore
structure. Taxpayer 1 was able to use virtual currency to repatriate his assets without governmental
detection.
For example, Taxpayer 1 originally worked with a foreign promoter who set up a
controlled foreign shell company which diverted his income to a foreign brokerage account, then to a
foreign bank account, and lastly back to Taxpayer 1 through the use of an automated teller machine
(ATM). Once Taxpayer 1 abandoned the use of his offshore structure in favor of using virtual currency,
the steps described above were the same until his income reached his foreign bank account. Once there,
instead of repatriating his income from an ATM in the form of cash, Taxpayer 1 diverted his income to a
bank which works with a virtual currency exchanger to convert his income to virtual currency. Once
converted to virtual currency, Taxpayer 1?s income was placed into a virtual currency account until
Taxpayer 1 used it to purchase goods and services. Taxpayer 1 failed to report this income to the IRS.
Utzke also mentions two other taxpayers, which were companies, not individuals, but which used Coinbase. He notes that others are laundering money and thus likely to be using cryptocurrencies. That may be true, but it seems like a pretty big stretch to argue that means Coinbase should cough up all details on all transactions.
In the IRS’s memorandum of support, it insists that it’s just trying to find all the tax cheats, so it should get to look at all the records.
Since 2009, the use of virtual currency has increased exponentially. Some users value the
relatively high degree of anonymity associated with virtual currency transactions because only a
transaction in virtual currency, such as buying goods or services, is public and not the identities of the
parties to the transaction. Because of that, virtual currency transactions are subject to fewer third-party
reporting requirements than transactions in conventional forms of payment. However, due to this
anonymity and lack of third-party reporting, the IRS is concerned that U.S. taxpayers are underreporting
taxable income from transactions in virtual currencies. Further, because the IRS considers virtual
currencies to be property, United States taxpayers can realize a taxable gain from buying, selling, or
trading in virtual currencies. There is a likelihood that United States taxpayers are failing to properly
determine and report any taxable gain from such transactions.
…. The issuance of
the summons is warranted here because (i) the summons relates to an ascertainable group or class of
persons; (ii) there is a reasonable basis for believing these U.S. taxpayers failed to comply with internal
revenue laws; and (iii) information sufficient to establish these U.S. taxpayers? identities is not readily
available to the IRS from other sources.
Our customers may be aware that the U.S. government filed a civil petition yesterday in federal court seeking disclosure of all Coinbase U.S. customers’ records over a three year period. The government has not alleged any wrongdoing on the part of Coinbase and its petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes.
Although Coinbase’s general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government’s request. Our customers? privacy rights are important to us and our legal team is in the process of examining the government’s petition. In its current form, we will oppose the government?s petition in court. We will continue to keep our customers informed on developments in this matter.
What happens here is going to be a big, big deal in the cryptocurrency world. The IRS had to know that this was going to get attention, and perhaps that’s the intent. But this seems like a massive overreach.
