Month: December 2013

How the NSA Paid Security Firm $10 Million to Promote Flawed Encryption

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Stories documenting the NSA’s intentional attempt to weaken encryption standards have been floating around for months now, but Reuters put out a story Friday that documents just how far the out of control agency has gone to weaken security for hundreds of millions of computer users.

RSA has been a leader in cryptography ever since it revolutionized the field after its genesis in the 1970s from three MIT professors. The company actually provided a lot of successful pushback against the NSA and the Clinton Administration’s push to introduce the Clipper Chip in the 1990’s, but has completely sold out in recent years as it became more corporatized and many of the technology leaders left. If it is true that the only received $10 million from the NSA, they sold out the American public very cheaply. RSA is now owned by EMC

From Reuters:

Documents leaked by former NSA contractor Edward Snowden show that the NSA created and promulgated a flawed formula for generating random numbers to create a “back door” in encryption products, the New York Times reported in September. Reuters later reported that RSA became the most important distributor of that formula by rolling it into a software tool called Bsafe that is used to enhance security in personal computers and many other products.

Undisclosed until now was that RSA received $10 million in a deal that set the NSA formula as the preferred, or default, method for number generation in the BSafe software, according to two sources familiar with the contract. Although that sum might seem paltry, it represented more than a third of the revenue that the relevant division at RSA had taken in during the entire previous year, securities filings show.

The earlier disclosures of RSA’s entanglement with the NSA already had shocked some in the close-knit world of computer security experts. The company had a long history of championing privacy and security, and it played a leading role in blocking a 1990s effort by the NSA to require a special chip to enable spying on a wide range of computer and communications products.

Started by MIT professors in the 1970s and led for years by ex-Marine Jim Bidzos, RSA and its core algorithm were both named for the last initials of the three founders, who revolutionized cryptography. Little known to the public, RSA’s encryption tools have been licensed by most large technology companies, which in turn use them to protect computers used by hundreds of millions of people.

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CNN Claims “Americans Want Security Over Freedom”

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Wow, this is straight up insane propaganda at the highest level. He is not even trying to hide the message. CNN’s Jake Tapper just comes out and says it: I think the American people, honestly, want security over freedom. – Jake Tapper Compare that to let’s say, Benjamin Franklin: Any society that would give up a … Read more

Video of the Day: Interview with Coinbase Founder Brian Armstrong

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This is one of the most interesting Bitcoin-related videos I have ever watched, and I have watched plenty. Coinbase has been at the center of BTC news as of late after it became the recipient of the largest investment ever in the Bitcoin space when Andreessen Horowitz announced a $25 million capital infusion. I personally … Read more

Meet the “Bandits’ Club” – The TBTF Wall Street Cartel Rigging the FX Market

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Another day, another tale of how the “Too Big to Jail” Wall Street cartel manipulates a major global market with no repercussions whatsoever. Must be nice having essentially every Congressperson and regulator in your back pocket. Get caught? Pay a little fine and get on with it. Everyone wins!

Actually, everyone loses. Except for the handful of FX manipulators, rigging global currency markets from their Essex villages outside of London. These traders for major TBTF banks refer to themselves by various names in their now silenced Bloomberg chat rooms, from The Cartel,” “The Bandits’ Club,” “One Team, One Dream” and “The Mafia.” Very classy guys. Glad we bailed your asses out…

More from Bloomberg:

Now regulators from Bern to Washington are examining evidence first reported by Bloomberg News in June that a small group of senior traders at big banks had something else on their screens: details of each other’s client orders. Sharing that information may have helped dealers at firms, including JPMorgan Chase & Co., Citigroup Inc., UBS AG and Barclays Plc, manipulate prices to maximize their own profits, according to five people with knowledge of the probes.

“This is a market where there is no law and people have turned a blind eye,” said former Senator Ted Kaufman, a Delaware Democrat who sponsored legislation in 2010 to shrink the largest U.S. banks. “We’ve been talking about banks being too big to fail. What’s almost as big a problem is banks too big to manage.”

At the center of the inquiries are instant-message groups with names such as “The Cartel,” “The Bandits’ Club,” “One Team, One Dream” and “The Mafia,” in which dealers exchanged information on client orders and agreed how to trade at the fix, according to the people with knowledge of the investigations who asked not to be identified because the matter is pending. Some traders took part in multiple chat rooms, one of them said.

The currency investigations are taking place as authorities grapple with a widening list of scandals involving the manipulation by banks of benchmark financial rates, including the London interbank offered rate, or Libor, and ISDAfix, used to determine the value of interest-rate derivatives. The U.K. regulator also is reviewing how prices are set in the $20 trillion gold market, according to a person with knowledge of the matter.

Don’t be ridiculous, everyone knows the gold market is the only market on earth that isn’t manipulated.

“Some of these problems developed over many years without anybody speaking up,” said Andrew Tyrie, chairman of Britain’s Commission on Banking Standards and Parliament’s Treasury Select Committee. “This is remarkable. It suggests something very wrong with the culture at these institutions.”

Blasphemy!

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HSBC Receives Slap on the Wrist for Helping to Finance Terrorists

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The “Too Big Too Jail” nonsense that surrounds large U.S. banks and their above the law employees has been glaringly obvious and thoroughly documented for quite some time now. Yet what represents an even larger slap in the face to millions of hard-working, law-abiding citizens, is how relentlessly the “justice” system goes after small time criminals, while merely fining oligarch thieves for far worse crimes. I first covered this theme earlier this year in my piece Some Money Launderers are “More Equal” than Others, which discussed how HSBC was caught laundering billions of dollars for Mexican drug cartels.

Well HSBC is back in the news. This time it relates to their transferring funds on the behalf of financiers for the militant group Hezbollah. If transactions such as these had even the slightest link to Bitcoin, there would be endless uproar, calls for countless Congressional hearings and demands to stop the currency at all costs. But when HSBC is caught doing it, what happens? A $32,400 settlement.

More from The Huffington Post:

A major U.S. bank has agreed to a settlement for transferring funds on the behalf of financiers for the militant group Hezbollah, the Treasury Department announced on Tuesday.

Concluding that HSBC’s actions “were not the result of willful or reckless conduct,” Treasury’s Office of Foreign Assets Control accepted a $32,400 settlement from the bank. Treasury noted, as did HSBC in a statement to HuffPost, that the violations were voluntarily reported.

Everett Stern, a former HSBC compliance officer who complained to his supervisors about the Hezbollah-linked transactions, told HuffPost he was “ecstatic and depressed at the same time.”

“Those are my transactions, I reported them,” he said, satisfied that the government was taking action. But, he added, “Where I am upset was those were a handful of transactions, and I saw hundreds of millions of dollars” being transferred.

Stern said he hopes the government’s enforcement actions against HSBC have not come to an end with the latest settlement. “They admit to financing terrorism and they get fined $32,000. Where if I were to do that, I would go to jail for life,” he said.

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My Thoughts on Last Night’s BTC Crash and a Guest Post on “Why Bitcoin Will Succeed”

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I haven’t seen action in Bitcoin like we saw last night since earlier this year in the spring when the price went from $10 in January to $260 in April, and then crashed down to $50 before stabilizing in the $80-$120 range for months before beginning the latest parabolic move. I was so taken by the action in BTC China last night that I wasn’t able to sleep until 5am Rocky Mountain time, trying to buy what I could at the best prices possible. I saw every single tick. It was a crazy evening.

Yesterday I posted that while I thought BTC was at the lower end of the range at $650, there was the potential for some near-term headline risk. I thought that it might come from the U.S. banking system, but instead it came from China when they banned new renminbi deposits into the leading global exchange BTC China. While I am not saying that the price will now quickly launch to new highs, there was complete and total panic in the air last night. No question about that. In addition I tweeted that:

Now I think we have a much more positive setup going forward, although a similar period of consolidation such as we saw earlier in this year is likely. The news out of China cannot get any worse, and BTC China as far as an exchange and price discovery mechanism is basically dead. The big risk now is that other nations take similar actions, but the sentiment is now sufficiently bad and people expect bad news. Last night represented the most BTC I have bought since the spring crash.

In light of all this, a reader of my blog going by the handle Anon Wibble posted an excellent comment and I have decided to republish it here. Would love to get reader feedback as well. Enjoy!

Bitcoin will prevail. This isn’t just another e-currency, this is an entire framework for communicating information and money unlike no other ever before. This is the biggest revolution since linux and the more you use bitcoin the better and more complex you realise it is.

Look at the following things:

1) bitcoin can do everything a bank can do

2) while it’s true that unlike credit cards, btc has no way to chargeback claims, also consider that in the past chargeback scams have defrauded business through payers likes paypal etc. Chargeback doesn’t prevent fraud at all, it moves the person being defrauded from one person to another. Also consider that escrow services do chargeback for far cheaper than credit cards do.

3) bitcoin isn’t just a currency it’s a protocol that can be used to exchange information, nowhere in the headlines is this even mentioned files and information can be exchanged through bitcoin nobody has even looked at this yet

4) JPMorgan wouldn’t have tried to patent their own version of bitcoin 170 times, if they didn’t think crypto currency wasn’t the future

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Official at the NSA States: “I Have Some Reforms for the First Amendment”

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Here’s an article by Daniel Drezner, a professor of international politics at Tufts University and a contributing editor to Foreign Policy. He recently spent a day at the NSA’s headquarters in Fort Meade, Maryland. As you might expect, some interesting tidbits came from the mouths of some of these control-freak statists. One truly unenlightened official seemed … Read more

Has Chase Begun a Covert War on Bitcoin?

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The past several days have seen considerable weakness in the price of bitcoin. The selling was sparked by the revelation that the Chinese government had essentially instructed its financial system to avoid it. Then yesterday it was revealed that China had banned third-party payment companies from doing business with bitcoin exchanges. As far as price is concerned, I have stated repeatedly via Twitter that I think the China news caps the upside in the near-term (baring other material news of course) and that we are in a new range of $650-$1050 per BTC. At roughly $700 where we are now, I think at least 75% of the “China premium” is now out of the price. This sets up a solid risk/reward profile. However, there is one thing in the U.S. that people should be aware of and represents some headline risk if true.

Recently, a friend of mine noted that Chase has threatened to shutdown his business account due to his use of Coinbase (remember Coinbase recently received the largest VC investment in Bitcoin to-date). Apparently, the problem hasn’t been when money moves out of U.S. banking deposits and into the Bitcoin ecosystem, but rather when the currency is converted back to dollars and then deposited back into the Chase accounts. With this already being in my mind, I read the following Reddit post this morning:

Hi everyone,

A few weeks ago, I posted that Chase decided to terminate my account, and they never notified me as to why they would do this. However, I believed it to be Bitcoin-related.

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Manhattan Apartment Rental Rates Drop for Third Month in a Row

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Now this is interesting. Investors looking at real estate should be aware of two main things at the moment. Those two things relate to what is really driving this centrally planned, manufactured rebound in U.S. real estate. It’s really a tale of two distinct trends. In formerly hurting markets such as Arizona, Nevada and Florida, private equity investors have flooded into what is a now gigantically crowded to “buy-to-rent” trade. Meanwhile, in the prime markets such as New York City and San Francisco, we have seen the “money laundering trade,” where rich oligarchs move their often ill-gotten gains into trophy real estate assets abroad.

We have seen many signs all year that the first key pillar to the manufactured rise in housing was becoming strained, as rents continued to rise while incomes continued to fall. It doesn’t take a genius to realize that this can only last so long, and many of the early investors in “buy-to-rent” have already gotten out or are trying to.

As far as the second pillar, well at some point the oligarchs will have purchased enough homes in London and Manhattan and then what? Interestingly, the seemingly unstoppable rental market in Manhattan is showing signs of cracking. What this ultimately means is unknown, but it’s an interesting data point nonetheless.

From Bloomberg:

Manhattan apartment rents fell for a third month in November and the vacancy rate reached the highest in at least seven years, signs the market is weakening amid a spike in homebuying and the lure of leasing in Brooklyn.

The median monthly rent in Manhattan dropped 3 percent from a year earlier to $3,100, according to a report today by appraiserMiller Samuel Inc. and brokerageDouglas Elliman Real Estate. The vacancy rate climbed to 2.8 percent, the highest since the firms began tracking the data in August 2006.

“With the scare about rising mortgage rates, it poached a lot of demand from the rental market,”Jonathan Miller, president of New York-based Miller Samuel, said in an interview. “On top of that, what else is poaching demand from the Manhattan rental market is Brooklyn.”

Manhattan landlords agreed to offer concessions, such as a month’s free rent, on 7.2 percent of all new leases in November, up from 4.2 percent a year earlier.

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