Financial Hacking: From Dark Web Smokescreens to White-Collar Crime

Stories of the entanglement of offshore banking, cryptocurrencies, the dark web, and white-collar (cyber)crime abound, leading to calls for crackdowns, policing and prohibition.

A growing group of financially and technically literate journalists and scholars are doing the important work of shedding an informed light on the relations between central banks, governments, offshore tax strategies, the crypto industry, the dark web, and global white-collar crime schemes.

While some look at possible ways forward for regulating and reforming cryptotechnologies, others are digging down to provide insight into the key mechanisms and players shaping offshore finance. Yet others outline the newest tactics in online extortion and the sale of illegal goods. What are the takeaways of these different investigative projects? What can be learned from American, Chinese and Russian attempts to regulate and reform?

Josephine Wolff provides an account of the larger history and development of cybercrime business models, from the theft of payment card data to identity fraud and ransomware.

Malcolm Campbell-Verduyn discusses the perils and possibilities of bringing cryptocurrencies into official regulatory remit. Thomas Bollen will zoom in on Tether, a stable coin that might just be the biggest fraud in the cryptomarket.

Speakers: Malcolm Campbell Verduyn, Josephine Wolff, Thomas Bollen

Moderator: …

Beyond the Cat and Mouse Chase? Crime, Cryptocurrencies and the Global Governance of Money Laundering

New forms of money are often critiqued for facilitating crime and undermining attempts to reduce illicit activity. A recurring critique of cryptocurrencies has been their (varying) ability to enable crime by bypassing existing money laundering controls at various levels of governance. Hesitantly and cautiously over the past decade, however, bridges have been built between the cryptocurrency industry and global anti-money laundering regime. Key national regulators coordinating through the Financial Action Task Force have experimented with varying approaches at bringing cryptocurrencies, and digital money more generally, into official regulatory remit. Harnessing the metaphor of the ‘cat-and-mouse chase’ this presentation contrasts how regulatory ‘cats’ working with technologist ‘mice’ enables more effective governance and stability in rapidly evolving markets than one-sided regulatory crackdowns that tend to push financial activities further into the shadows. The perils of closer coordination between industry and government are outlined along with further suggestions for governance reforms.

Malcolm Campbell Verduyn is an Assistant Professor of International Political Economy in the Department of International Relations and International Organization at the University of Groningen. He is the editor of Bitcoin and Beyond: Cryptocurrencies, Blockchains and Global Governance (Routledge, 2018), as well as editor of a special section of Global Networks on ‘Blockchains and Financial Globalisation’ (2019). With Nick Bernards he also co-edits a forthcoming special issue of the Review of International Political Economy on ‘The Changing Technological Infrastructures of Global Finance’.

How Cryptocurrencies Transformed Cybercriminals’ Business Models

Cybercrime has evolved over time to address new policing tactics, new technologies, and fluctuating prices of stolen data on the black market, but few things have changed the landscape for cybercriminals as radically as the growth and widespread use of cryptocurrencies. This talk looks at how cryptocurrencies have shifted cybercrime models towards ransomware and other forms of online extortion as well as online sale of illegal goods. Through examining the cases of Cryptolocker and the takedown of the GameOver Zeus botnet, the WannaCry and NotPetya ransomware attacks, and Silk Road and the prosecution of Ross Ulbricht, this talk will explore how different types of criminals have made use of cryptocurrencies in different ways to achieve different goals. It will also put these case studies in context of the larger evolution of cybercrime business models from the theft of payment card data to identity fraud to extortion, examining how those shifts have changed the defensive responsibilities and capabilities of different stakeholders and law enforcement agencies and what role cryptocurrencies in particular have played in changing who bears the costs of cybersecurity incidents. The talk will conclude with some discussion of how several governments including the United States, China, and Russia have tried to regulate cryptocurrencies and the strengths and weaknesses of these different approaches.

Josephine Wolff joined the faculty of the Fletcher School as an assistant professor of cybersecurity policy in 2019. Her research interests include international Internet governance, cyber-insurance, security responsibilities and liability of online intermediaries, government-funded programs for cybersecurity education and workforce development, and the legal, political, and economic consequences of cybersecurity incidents. Her book “You’ll See This Message When It Is Too Late: The Legal and Economic Aftermath of Cybersecurity Breaches” was published by MIT Press in 2018. Her writing on cybersecurity has also appeared in Slate, The New York Times, The Washington Post, The Atlantic, and Wired.

Cryptocurrencies: Monetary Revolution or Hoax

The financial sector is the most heavily regulated sector in the world. Although banks still get away with facilitating money laundering (see for example last year’s settlement between ING and the Dutch government), very obvious forms of fraud and market manipulation are being detected by the financial authorities. In the crypto world obvious tricks to manipulate the markets are happening every day. No financial authority is monitoring the markets. However: this does not seem to deter crypto traders from entering the markets; they still prefer trading crypto over other markets. Let’s have a quick look at the manipulation going on in the markets and then zoom in on one particular cryptocoin called Tether. After Bitcoin it is the most heavily traded coin available. Tether is a stable coin: it is always worth 1 dollar. How does that work and is it really worth 1 dollar? The case study of Tether is very interesting because it could either be the smartest invention (based on regular banking) or the biggest fraud in the cryptomarkets.

Thomas Bollen works as a journalist for Follow the Money, an independent platform for investigative journalism in the Netherlands. He is a financial economist specialised in monetary policy and the banking sector. After working as a consultant in the corporate sector Thomas made a career switch to journalism.