Venezuela Sues US Website Owners For 'Racketeering' And 'Cyberterrorism' To Try To Shut Them Up About Exchange Rates

from the oppressive-government-in-line-for-some-First-Amendment-education dept

Cyrus Farivar is reporting that the government of Venezuela has decided the best way to keep its citizens from learning more about its collapsing economy is to sue the US-based operators of a currency exchange information website… in a US federal court.

The US-based website that publishes a daily unofficial exchange rate between American dollars and Venezuelan bolivares has recently filed a vigorous defense in a strange international lawsuit. The site, DolarToday, was sued in October 2015 by the Central Bank of Venezuela (CBV) in federal court in Delaware, where the site is based.

In its bizarre and bombastic civil complaint, the US-based lawyer for the CBV argued that the three Venezuelan-American men who run the site are engaged in "cyber-terrorism" designed to create "the false impression that the Central Bank and the Republic are incapable of managing Venezuela’s economy."

When corrupt and censorious governments engage in litigation, "bizarre" and "bombastic" are a given. It isn't exactly deposed Panamanian dictator Manuel Noriega suing Activision from his jail cell, but it's close. The opening paragraph of the complaint takes a purple swing for the prose fences.

How far will some go to enrich themselves (and their friends) and to regain the political power they crave to enrich themselves further? Would they go so far as to hurt their own countrymen by making their already challenging lives even harder? Defendants would. And they have.

What follows is revisionist history, a rose-tinted view of Venezuela's future prospects as a viable nation state and lots of accusations with little evidence to back them up.

The Venezuelan government claims the real reason the website publishes exchange rates (that the government itself won't allow anyone to publish) is not to inform Venezuelan citizens of the decreasing worth of their cash, but to overthrow the government. Or get rich trying.

Defendants are Venezuelan exiles living in the United States who virulently oppose the Republic’s elected leaders, but not out of concern for their countrymen. To the contrary, Defendants seek only to grab riches and power for themselves and their friends, willingly increasing the hardships of ordinary Venezuelans in the process. And in a ruthless exercise of realpolitik, Defendants seek to trick the Venezuelan populace that elected the Republic’s current government, hoping that voters will turn on their leaders, and blame them for the harm caused by Defendants.

Like many baseless lawsuits filed by censorious entities, the filing claims there's a RICO violation in play here. Oh, and Lanham Act violations. Also: cyber-terrorism.

In taking these steps, Defendants conspired to use a form of cyber-terrorism to wreak, and in fact they have wreaked, economic and reputational harm on the Central Bank by impeding its ability to manage the Republic’s economy and foreign exchange system. Among other things, Defendants’ actions are:

• Exacerbating inflationary pressures that diminish the purchasing power of the Venezuelan people and the Central Bank;
• Diminishing the value of the Central Bank’s seigniorage for the new currency it prints (or the coins it mints) or that it newly puts into circulation;
• Depriving the Central Bank of the higher real returns that it would otherwise receive on monies it lends to other financial institutions and entities;
• Causing trade to be withheld from the Central Bank, as capital that it would otherwise retain or attract instead leaves, with investors seeking returns from other world economies; and
• Creating the false impression that the Central Bank and the Republic are incapable of managing Venezuela’s economy.

The operation of DolarToday is rather simple, at least in terms of establishing an exchange rate. (The constant creation of mirror sites to circumvent government censorship is a bit more complex.) An interview cited by the government's filing indicates the site operators call up trading houses and ask for the current exchange rate without disclosing who they are or which site they work for. This precaution serves two purposes: to "prevent speculation" and to protect the owners of the site, because the Venezuelan government considers publishing anything but the "official" exchange rate to be criminal activity.

Because of this censorious activity, the DolarToday has become a trusted source for credible exchange rates, much to the government's litigious chagrin.

The Central Bank is informed and believes and therefore alleges that the DT Rate has been the most widely read and followed exchange rate reference in Venezuela since 2013. News outlets – including respected ones such as CNN, CNBC, Reuters, and the well-known blog Venezuela Live Economic – have embraced the DT Rate as the authoritative “parallel” or “black market” exchange rate in Venezuela.

The large number of Venezuelan daily visitors to the DT Site, users of the DT App and DT Twitter followers demonstrates that many Venezuelans have likewise been led to believe that the DT Rate represents the “true” dollar-to-bolívar exchange rate. Indeed, the Central Bank is informed and believes that at least one million people – mostly in Venezuela – visit the DT Site (or one of its “mirror” sites) daily, making it one of the most visited websites in Venezuela.

The Central Bank claims DT's owners have distorted the exchange rate on purpose to engage in currency speculation. And yet, other sources appear to agree that Venezuela is suffering from triple-digit inflation. The government could dispel these "rumors," but it has never offered anything substantive to counter claims made by several news sites.

To the consternation of economists and anger of political opponents of President Nicolas Maduro's government, the Central Bank has released no price data this year after inflation hit 68.5 percent in 2014, the highest in the world.

El Nacional cited the source as saying the annual rate could rise even further than the 180 percent range in 2015, given anticipated fourth-quarter price pressures.

If correct, the 16.9 percent inflation figure for September is the second-highest monthly rate in Venezuelan history, according to Central Bank data.

[...]

Central Bank officials said they could not confirm the figures reported in El Nacional. Nor did they know when official data would be given.

Most economists are predicting Venezuela's inflation will be in three figures this year.

The Central Bank claims this is all the result of DolarToday's deliberate misrepresentation of the true exchange rate. The site owners' legal reps disagree with all of the government's assertions.

Facing a national economic crisis largely of its own creation, the Revolutionary Government has censored the press and online media from publishing "negative" information about the Venezuelan economy, under the pretext that it is protecting the Venezuelan people from the damaging effects that negativity has on the nation’s economy. To be sure, the only thing the Revolutionary Government is protecting is its own slippery grip on power. The Complaint is just another "weapon" in the Revolutionary Government’s arsenal of censorship against DT, whose only "crime" has been to facilitate access to information to the general public. But, the Revolutionary Government clearly failed to calibrate its "weapon" before it fired it. Premised on implausible legal theories, the Complaint fails to satisfy even the basic jurisdictional and pleading requirements. For all of the reasons described above, the Court should enter an Order dismissing the Complaint with prejudice, and awarding Defendants such other relief as the Court deems just and proper.

The defendants also point out that it's rather rich for an oppressive regime to avail itself of the benefits of an open court system simply to further its censorious aims.

[T]he Revolutionary Government has failed to silence DT, in large part, because DT operates in the United States where it may exercise its rights to freedom of speech and freedom of the press without reprisal. Put in the proper context, the Complaint is the latest salvo in the Revolutionary Government’s “war” of censorship and harassment of the press and media in Venezuela. Apparently, the Revolutionary Government believes that it will succeed in silencing DT by bringing the “war” to its doorstep. But, just like its previous efforts, the Revolutionary Government’s attempt to silence DT by filing this action in the United States must fail.

Almost ironically, the Revolutionary Government has availed itself of the open and “equal access” to courts afforded to litigants in the United States and filed a Complaint that contains legally deficient claims.

The response also points out that the Central Bank has no standing to pursue any of the claims, thanks to its willingness to conflate itself with the government as a whole as well as the Venezuelan public. Specific injuries must be claimed and limited to specific claimants, not just generally alleged and applied haphazardly to the nation of Venezuela, in whole or in part.

The alleged “injury” underlying all of Plaintiff’s claims is the purported “acceleration” or “exacerbation” of price inflation in Venezuela. However, “price inflation” in a nation’s economy is not an injury sufficiently “particularized” to the Central Bank, but rather, a generalized harm allegedly visited upon an entire nation’s economy and its people. This is manifest on the face of the Complaint which uses the terms “Central Bank” and “Venezuelan people” either conjunctively or interchangeably to describe the alleged “victims” of the “price inflation” allegedly caused by Defendants. Where, as in this case, a plaintiff asserts a “‘generalized’” harm that is “shared in substantially equal measure by all or a large class of citizens,” it will not have standing.

[...]

[N]owhere in the Complaint does it affirmatively plead any facts to support that conclusion, including whether its seignoriage has, in fact, been diminished, and, if it has, the value of any such diminution. Similarly, Plaintiff fails to plead any facts to support its assertions that Defendants’ conduct “robs” the Central Bank of lending or trade income, or the loss of “capital that it would otherwise retain . . . [to] other world economies.” Id. In short, Plaintiff’s alleged injuries are neither “concrete” nor “actual or imminent.” Plaintiff asserts broad, ambiguous, and wholly unsupported theories about the “economic and reputational” harm Defendants have allegedly caused, but nowhere in the Complaint does it affirmatively plead any facts to “nudge” those theories, in the parlance of Iqbal, “from conceivable to plausible...”

I don't imagine this lawsuit will last long once a judge gets ahold of it. It's obviously an attempt by the Venezuelan government to control the narrative on its financial woes -- something it already does on the domestic front by forbidding anything but publication of the official rates and the use of three different exchange rates based on what the currency is being used to purchase. If nothing else, the First Amendment should have plenty to say in the defense of the accused website operators.

Filed Under: currency exchange, cyberterrorism, free speech, racketeering, rico, venezuela
Companies: dolar today

Cyberwar Hype Leaps To The UK, While Electric Grid Expert Calls Claims Of Attacks 'Hooey'

from the espionage-is-not-war dept

We've been covering all the hyped up claims of cyberwar, often made by law enforcement officials or defense contractors who clearly benefit from keeping people fearful. However, evidence of such claims is always lacking, beyond some vague "trust us, it's bad!" But, all we've seen so far is that people are definitely trying to hack into each other's systems, but that's hardly "war." However, it looks like this hype isn't just happening in the US. A UK official is getting in on the act too, claiming that cyberwar attacks are already happening. But, of course, he's again pretty vague on details. At best he says that the internet has "increased the risk of disruption to infrastructure such as power stations and financial services."

Of course, right before I had read that article, I had been reading an article where the reporter spoke to an energy grid expert, who called such claims "a bunch of hooey." The guy, Seth Blumsack, along with a couple of colleagues, had been hearing all these stories about how "at risk" the electric grid was, so they went looking for the evidence. After looking at the claims and predictions, they realized that those claiming the electrical grid was at risk didn't actually appear to understand the physics of how electric grids actually work.

Blumsack, Hines and Cotilla-Sanchez decided to contrast the performance of a topological model with one based on actual physics - specifically on Ohm's and Kirchoff's Laws governing the flow of electricity in the real world. They tried out both kinds of model on an accurate representation of the North American Eastern Interconnect, the largest and one of the most trouble-prone portions of the US grid, using real-world data from a test case generated in 2005.

The three engineers say that the physics-driven model was much closer to reality, and that this verifies what physics models show. The results showed that in fact it is major grid components through which a lot of power flows - big generating stations and massive transformers - which are the main points of vulnerability, not the minor installations scattered across the country.

It isn't so much that a minor event on a minor line or installation can't crash the network: such things do happen. But in general there have to be huge numbers of such minor events before one of them happens to hit the miracle weak point and bring everything down. It would be an impossible task for terrorists or other malefactors to know in advance just where and when a minor pinprick could cause massive effects.

"Our system is quite robust to small things failing," says Hines.

Seems like, once again, the claims of cyberwar are overblown.

Filed Under: cyberterrorism, cyberwar, electric grid, fud, hype

More Cyberwar Hype: Gov't Fear Mongering To Get More Control Over The Network

from the where's-the-evidence? dept

We've been discussing the nature of the hype around the concept of a "cyberwar." There still has been no credible evidence presented that any such thing exists. There certainly has been computer based espionage. And there have been various vandalism attempts. But that's hardly a "war" and doesn't amount to all that much. But politicians and defense contractors have been playing up a few stories of vandalism to make it sound like foreign hackers are going to shut down critical services. And journalists are eating it up. Take, for example, a recent MSNBC blog post, that describes the following "scenario":

Imagine this scenario: Estonia, a NATO member, is cut off from the Internet by cyber attackers who besiege the country's bandwidth with a devastating denial of service attack. Then, the nation's power grid is attacked, threatening economic disruption and even causing loss of life as emergency services are overwhelmed. As international outcry swells, outside researchers determine the attack is being sponsored by a foreign government and being directed from a military base. Desperate and outgunned in tech resources, Estonia invokes Article 5 of the NATO Treaty -- an attack against one member nation is an attack against all. It requests an immediate response from its military allies: Bomb the attacker's command-and-control headquarters to stop the punishing cyber attack.

Now, the U.S. government is faced with a chilling question: Should it get dragged into a shooting war by a cyber attack on an ally? Or should it decline and threaten the fiber of the NATO alliance?

About half this fictional scenario occurred in 2007, when Estonian government and financial Web sites were crippled by a cyber attack during a dispute with Russia. That incident never escalated to this hypothetic level, however: The source of the attack was unclear, physical harm did not occur and Estonia never invoked Article 5.

I'd say that's a lot less than "half" of the scenario. Basically, there was a denial of service attack. It's not good, but it happens, and it's hardly a "war." No power grid was attacked. No one was harmed. People and businesses were certainly inconvenienced, but that's not the same thing. It's not war. But, adding in the hypotheticals, suddenly the "reality" that never happened seems so much closer.

And then there's NPR. It recently ran a whole long article about cyberwar that repeatedly suggests that the way to deal with this is to solve the "attribution problem" so that everyone online can be identified. Privacy? Anonymity? Not important, because of this threat -- even though no one can provide any proof actually exists. The NPR piece uses Mike McConnell as a key source, highlighting (as everyone does) his former public service positions: former director of the National Security Agency and later the director of national intelligence. What NPR leaves out? Oh, that McConnell is now a Vice President at defense contracting giant Booz Allen Hamilton -- a firm that recently scored contracts worth hundreds of millions of dollars around this whole bogus cyber war threat.

Wouldn't you think that a news organization like NPR would at least mention that whopping conflict of interest? It doesn't.

Instead, it lets McConnell go on and on about his favorite idea: re-architecting the internet to get rid of anonymity:

Security experts focus on the "attribution problem" -- the challenge of identifying and tracking down the source of a cyberattack. Under current conditions, cybercrime, cyber-espionage, and cyberattacks can be directed remotely, with the perpetrator's identity and location a secret.

This totally overhypes how much of a problem "attribution" really is. If people want to figure out a way to be anonymous, they'll do so. Worst case, they hijack someone else's line and attack that way. Attribution is not the issue. Having reasonable security is. And that doesn't require taking away anonymity or changing the nature of the internet.

"One side couldn't attack the other side without the side being attacked knowing who it is and from where it came," says retired Vice Adm. Mike McConnell, a former director of the National Security Agency and later the director of national intelligence.

McConnell argues that deterrence is needed to prevent countries today from waging cyberwar on each other. An attack on U.S. computer networks could knock out power grids, telecommunications, transportation and banking systems in a matter of seconds.

Note, yet again, the lack of a mention of his current job. Note also no explanation of why any critical infrastructure would be connected to the internet? Also, there's no mention of how serious this threat really is. After all, we currently do have this so-called "attribution" problem, and based on other fear mongering reports, there are tens of thousands of "cyberwarriors" conducting attacks around the globe. And we haven't heard of a single case of such an attack knocking any of those things offline. Yes, there have been temporary denial of service attacks that blocked some internet sites. But that's not the same thing.

Such an attack could be deterred if the attacking country knew it would bring immediate retaliation. But first it would be necessary to attribute the attack to someone.

"Some level of confidence that you know from where a transaction originated is a requirement," McConnell says.

Except that's not true. In pretty much every case of such hacking/DDoS attempts, people have been pretty quick to figure out where they're really originating from. No one actually seems confused by that -- and, again, if the lack of such attribution means more attacks, why aren't there more attacks now?

McConnell highlighted the "attribution problem" in a recent interview with NPR. He advocates "re-engineering the Internet" to make more transactions there traceable.

"There is a need for investment in technology that would allow you to achieve a level of attribution," McConnell says, "[so you could know] who's engaged in this transaction."

Why? He doesn't say. He just tells NPR so, and NPR says ok. At least NPR quotes a few people are are skeptical of the fix, but no one who questions either the actual size of the problem or why NPR is letting McConnell spin the story for his employer's benefit, without even the most basic level of disclosure.

And, of course, with all this fear mongering going on in the press -- a very high percentage of which you can trace back to McConnell -- Congress is eager to act. It's put together a new "cybersecurity" bill that will give the White House the power to declare a "cyber emergency" and step in and take control over certain "assets." It will also involve creating an "Office of Cyberspace Policy." Yes, we'll soon have a Cyber Czar. I thought we already had an Office of Science and Technology Policy in the White House. We need a separate Cyberspace office too?

Filed Under: cyberterrorism, cyberwar, michael mcconnell, moral panic, politicians
Companies: booz allen

Now That We're All Afraid Of A Cyberwar, The Gov't Starts Legislating

from the well-that'll-fix-things dept

We've discussed the overhyped moral panic around the concept of a cyberwar, and how the term is abused -- potentially just as a way for government contractors to get hundreds of millions in easy government contracts. And, it looks like that process has only just begun. Senator Joe Lieberman is apparently about to unveil a "Cybersecurity" bill that doesn't seem to attack any real issue in making the government more secure. Instead, it looks like it really just seeks to limit competition in what government agencies can purchase. In other words, it'll just make things more expensive for the government, while probably not doing much to make anything or anyone more secure.

Filed Under: cyberterrorism, cyberwar, politicians

Pushing Cyberwar Moral Panic Apparently Quite Profitable For Booz Allen

from the spreading-fear-for-money dept

A few months ago, people began questioning the difference between reality and rhetoric when it came to the "threat" of "cyberwar." Many of the claims were clearly exaggerated with people purposely confusing script kiddies doing basic vandalism with some sort of organized "war" or threat. One of the folks, who has been given the most attention for playing up this threat, is former director of national intelligence, Michael McConnell, who just happens to have scored a job as a top exec at Booz Allen. So it seems worth noting that Booz Allen has racked up over $400 million in gov't contracts in just the past few weeks. Of course, most of the press that McConnell has been able to get about this issue plays up his former gov't role, but plays down the fact that his new job seems to be scaring the gov't into shoveling truckloads of cash to Booz Allen, no matter how serious the "threat" really is.

Filed Under: cyberterrorism, cyberwar, michael mcconnell, moral panic, politicians
Companies: booz allen

Cyberwar Or Moral Panic? Beware Of Ex-Politicians Screaming About Cyberthreats

from the let-it-go dept

For years and years we've been hearing about the supposed threats of "cyberwar" and "cyberterrosism." For nearly a decade we've questioned whether this was all hype, and the story hasn't changed. Sure, there are hackers and those who look to break into systems, but the real risks and overall threats still seem fairly minimal. But that's not enough for some people. Wired's Ryan Singel has a long, but excellent look at how former director of national intelligence (now consultant) Michael McConnell appears to be trying to build up a giant moral panic about this ill-defined threat, with the goal of basically ripping out the guts of today's internet to recreate it with almost no privacy at all. He recently claimed:

We need to re-engineer the Internet to make attribution, geo-location, intelligence analysis and impact assessment -- who did it, from where, why and what was the result -- more manageable

In other words, we need to be able to spy on everyone. To build up this moral panic, McConnell isn't even just getting the press to write articles for him -- he's doing it himself. The Washington Post recently gave him op-ed space to ridiculously claim that the recent hack on Google showed we're "losing the cyberwar." Yet, as Singel points out, that was entirely different. It wasn't warfare, it was espionage. McConnell also played up some bogus threats, such as some old viruses and botnets that are hardly part of some dangerous "cyberwar."

Singel then goes on to connect McConnell's efforts with various other political proposals lately -- suggesting that the government is moving towards more control of the internet and more monitoring. At times, unfortunately, the piece feels like it slips a bit into conspiracy theory territory -- but McConnell's efforts certainly appear questionable. He's pushing a bogus "threat" and he works for a company that could profit tremendously from any "response" to such a threat. That seems like a massive conflict of interest that a lot of people are ignoring.

Filed Under: cyberterrorism, cyberwar, michael mcconnell, moral panic, politicians

CIA Claims Cyberattacks At Fault In Blackouts

from the now-they-tell-us dept

A few years back, after a major blackout hit the northeast, many people immediately assumed that it had something to do with a terrorist attack on the electricity system or perhaps a computer worm/cyber attack. It turned out to be neither, but it wasn't that surprising that people jumped to that conclusion. However, afterwards, people began discussing how likely it was that a cyberattack really could take out the power grid for a city, and some people felt that it was fairly unlikely to occur. The CIA, apparently, would disagree. Late Friday, a CIA official claimed that cyberattacks have been to blame for certain blackouts over the past few years, and that the agency had debated whether or not to release that information publicly. Of course, without much in the way of detail, it's difficult to have any sense of what's actually happening here and how accurate the information really is. However, we will repeat what we said after that huge blackout: even if it was a cyberattack, it wasn't particularly damaging. Yes, it was an inconvenience. And, yes, it was annoying, and some businesses were temporarily hurt due to the blackout. But, compared to other types of attacks, shutting off the power certainly seems relatively minor.

Filed Under: blackouts, cia, cyberattacks, cyberterrorism
Companies: cia