Government Moves To Seize All Backpage Assets Prior To Securing Convictions

from the civil-asset-forfeiture:-because-proving-your-case-takes-too-much-time dept

The DOJ rounded up the cast and crew from Backpage and threw a 93-count indictment at them. It did this prior to FOSTA's passage -- legislation portrayed as the only way the government could take sites like Backpage down. History is being rewritten to give FOSTA the credit for the Backpage takedown, but the truth is the government didn't need the legislation to target the site. Of course, for all the talk of sex trafficking, sex trafficking is not among the 93 charges the government brought against the site's personnel.

Now that it has Backpage execs facing criminal charges, the government is doing what it can to make sure they can't mount a solid defense. The government is coming after their money via civil asset forfeiture, hoping to lock up their property even if it can't lock up the Backpage site runners.

The complaint [PDF] -- titled "United States of America v. Various Internet Domain Names" -- claims everything the site's personnel owned was obtained through illegal activity, even if it's likely at least some of the assets are completely unrelated to Backpage's income. It also must be noted these assertions are being made prior to anything being proven in the DOJ's prosecution, but will receive far less scrutiny from the judge making the determination on the ultimate ownership of the property.

The complaint also contains a large amount of "surrendered" property, which was apparently handed over voluntarily after the arrest of Backpage execs. This list includes internet detritus such as domain names and bitcoin. There are millions of dollars at stake, scattered across multiple banks located around the world. The DOJ is busy consolidating its purloined fortune in advance of convictions.

This is a bullshit, but completely legal, tactic. In addition to depriving the accused of the finances needed to secure solid legal representation, it also forces them to fight a legal battle on two fronts. The money the defendants no longer have access to won't help them find top lawyers willing to take on the government in both criminal and civil actions.

In addition, the complaint plays small ball to hoover up funds from accounts in the names of Backpage execs' family members. Sure, the governments wants what's in joint accounts or those controlled by significant others, but the decision to empty personal checking accounts of what appear to be the children of the defendants seems unnecessarily punitive.

Here's what listed under Backpage co-founder James Larkin's seizable assets:

$278.73 seized from Bank of America account ‘8225 (“BA ‘8225 Funds” or “Account 22”), held in the name of Troy C. Larkin (“T. Larkin”)

$1,038.42 seized from Bank of America account ‘7054 (“BA ‘7054 Funds” or “Account 23”), held in the name Ramon Larkin (“R. Larkin”)

Then there's some questionable claims about the legality of certain expenditures. These allegations are made to shore up the government's seizure of all funds in certain accounts. The nefarious activities alleged include [re-reads complaint] paying for phone service, internet service, and site backup.

Plaintiff alleges that a substantial percentage of outgoing payments from Account 1 have been payments for the operation of Backpage.com. For example, between July and October 2017, funds were wired from Account 1, as following:

a. $570,530 to Verizon Digital Media Services in Los Angeles for services related to the Backpage.com website; and

b. $1,497 to “Backupify,” a company that provided data backup services for Backpage

Linking "Account 2" to "Account 1" -- supposedly as evidence of criminal activity -- the government finds money was moved around to… pay for internet service. The lead-up and denouement are unintentionally hilarious.

Funds from Account 2 were also used to promote and facilitate prostitution. For example:

a. On December 2, 2016, the Netherlands Account transferred $324,055.85 to Account 2;

b. On December 8, 2016, the Netherlands Account transferred $499,970.00 to Account 2;

c. On December 27, 2016, the Netherlands Account transferred $199,970.00 to Account 2; and

d. From March to December 2017, Account 2 paid over $9,000 to “Cox Communications,” an internet services company that Backpage used to facilitate its internet presence and promote its sale of prostitution advertising.

Whatever you may think about Backpage and its execs, you should not be applauding the government's decision to move forward with seizing assets before securing convictions and proving its case in court. This gives the government two shots at these funds -- via civil asset forfeiture and, if this fails but the government secures convictions, via criminal asset forfeiture post-trial.

It's a Congress-ordained scam -- one that separates people from the assets they need to fight criminal charges while they're still under the presumption of innocence. Civil asset forfeiture allows the government to declare inanimate objects "guilty" using a lower standard of proof and could conceivably allow the feds to keep every cent they seized even if the arrested Backpage execs are found innocent. And, while the government can drag out criminal proceedings for as long as it can get away with it, the clock starts ticking immediately on civil forfeiture, forcing defendants already tied up in one court to somehow find a way to fight the proceedings with limited time and funds.

Filed Under: civil asset forfeiture, doj, domain names, james larkin, phone service
Companies: backpage

In Unsealed Document, FBI Admits Stingray Devices Will Disrupt Phone Service

from the making-Stingray-omelets-required-breaking-a-few-communications dept

A small crack in the FBI's Stingray secrecy has appeared. A 2012 pen register application obtained by the ACLU was previously sealed, but a motion to dismiss the evidence obtained by the device forced it out into the open. Kim Zetter at Wired notes that the application contains a rare admission that Stingray use disrupts cellphone service.

[I]n the newly uncovered document (.pdf)—a warrant application requesting approval to use a stingray—FBI Special Agent Michael A. Scimeca disclosed the disruptive capability to a judge.

“Because of the way, the Mobile Equipment sometimes operates,” Scimeca wrote in his application, “its use has the potential to intermittently disrupt cellular service to a small fraction of Sprint’s wireless customers within its immediate vicinity. Any potential service disruption will be brief and minimized by reasonably limiting the scope and duration of the use of the Mobile Equipment.”

Notably, the application (and the magistrate's approval) do not refer to the device by any of the common names (Stingray, IMSI catcher, cell tower spoofer, etc.), but rather as "mobile pen register/trap and trace equipment." While it does admit the device will "mimic Sprint's cell towers," it downplays the potential impact of the device's use.

The fact that Stingray devices disrupt cell service isn't new, but an on-the-record admission by law enforcement is. The warrant application claims that numbers unrelated to the ones being sought will be "released" to other cell towers. The unanswered question is how long it takes before this release occurs.

“As each phone tries to connect, [the stingray] will say, ‘I’m really busy right now so go use a different tower. So rather than catching the phone, it will release it,” says Chris Soghoian, chief technologist for the ACLU. “The moment it tries to connect, [the stingray] can reject every single phone” that is not the target phone.

But the stingray may or may not release phones immediately, Soghoian notes, and during this period disruption can occur.

The problem with the so-called "release" is related to the amount of disruption that occurs when the device is used. Advances in cell technology have surpassed the ability of Stingray devices to capture calling info and location data. Upgrades are available and law enforcement agencies are scrambling to get their cell tower spoofers up-to-date, but the general process still involves "dumbing down" everyone's connection to the least secure and most easily-intercepted connection: 2G.

In order for the kind of stingray used by law enforcement to work, it exploits a vulnerability in the 2G protocol. Phones using 2G don’t authenticate cell towers, which means that a rogue tower can pass itself off as a legitimate cell tower. But because 3G and 4G networks have fixed this vulnerability, the stingray will jam these networks to force nearby phones to downgrade to the vulnerable 2G network to communicate.

If a device is in operation nearby, all calls that can't find a better connection will be routed to the cell tower spoofer. This means calls won't be connected, texts won't be sent/received and internet service will be knocked offline. While Stingrays are supposed to allow 911 calls to pass through without interruption, these are far from the only type of "emergency" communications. If the device is deployed for any considerable length of time, citizens completely unrelated to the criminal activity being investigated may find themselves unable to communicate.

And while the targeted number apparently belonged to Sprint, the warrant application notes that all service providers in the area will be asked to turn over a large amount of subscriber information.

[D]irecting AT&T, T-Mobile U.S.A., Inc., Verizon Wireless, Metro PCS, Sprint-Nextel and any and all other providers of electronic communication service (hereinafter the "Service Providers") to furnish expeditiously real-time location information concerning the Target Facility (including all cell site location information but not including GPS, E-911, or other precise location information) and, not later than five business days after receipt of a request from the Federal Bureau of Investigation, all information about subscriber identity, including the name, address, local and long distance telephone connection records, length of service (including start date) and types of service utilized, telephone or instrument number or other subscriber number or identity, and means and source of payment for such service (including any credit card or bank account number), for all subscribers to all telephone numbers, published and nonpublished, derived from the pen register and trap and trace device during the 60-day period in which the court order is in effect…

This request seems to run contrary to what's asserted earlier in the warrant application, in reference to the Stingray device itself.

In order to achieve the investigative objective (i.e., determining the general location of the Target Facility) in a manner that is the least intrusive, data incidentally acquired from phones other than the Target Facility shall not be recorded and/or retained beyond its use to identify or locate the Target Facility.

It appears there is a "catch-and-release" policy when it comes to Stingray devices, but the FBI's data request to every cell phone service provider in the area contains no such assurances about minimization. Additionally, the request for data on "all subscribers to all telephone numbers" covers a 60-day period, while the use of the tower spoofer is limited to two weeks.

So, not only did the FBI potentially disrupt cell service while searching for the robbery suspects, it also collected a massive amount of data on every subscriber whose phone happened to connect with its fake tower. It's not really "catch-and-release" if additional call/location data on unrelated subscribers is obtained from from other providers. This broad request was granted without question or additional stipulations by the magistrate judge -- the only limitation applied (in a handwritten addition, no less) being that the FBI would not be able to use the device "in any private place or when they have reason to believe the Target Facility is in a private place." (This falls in line with the FBI's "warrant requirement," which is written in a way that ensures the FBI will never have to seek a warrant for Stingray use.)

The FBI, along with other law enforcement agencies, has refused to answer questions about the disruptive side effects of Stingray device usage. With the unsealing of this document, their silence no longer matters. These agencies are well aware of these devices' capabilities -- something they're clearly not comfortable discussing. The excuses deployed routinely involve "law enforcement means and methods" and claims about "compromising current and future investigations," but with more heat being applied by the nation's legislators, this code of silence may finally be broken. The use of these devices -- despite being fully aware that critical communications may be at least temporarily prevented -- sends a continual implicit message to the public: your safety and well-being is subject to law enforcement's needs and wants.

Filed Under: fbi, phone service, stingray

AT&T, Google Spat Over Google Voice Blocked Calls Is Important... But Totally Misses The Point

from the distracting,-but-important dept

Well, well, well. It looks like AT&T's latest line of anti-Google attack is to accuse the company of being hypocritical on net neutrality by not living up to the same principles when it comes to its Google Voice product. The issue is that, apparently, Google Voice is now blocking calls to free conference services like FreeConference.com. This is identical to the problem I discussed a few weeks ago when I noticed that the MagicJack VoIP service blocked calls to those same services. Oddly, at the time, I got around the MagicJack block... by using Google Voice. So if it's now blocking those calls, I haven't yet seen it, but there are numerous complaints. And, just like I said at the time with MagicJack, I think that the FCC has been pretty clear in the past that this is not legal. If you're offering a phone service of this nature, you need to connect it with the phone calls customers are making.

So, I have to admit that I find Google's response to be disingenuous. It basically tries to shrug off the problem by saying Google doesn't have to follow such rules on connecting phone calls because it's a "web-based" offering. First, making such a claim just makes Google look like it's ducking the issue. Second, Google has done a dreadful job letting Google Voice users know that such calls are totally blocked by its service.

However (and this is important), the actual issue here is not net neutrality. The real issue is ridiculous regulatory setups in certain rural areas, that force unnaturally high connection fees on telcos to rural telcos, creating a massive arbitrage opportunity that the Free Conference call offerings making good (and profitable) use of in offering their services. Basically, every inbound call to these telcos requires massive per minute fees from the connecting service provider to the rural telco. It's so expensive that as long as the rural telco can offer a service (such as conference calls) at a cheaper rate, they make money on every inbound call -- but it's all due to outdated regulations that "protect" those telcos. Google mentions this in its response, but it should be the headline, not buried in the details: the issue with net neutrality is the telcos trying to double charge for the use of their network. The issue with these calls is a dumb regulatory setup that forces telephone service providers to pay insanely high rates to a small group of small telcos for any inbound calls.

So, yes, I agree that it's bad that Google (and MagicJack) blocks these calls -- and I believe it may in fact go against some previous statements by the FCC concerning phone services. But... it's not a net neutrality issue where they're doing so to squeeze extra money out of customers by holding part of the access for ransom. Instead, it's the result of bad and outdated local state regulations concerning connection fees that really need to be overturned.

Filed Under: arbitrage, conference calls, connection charges, google voice, net neutrality, phone service
Companies: at&t, google

Can A Phone Service Provider Block Calls To Numbers It Doesn't Like?

from the that-seems-like-an-fcc-violation dept

About four years ago, I signed up for AT&T CallVantage VoIP service and ditched my traditional POTS landline phone service. This was back when AT&T was actually betting on CallVantage and using it as a (many reviews claimed) better alternative to Vonage. Then, of course, SBC bought AT&T and wanted nothing whatsoever to do with CallVantage. It neglected the service, and quality got worse and worse until it announced a few months ago that it was shutting the service down completely. Fair enough. I contemplated going strictly with a combination of Skype and my cell phone for phone service, but I've found both to be somewhat unreliable at times -- and for unexplained reasons my new laptop has terrible microphone inputs -- so everyone I've called via Skype insists they can't hear me at all (and I've tried both USB and the mic inputs, and multiple microphones -- no luck).

So, after hearing about some friends who were using it and doing some online research, I decided to try "MagicJack." You may have seen their late night commercials that are hard to avoid (even if you use a DVR). It's basically a much cheaper VoIP option that's not that unlike Vonage/CallVantage, except that instead of getting a VoIP router to hook up to your broadband modem directly, it's just a USB dongle that connects directly to your computer. I read some reviews online, and they all basically said the same thing: when it works, it works great, but don't expect any customer support if things go wrong. And, oh yes, hold your nose at the infomercial sales process and the constant upsell attempts. Still, I figured it was worth a shot and ordered a free trial (you have 30 days). Of course, to get through the process, you have to decline something like 30 upsell attempts (my favorite: $4 to have them ship it faster -- I declined and the thing still showed up in two days).

I've been using it for about a week, and it's not too bad. There are some annoyances, but the call quality works fine. I think there's a slight delay, which gives calls that old long distance pause between people speaking that used to be common, but I can live with that. The actual call quality seems better than my old CallVantage.

But today, MagicJack appears to be breaking the law. Every Friday we have a staff call at Floor64. Since not everyone here works locally or in the office every day, we have a conference call using every startup's favorite: FreeConference.com. So I called in this morning, and MagicJack refused. Instead, it gave me a recording telling me that I needed to use MagicJack's own free conferencing solution. That might be fine for setting up conference calls, but this was a call that was already going on, and which people were waiting for me to dial into. And there was no way to get around it. MagicJack simply refuses to let you call FreeConference.com.

Now, it's not hard to figure out why. This issue cropped up two years ago, when a bunch of small telcos started blocking calls to FreeConference.com, because FreeConference is actually a big regulatory arbitrage scam. MagicJack itself is a CLEC that most likely benefits from some kind of regulatory arbitrage, so it's just another small telco blocking FreeConference to push its own services. But, just because telcos don't like competition, it doesn't mean it's legal for them to block others' services. After widespread complaints in 2007, most telcos backed down and stopped blocking calls to FreeConference, and the FCC started looking into the matter -- though I don't believe it ever came out with a ruling on the matter. I'm pretty sure there are still a smattering of lawsuits out there about the whole thing.

But, considering how many conference call invites I get these days that use FreeConference, it's quite a pain to find out that my own phone line can't dial into it. Other MagicJack users have been discovering the same thing, and MagicJack's customer service response has been hopelessly inept. They just keep repeating that you need to use their own free conferencing service, and if you finally find someone who understands that you're trying to call into someone else's conference they just say sorry, you can't do that.

In the past, of course, the FCC has indicated that it's a violation of federal rules to disallow phone calls to get through just because you don't like the numbers being dialed, and it seems that when you promise people free unlimited local and long distance phone calls throughout the US, then you need to live up to that promise. I'm not sure if I'm going to keep the MagicJack after this trial period, but this is a huge strike against it. Who knows what other numbers they might not let me call next week?

Filed Under: blocks, free conference calls, phone service, voip. arbitrage
Companies: fcc, magicjack