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

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”

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 little liberty to gain a little security will deserve neither and lose both.
– Benjamin Franklin

That right there demonstrates perfectly how far we have fallen culturally.

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CNN Claims “Americans Want Security Over Freedom” originally appeared on A Lightning War for Liberty on December 21, 2013.

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Video of the Day: Interview with Coinbase Founder Brian Armstrong

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 set up an account at Coinbase recently and have been very pleased with my experience so far. I feel even more comfortable having watched the founder Brian Armstrong speak in this video. Not only do I like the way his mind works, but I’m impressed that he has a background in both Computer Science and Economics.

The topics in this video are wide-ranging and it answered a lot of my own personal questions. The highlights for me were:

1) The fact that they keep about 95% of customer BTC offline in cold storage (not connected to the internet). They maintain 5% of customer funds in a hot-wallet used to handle normal day-to-day activity. It was also fun to hear the process of how they go about retrieving offline private keys in the case of outsized trading activity.

2) The potential change within the Bitcoin community to move from price quoting per BTC to mBTC (1/1000 of a bitcoin).

3) The fact that they are in discussions with very large merchants about accepting BTC. He thinks 2014 will be a huge year for merchant adoption (recall just yesterday the CEO of Overstock said they would begin accepting it in 2H14).

4) That the creator of Litecoin works for Coinbase.

These are just some of the topics discussed. An absolute must-watch for anyone interested in Bitcoin.

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Video of the Day: Interview with Coinbase Founder Brian Armstrong originally appeared on A Lightning War for Liberty on December 20, 2013.

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

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.”


In addition to seeking evidence of collusion, the FCA is looking into whether traders cut deals for personal profit before completing customers’ orders, according to a person with knowledge of the probe. Bloomberg News reported in November, based on the accounts of two people who witnessed the transactions, that some dealers placed side bets for personal accounts or through friends in exchange for cash payments.

None of the traders or the banks they work for has been accused of wrongdoing.

Of course not. We wouldn’t want to hurt these poor babies’ feelings now would we? God’s work is very sophisticated and very important. You serfs wouldn’t understand.

Usher, Ramchandani and Gardiner, along with at least two other dealers over the years, would discuss their customers’ trades and agree on exactly when they planned to execute them to maximize their chances of moving the 4 p.m. fix, two of the people said. When exchange rates moved their way, they would send written slaps on the back for a job well done.

The conversations echo those uncovered by regulators about Libor, in which bankers promised bottles of Bollinger champagne or cash to counterparts at firms willing to help them rig the benchmark interest rates used to price $300 trillion of contracts from student loans to mortgages. More than six banks have been fined about $6 billion since June 2012, and regulators are investigating traders at half a dozen more firms.

The currency discussions were even more calculating, one of the people who reviewed the transcripts said.

Spot currency trading is conducted in a small and close-knit community. Many of the more than a dozen traders and brokers interviewed for this story live near each other in villages dotting the Essex countryside, a short train ride from London’s financial district, and stay in touch over dinner, on weekend excursions or with regular rounds of golf at local clubs.

On one excursion to a private golf club in the so-called stockbroker belt beyond London’s M25 motorway, a dozen currency dealers from the biggest banks and several day traders, who bet on currency moves for their personal accounts, drained beers in a bar after a warm September day on the fairway. One of the day traders handed a white envelope stuffed with cash to a bank dealer in recognition of the information he had received, according to a person who witnessed the exchange.

Take the money, or you’ll be swimming with the fishes.

Full article here.

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Meet the “Bandits’ Club” – The TBTF Wall Street Cartel Rigging the FX Market originally appeared on A Lightning War for Liberty on December 20, 2013.

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HSBC Receives Slap on the Wrist for Helping to Finance Terrorists

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”

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. 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 read posted going by the handle Anon Wibble provided 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”

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 to hold the press in particular disregard and stated: “I have some reforms for the First Amendment.”  I’m quite certain he has some reforms in mind for the 4th Amendment as well…

Once again I ask, if they hold the U.S. Constitution and civil rights in such disdain; what exactly are they protecting us from?

From Foreign Policy:

For an organization that is so efficient at amassing data intended to be kept secret, the National Security Agency seemed surprisingly clumsy in accepting data that was volunteered to them. I’d emailed the bits and pieces of my personal data necessary to be cleared for access to the agency’s headquarters in Fort Meade a week before the scheduled visit, with zero response. As it turns out, an NSA server has crashed, they told me, creating havoc with some email accounts. This sort of hiccup humanizes the agency, though it also raises questions about their vulnerability.

The NSA’s biggest strategic communications problem, however, is that they’ve been so walled off from the American body politic that they have no idea when they’re saying things that sound tone-deaf. Like expats returning from a long overseas tour, NSA staffers don’t quite comprehend how much perceptions of the agency have changed. The NSA stresses in its mission statement and corporate culture that it “protects privacy rights.” Indeed, there were faded banners proclaiming that goal in our briefing room. Of course, NSAers see this as protecting Americans from foreign cyber-intrusions. In a post-Snowden era, however, it’s impossible to read that statement without suppressing a laugh.

The NSA’s attitude toward the press is, well, disturbing. There were repeated complaints about the ways in which recent reportage of the NSA was warped or lacking context. To be fair, this kind of griping is a staple of officials across the entire federal government. Some of the NSA folks went further, however. One official accused some media outlets of “intentionally misleading the American people,” which is a pretty serious accusation. This official also hoped that the Obama administration would crack down on these reporters, saying, “I have some reforms for the First Amendment.” I honestly do not know whether that last statement was a joke or not. Either way, it’s not funny.

If that’s what they are willing to say when a professor is around, just imagine what they say behind closed doors…

Full article here.

In Liberty,

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Official at the NSA States: “I Have Some Reforms for the First Amendment” originally appeared on A Lightning War for Liberty on December 18, 2013.

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Has Chase Begun a Covert War on Bitcoin?

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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