Secret money: ABC virtual currency racket probe 

 

An ABC IT worker has reportedly dragged the public broadcaster into a virtual currency money making racket and a "serious misconduct case" is underway.

An item by an "ABC insider" in Crikey said the IT worker at ABC Innovation sought to use ABC's vast audience and internal systems to mine for "Bitcoins" - a peer-to-peer virtual currency that has gained notoriety after it was adopted by a clandestine drug dealing website.

According to the report, the IT staffer installed a "Bitcoin miner" on ABC's servers. The program uses idle computer processing power to generate Bitcoins, which can be exchanged for cash.

ABC's head of corporate communications, Sandy Culkoff, said that the ABC would not comment on IT security matters however "there is a serious misconduct case underway in relation to this matter".

Fairfax Media also contacted several ABC Innovation executives, including its head of technology, and all refused to deny the allegations in Crikey. None would comment further, however.

The incident raises questions as to what else was installed on ABC's servers without its knowledge and whether there is any risk that readers could have their computers infected with malware. The ABC refused to comment on this.

The world's first global encrypted currency

Created in 2009 by a Japanese programmer (see his original paper here), Bitcoins are the first serious attempt at creating a global, untraceable currency that is controlled by no government and has no central bank. Publicity around the currency has sparked huge trading that has set its value soaring in the past six months.

This month, the wheels began to come off the Bitcoin wagon when a hacker managed to steal 25,000 Bitcoins - then worth $US500,000 - from someone's account using specially designed malware.

The biggest exchange for buying and selling Bitcoins, MtGox, was also hacked, exposing all users' email addresses and passwords. This sent the value of Bitcoins on MtGox plummeting from more than $US17 to $US0.01.

The Bitcoin economy, before the crash, was worth almost $US200 million.

The economy for Bitcoins has since recovered as other exchanges like TradeHill have taken over from MtGox, but they are worth less than before the crash.

To obtain Bitcoins, users can go through the slow process of "mining" them using idle computer processing power. Batches of intensive calculations are carried out on millions of PCs across the world in a similar way to how the Folding@Home project looked for cures for diseases and the SETI project tried to find aliens.

Anyone can install the software and start generating Bitcoins by solving problems but lots of computing power is needed for it to pay off and The Guardian reported that a standard laptop could work for two years without ever generating any Bitcoins.

MtGox has now been taken offline and it is unclear when it will re-open or what value the Bitcoins will settle on.

Bitcoin mining operations spring up

As the value of Bitcoins skyrocketed from $US1 to $US17, this created huge incentives to generate Bitcoins through creative means. This can range from IT workers installing mining software on company servers, as in the case with the ABC, to hackers loading the software on to "botnets" or networks of infected machines.

Some Bitcoin generating operations have reportedly drawn so much power that they were raided by police on suspicion of drug cultivation.

But Bitcoins can also be bought through exchanges with real cash or by exchanging other virtual currencies like World of Warcraft gold.

The anonymity of the encrypted Bitcoin system - users don't create accounts but instead are given a unique but nonsensical string of letters and numbers as an effective "account number" - has made it attractive to criminals.

The Silk Road website, which is an eBay-style site for illicit drugs that connects buyers and sellers, uses Bitcoins as its payment system. Several pornography websites also accept Bitcoins.

Crooks use Bitcoins to launder money

Bitcoins and other virtual currencies have also been used by criminals to launder money, said Marc Goodman, a former cyber crime law enforcement officer with two decades of experience who now runs his own consultancy, the Future Crimes Institute.

"If you were to look at all the money that was laundered in the world ... I would say maybe 1 per cent of that are pure virtual currencies ... it's a very small percentage of a very large pie," said Goodman.

"But I think as we move towards more and more alternative currencies and as in effect digital currencies end up replacing physical paper and coins, that number will surely increase moving forward."

Goodman said the recent hack of MtGox and the subsequent crash in the value of Bitcoins meant the currency would be in for "a very rough ride moving forward". But he said virtual currencies in general were here to stay.

"The case of Bitcoin and the malware used to steal them is instructional: you never had to worry about your Aussie dollar bill catching a virus," said Goodman.

Significant barriers for law enforcement

AFP officer turned security consultant Nigel Phair said it would be very difficult for police to shut down sites like Silk Road and track Bitcoin transactions due to the encrypted nature of the system and the fact that servers are located outside Australian jurisdiction. However, he said it was important for police to keep abreast of developments in technology.

"I don't think it's a game changer [for money laundering]. I think criminals are just as comfortable to use Western Union and other more mainstream mechanisms," said Phair.

Hacker groups such as Lulz Sec and Anonymous have reportedly been using networks of infected computers to mine Bitcoins and the Guardian reported that a rogue member of LulzSec was suspected to have been responsible for hacking the MtGox exchange.

Despite the recent loss of confidence in Bitcoins, Paul Ducklin of security firm Sophos said the benefits of an anonymous worldwide digital currency were obvious.

"A reliable system would be more useful than traditional cash, as it could be used online and between countries," he said.

"No need to post banknotes overseas, visit currency dealers, pay exorbitant commissions and worry about arbitrage.

"Better still, anonymous digital cash means that you don't need to worry about leaving an eternal trail of information about your buying habits which might get sold on to less-than-scrupulous marketing companies, or used to bombard you with credit offers you don't want, or incorrectly recorded and held against you later, leaked in a hack, or abused by an authoritarian government to bundle you off to a re-education camp for buying 'unsuitable' stuff."

Police, naturally, are wary of any digital currency that purports to offer untraceable transactions. A NSW Police spokeswoman said police were aware of the Silk Road website and Bitcoins and that detective were committed to conducting investigations within any environment, even virtual.

"Police attached to the Computer Crime Unit are aware of the significance of virtual environments and the potential for crimes to be committed within these online arenas," the spokeswoman said.

"Police are currently assessing relevant information on this matter."

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