6: Crime and New Media

Question 1

What is advanced prisoner fraud?

Answer 1

Dates back to the 16th century: “Spanish prisoner fraud”
Became associated with Nigeria in the 1980s (419 fraud)
But it has a long history in Nigeria before the 1980s
P. Crentsil, Professor of Wonders
Turned to Internet and email in 1990s and this opened the floodgates

Question 2

How does the 419 fraud work?

Answer 2

419 fraud involves emails sent to potential victims with promises of great wealth with little work.
If the bait is taken the victim is then asked to send larger and larger sums of money for “incidental” or “unexpected” fees
The process continues until the victim runs out of money or gets wise

Usually organized across three different countries
Victim is usually in the US, Canada, or UK
Conman is in a different country
Money is transferred to a third country
This maximizes the difficulty for law enforcement

Question 3

Why was Nigeria a fertile environment for advanced fee fraud?

Answer 3

Nigeria a fertile environment for advanced fee fraud
Collapse of Nigerian economy in 1980s
60% of Nigerians live below poverty line
70% of college and technical school graduates unemployed
Deeply embedded corruption in both state and society - $400 billion in oil revenues stolen from 1960 to 1999
North/south split with Igbo’s in the east involved in civil war in 1960s

But not just Nigerians

Question 4

How much was lost due to advanced fee fraud?

Answer 4

Estimates suggest around 250,000 are involved in the “industry”
In 2005, $US3.1 billion stolen in this way
The largest single case was $180 million is losses and the collapse of a Brazilian bank

Media losses in the US were $US31,000 per victim
But there is a psychological toll as well as many see only “stupid” people falling for such scams
Ed Mezvinsky – former member of Congress

And for Nigeria as a whole, there are significant costs

Question 5

What is scam-baiting?

Answer 5

Scam-baiting is a response to the difficulty to get legal assistance in these crimes
Scam-baiters pretend to be innocent victims of 419 scams, in the process seeking “trophies”
Photos, or small sums of money advanced to the scam-baiter or souvenirs (ie. African mask or toy)
Scam-baiters believe that by wasting the time of 419 conmen they help reduce the number of scams

Question 6

What is the dark side of scam baiting?

Answer 6

A number of scholars point that
There is an element of racism involved in scam-baiting
And there is a link between scam-baiting and a history of anti-black vigilante movements in the United States

Question 7

How does the community see the scammers

Answer 7

As for the scammers and their communities …
Frequently they are seen as heroes
Victims seen as mugu (fools)
And the money obtained as compensation for years of colonial and post-colonial oppression
Sakawa boys

Question 8

What is money laundering?

Answer 8

Money laundering:
On the increase since the 2000s
Estimated US$1.6 trillion each year laundered (2.7% of global GDP)
Cryptocurrencies are revolutionizing the practice
Digital currencies, not backed by any state or institution
Not being backed by a state or institution means that pure supply and demand determine its value

Question 9

What is bitcoin?

Answer 9

Perhaps the largest and most successful cryptocurrency to date
December 2017: $S19,000 to 1 bitcoin
February 2018: $S12,800 to 1 bitcoin

Bitcoin basics
Maximum number of bitcoins is capped at 21 million
25 bitcoins are created every 10 minutes
This rate is halved every 4 years
The limit will be reached in 2140
Bitcoins can be subdivided to eight decimal places
These subdivisions are called Satoshis

Question 10

How does bitcoin work?

Answer 10

How it works
A new user requires a wallet (open source app installed on PC, smartphone or server)
When requested, the wallet generates an address and a public and private key (public key cryptography)
The user buys bitcoins from a BitCoin currency exchange
To engage in a buying transaction the seller sends the user their BitCoin address
And the seller send bitcoins to that address through the BitCoin system

This system aggregates individual transactions into a “block” and sends them to a BitCoin mine for verification

Question 11

Where are Bitcoin mines hosted?

Answer 11

BitCoin mines are hosted on computers and in return for the processing power a reward bitcoins is given for a successful verification. Verification is achieved by use of very complicated algorithms

Question 12

Why are cryptocurrencies are excellent vehicles for money laundering?

Answer 12

Cryptocurrencies are excellent vehicles for money laundering:
Anonymity almost completely guaranteed
All transactions are processed by all mines so it is impossible to shut down
Transfers between a number of BitCoin addresses would add to the difficulty of identifying cash source
BitCoin miners would be hard to prosecute since they often don’t even understand the algorithms their computers crunch and they don’t have access to transaction data
Currently BitCoin enjoys much support, difficult to crack down on its use
The weakest link seems to be the BitCoin exchanges which could be regulation like regular exchanges

Question 13

What is the dark net? Is it lawless?

Answer 13

Dark net or cryptomarkets
Provides a virtual place for people to share information and trade goods that are in many cases (but not all) illegal, anonymously’
The dark net is enabled by encryption technologies
Although illegal goods are traded, the dark net is not lawless
There are norms of behaviour that proscribe things like contract killings and child pornography

Question 14

What are the key technologies and key mentalities of the dark net?

Answer 14

Key technologies
TOR
Crypto-currencies (example, BitCoin)

Key mentalities
Libertarian – want limited institutional control over individuals
Code of ethics – emphasis on drug purity (or at least proper labelling), proper instructions for use, and so on

Question 15

How do cryptomarkets work?

Answer 15

Buying and selling process
Vendor registration, security and cryptomarket branding
Vendor pages and branding
Product differentiation
Customer feedback and seller rankings

Question 16

Describe the buying and selling process of cryptomarkets.

Answer 16

Vendors pay US$200 or $300 for an account and seller page
Consumers can create free accounts and browse seller pages
Cryptocurrencies such as BitCoin are used
Escrow: funds held by administrator until product is delivered
FE (Finalize early): funds move from buyer to seller immediately
Regular postal services are used for delivered

Question 17

Describe the vendor registration, security and cryptomarket branding of cryptomarkets

Answer 17

Vendor registration, security and cryptomarket branding
2013 closure of Silk Road dark net has made it necessary to re-establish consumer trust
So now new sites advertise there advanced security procedures
Vendors required to have flawless records - guaranteed proper postal concealment of goods, proper stealth packaging.
This increases costs and decreases the number of vendors, but seems necessary in the new environment

It is also a means to distinguish between one site and another

Question 18

Describe the vendor pages and branding of cryptomarkets

Answer 18

Vendor pages and branding
Most vendors try to project a friendly and helpful, while professional image
Big difference between online and street vending

Product differentiation
Plenty of sales and gimmicks
Reports of lab testing regarding purity
If not pure, vendors are up-front about it
Stress its reduced cost
That it is better than on the street
Differentiation between individual and social use
Some vendors stress the ethics of their operation

Question 19

Describe the customer feedback and seller rankings of cryptomarkets

Answer 19

Customer feedback and seller rankings
Allows for vendor ranking by the site
Allows for the building of trust (the records are permanent and cannot be altered)
There is still the problem of dummy accounts being used to write fake reviews

Question 20

Compare conventional VS online drug distribution networks.

Answer 20

Conventional versus online drug distribution networks
Problems with the conventional trade:
Network inefficiencies resulting in increased prices or decreased quality
Systemic violence
Used to exclude rivals, protect territory, enforce contracts, resolve disputes, maintain group discipline, and control of police and politicians

Online drug distribution doesn’t have these problems
More efficient network as a result of encryption technologies and network effects on geographical space
Systemic violence is not necessary or possible in online trading

Question 21

How was the closure of Silk Road dark net site in 2013 a major turning point in law enforcement?

Answer 21

Cryptomarkets and law enforcement
Close of Silk Road dark net site in 2013 a major turning point
Silk Road was the largest dark net trading network to date
Established by Ross Ulbricht (Dread Pirate Roberts)
Closure demonstrated that the hand of the State could reach dark net
(but at a significant cost – to close Silk Road took 2 years)

There have also been instances of hacking attacks and administrator fraud that have closed certain sites
Now dark net sites are much smaller but have multiplied
And the current decentralized structure of the dark net is a significant headache to enforcement

Question 22

What are the indirect policies for law enforcement of dark net.

Answer 22

Indirect policing:
X-ray or dogs, but just too much mail
Risk profiling
Police informers
Risk matrices

Up to now, this ability to collect and analyse intelligence has given an edge to police, but now, dark nets also include much intelligence on how to evade postal detection

Question 23

Describe the postal interception and collection of evidence for law enforcement of dark net.

Answer 23

Postal interception and the collection of evidence
Lack of face-to-face contact and inability to monitor TOR and cryptocurrency transactions in real time eliminates buy and bust police operations

Now postal interception of drugs is important
Chemical analysis provides evidence as to the origin of the drug
Further analysis of the package can also shed light on its origin

Question 24

Describe the covert surveillance for law enforcement of dark net.

Answer 24

Covert surveillance
Merely receiving a shipment of drugs in the mail is unlikely by itself to lead to successful prosecution
Hence hidden cameras or tracking software can be used
But this is expensive and in the US at least likely unrewarding

Question 25

Explore the concepts of crypto-libertarians and cyber-criminals.

Answer 25

Crypto-libertarians or cyber-criminals?
“The Silk Road keeps your streets a little cleaner, with fewer dealers polluting the streets. The road reduces violence, it removes much of dangerous criminal element of drugs … Why bother devoting yourself to the eradication of this and other deep web communities? The road is the lesser evil … You are losing a drug war on the streets, people are dying as cartels spread their influence and gang violence endures” (pg. 76)

“The website was used by drug dealers to put illicit drugs into our communities and literally at our doorsteps nationwide. 200,000 people die annually from drug abuse throughout the world … and our investigators worked tirelessly to bring to justice a facilitator who made every effort to hide behind highly encrypted technology … Ulbricht’s goals were to make millions from drug use and money laundering while protecting the world’s criminals …” (pg. 76)