Five indicted in massive hacking scheme

Five men from Russia and Ukraine have been indicted in New Jersey for charges they conspired with each other in a worldwide hacking scheme targeting major corporate networks that compromised more than 160 credit card numbers, the U.S. Department of Justice announced.

The men allegedly attacked the networks of several companies, including Nasdaq, 7-Eleven, JCP, Dow Jones and Hannaford, the DOJ said. Companies reported US$300 in losses from the attacks, the DOJ said in a press release.

Charged in an indictment unsealed Thursday in U.S. District Court for the District of New Jersey were Vladimir Drinkman, 32, of Syktyykar and Moscow, Russia; Alexandr Kalinin, 26, of St. Petersburg, Russia; Roman Kotov, 32, of Moscow; Mikhail Rytikov, 26, of Odessa, Ukraine; and Dmitriy Smilianets, 29, of Moscow.

Drinkman and Kalinin allegedly specialized in penetrating network security and gaining access to the corporate victims' systems, while Kotov allegedly specialized in mining the compromised networks to steal data, the DOJ said. The defendants hid their activities using anonymous Web-hosting services provided by Rytikov, while Smilianets allegedly sold the information stolen by the other conspirators and distributed the proceeds of the scheme to the participants.

The five compromised networks for nearly five years, between mid-2005 and mid-2012, according to court documents.

""This type of crime is the cutting edge," Paul Fishman, U.S. attorney for the District of New Jersey, said in a statement.  "Those who have the expertise and the inclination to break into our computer networks threaten our economic well-being, our privacy, and our national security.  And this case shows, there is a real practical cost because these types of frauds increase the costs of doing business for every American consumer, every day."

Kalinin and Drinkman were previously charged in New Jersey as "Hacker 1" and "Hacker 2" in a 2009 indictment charging Albert Gonzalez, 32, of Miami, in connection with five corporate data breaches, including the breach of Heartland Payment Systems, which at the time was the largest breach ever reported.  Gonzalez is currently serving 20 years in federal prison for those offenses.

The U.S. Attorney's Office for the Southern District of New York on Thursday announced two additional indictments against Kalinin. One charges him in connection with hacking certain computer servers used by Nasdaq and a second indictment charged Kalinin and another alleged Russian hacker, Nikolay Nasenkov, with an international scheme to steal bank account information by hacking U.S.-based financial institutions.

Rytikov was previously charged in the Eastern District of Virginia with an unrelated scheme. Kotov and Smilianets have not previously been charged publicly in the U.S.

Drinkman and Smilianets were arrested at the request of the DOJ while traveling in the Netherlands on June 28, 2012.  Smilianets was extradited on Sept. 7, 2012, and remains in federal custody. Kalinin, Kotov and Rytikov remain at large.

The five defendants allegedly conspired with others to penetrate the computer networks of several of the largest payment processing companies, retailers and financial institutions, stealing the personal identifying information of individuals. They allegedly took user names and passwords, other means of identification and credit and debit card numbers, the DOJ said.

The attackers often gained initial entry into a corporate network through an SQL injection attack, the DOJ alleged. The hackers identified vulnerabilities in SQL databases and used those vulnerabilities to infiltrate a computer network. Once the network was infiltrated, the defendants allegedly placed malware on a network, creating a back door that allowed further access. In some cases, the defendants lost access to the system due to companies' security efforts, but they were able to regain access through persistent attacks.

The defendants often targeted victim companies for many months, with the DOJ saying they waited "patiently" as their efforts to bypass security were underway.

After acquiring the card numbers and related data, the conspirators allegedly sold it to resellers around the world, the DOJ alleged. The buyers then allegedly sold the so-called dumps through online forums or directly to individuals and organizations. Smilianets was allegedly in charge of sales charging approximately $10 for each stolen U.S. credit card number and associated data and approximately $50 for each European credit card number and approximately $15 for each Canadian credit card number.

If convicted, the maximum penalties for each of the counts are: five years in prison for conspiracy to gain unauthorized access to computers; 30 years in prison for

Joanna Krupa -- Look At My Massive ... Diamond Ring

Joanna Krupa
Look At My Massive ...
Diamond Ring
What's more distracting than Joanna Krupa's giant boobs spilling out of a skin-tight gold dress? Her humungous DIAMOND ring ... a ring SO BIG it blinded half a city block (maybe) ... and we got it up close.

Our photog spotted the "Real Housewives of Miami" star Saturday night in L.A. and asked to see the massive rock on her finger, considering JK tied the knot Thursday with Romain Zago ... in a wedding that reportedly cost $1 MILLION.

You may have seen pics, but nothing can prepare you for how HUGE the radiant-cut yellow diamond is up close ... seriously, you have to see it. Even Jennifer Aniston would be jealous.

As for how many carats? We'll let Joanna's new hubby answer that ...

 

What is behind Snapchat's massive valuation?

FORTUNE -- Snapchat is one of the world's fastest-growing mobile apps, with users sharing more than 200 million "snaps" per day. For the uninitiated (or those over 30), "snaps" are instant messages/photos that self-destruct ten seconds or less after being viewed.

It also has one of the mobile world's fastest-growing valuations, with multiple reports out today that the company has raised $60 million in new VC funding at an $800 million pre-money valuation (the company confirmed the deal, sans financial specifics).

What Snapchat doesn't have yet, however, is revenue. Nor does it have easily identifiable paths to revenue.

Traditional mobile advertising would seem to be a no-go, given how quickly snaps disappear. There may be some residual recall value like with television ads, although it's tough to compare a 10-second view when the user is focused on something else (i.e., the snap's content) to a 30-second spot where the user only has one thing to watch on the screen. Much of the data also seems fleeting, compared with information collected by such companies as Pinterest and Tumblr. And, speaking of Tumblr, it was acquired by Yahoo (YHOO) at a valuation just 25% or so higher than this round. That would be a decent return for late-stage investors like IVP, but hardly spectacular.

So is this valuation based solely on massive usage/growth, and the belief that someone like Yahoo (YHOO) will be desperate for it as a feature? That doesn't make sense to me either, given that Tumblr sold for just 25% more than the post-money. Snapchat always could introduce some sort of subscription model -- or make unlimited snaps a premium service -- but that could eat a bit into the growth and enable cannibalization by a rival service.

Or maybe the snap service is really just a Trojan horse, securing users while the company polishes up what could become the de facto mobile camera app.

One person who should know the answer is Dennis Phelps of Institutional Venture Partners, which led the new financing round. Unfortunately, he isn't doing interviews on the deal. Instead, he wrote a blog post titled Ten Reasons Why IVP Invested in Snapchat. It left me with two thoughts:

1. Either Phelps is a lousy venture capitalist who doesn't know what he's doing, or2. He knows exactly what he's doing, and has expertly talked around telling readers of the blog post.

My guess is the latter.

Seriously, many of the reasons Phelps gives are generic enough that they could apply to dozens of startups, if not to hundreds. Mobile-first? Focused on imagery rather than text? The founders are digital natives? The company is based in Southern California?

And some of them just aren't good reasons to invest. Namely the ones about following smart Series A investors (Benchmark and Lightspeed) and the one about "because they let us."

So that's why I come back to the idea that Snapchat has a grand plan that neither it, nor its investors, are willing to divulge. Yet. Not even in a 10-second message that self-destructs.

 

British intelligence tapping fiber-optic cables for massive amounts of data

More secret National Security Agency documents leaked by Edward Snowden to The Guardian suggest that the U.S. agency’s British counterpart intercepts petabytes worth of communication data daily from fiber-optic cables.

The operation codenamed “Tempora” by Britain’s Government Communications Headquarters (GCHQ) has been going on for at least 18 months and involves the use of “intercept probes” attached directly to transatlantic fiber-optic cables landing on British shores from telephone exchanges and Internet servers in North America.

Commercial companies, described in the documents only as “intercept partners,” were secretly used to attach the intercepts on behalf of the GCHQ. The companies, whose identities have been concealed in the documents, were apparently obliged by law to cooperate with the GCHQ and in some cases paid for their effort.

The intercepts have allowed GCHQ to scoop up and filter huge volumes of data, including email content, records of phone calls, Facebook entries and Internet browsing histories. “For the 2 billion users of the world wide web, Tempora represents a window on to their everyday lives, sucking up every form of communication from the fiber-optic cables that ring the world,” the Guardian noted.

As of May a year ago, 300 analysts from the GCHQ and 250 from the NSA had been assigned to sift through and analyze the data for terrorist threats and signs of other criminal activity.

Each set of analysts, however, was operating under different rules, with those at the NSA appearing to have more stringent guidelines about how they use the data.

Details of the GCHQ operation are likely to fuel new fears about the nature and scope of the data surveillance activities by the NSA. The concerns first surfaced when Snowden leaked two documents describing a couple of surveillance programs to the Guardian and the Washington Post. Since then, there have been several other disclosures pertaining to surveillance activities by the NSA and the FBI and the authority under which it is being done.

The Obama Administrationand U.S. intelligence agencies have insisted that everything is being done under proper authority and oversight. They have downplayed concerns about U.S. persons being illegally spied on and have maintained that the surveillance activities are crucial to national security.

Even so, the sheer scale of the efforts, at least as described by the documents that the Guardian claims to have obtained from Snowden, is sure to heighten calls for more transparency into the data collection programs.

According to the Guardian, the GHCQ has been expanding its data interception capabilities steadily over the past five years. As of last year, the agency was capable of handling 600 million telephone “events” a day and was able to process data from at least 46 of the more than 200, 10Gbps fiber-optic cables on which it placed intercepts.

The agency applies a series of filters to the data it intercepts to reduce the volumes. For instance, the first filter throws out all high-volume, low-value traffic such as peer-to-peer downloads, reducing traffic volumes by up to 30% right away, the paper noted.

Numerous other filters pull out information that is of specific interest to the NSA or GCHQ. The NSA uses a total of 31,000 specific search terms, including specific phone numbers, email addresses and other identifiers to keep an eye on communications being carried out by persons or entities of interest. The GCHQ uses about 40,000 such terms to filter the information it intercepts.

The technology allows GCHQ to store certain information of interest for up to three days and phone call metadata for up to 30 days. Such data interception and filtering has apparently allowed the agency to identify potential terrorist threats, child exploitation networks and cyber threats.