Internet Offenses

The Encryption Debate – Once Again, Technology Outpaces the Law

March 6, 2016 | By James S. Friedman, LLC

A US Magistrate Judge in California ruled recently that technology giant Apple could be required to create specialized software to help federal investigators bypass the security protocols on the encrypted Iphone 5S used by Syed Farook, one of the San Bernardino shooters. This ruling conflicts with the ruling of a US Magistrate Judge in Brooklyn, who found that he could not order Apple to take steps to bypass the security features of an Iphone seized during an earlier drug investigation.

The media coverage of the more recent San Bernardino case has been far more extensive because it involves the December 2, 2015 mass-shooting committed by a married couple who were radicalized by ISIS. The facts and events giving rise to the older Brooklyn case are far more ordinary. But for the Iphone issue, that matter arises from just another relatively routine federal narcotics investigation – one of who-knows-how-many that play out in federal courts across the country every single day.

But a review of the ordinary drug case reveals far more about the development of the cell phone security issue that is at the heart of this debate. The drug case involves an alleged methamphetamine dealer named Jun Feng, who’s phone was seized during the 2014 search of his Queens, New York residence. Investigators sought to access his phone to obtain information that is fairly routine in drug cases, such as contact lists. According to prosecutors in that case, Apple had assisted federal agents in extracting information from Iphones tied to criminal investigations approximately 70 times in seven years. To law enforcement’s surprise, Apple suddenly changed its position as to such issues in Feng’s case. Feng entered a guilty plea last October, but attorneys for both Apple and the Government continued to press the Court for a ruling and the Court ruled against the Government. Continue reading ›

Computer Crime Increasing in Frequency, Magnitude and Sophistication

December 11, 2015 | By James S. Friedman, LLC

The United States Attorney’s Offices for the Southern District of New York and the Northern District of Georgia recently announced three indictments charging several defendants with, among other things, computer hacking, theft and fraud. [US v. Shalon, No. 15-cr-00333 (S.D.N.Y.); US v. Murgio, No. 15-cr-00769 (S.D.N.Y.); and US v. Shalon, No. 15-cr-00393 (N.D.Ga.)] More specifically, the grand juries hearing these cases charged the defendants with computer hacking, securities and wire fraud, identity theft, illegal internet gambling, conspiracy to commit money laundering, and operating an unlicensed money transmitter. These cases are noteworthy not only because of the sheer magnitude of the enterprise described by federal prosecutors, but also because of the manner in which they highlight the increasingly aggressive posture that the Justice Department continues to take toward cybercrime.

According to the US Attorney, the defendants hacked into the computer systems of several large financial services companies and financial news publishers. Federal prosecutors did not identify the companies involved, but other news sources identified at least some of them as JPMorgan Chase, ETrade, Scottrade, TDAmeritrade, Fidelity Investments, and Dow Jones. The defendants allegedly stole personal information for more than 100 million people and used it to, among other things, market securities in a deceptive manner by arranging to have prospective purchasers cold-called.

The defendants’ other activities allegedly included operating illegal online casinos, payment processing for criminals, operating an illegal bitcoin exchange, and laundering money through up to 75 shell companies and accounts around the world. In the course of doing so, the defendants purportedly procured and used over 200 false identification documents which included over 30 false passports issued by almost 20 different countries, as well as servers located in Egypt, the Czech Republic, South Africa, Brazil and other countries. The US Attorney believes the defendants generated hundreds of millions of dollars in illegal proceeds. Many of the charged offenses carry federal prison terms of 20 years. Continue reading ›

Computing Restitution Awards in Child Porn Cases

February 12, 2014 | By James S. Friedman, LLC

In 1997 and 1998, an eight-year-old girl known as “Amy” was sexually abused and raped repeatedly by her uncle. Amy’s uncle received a custodial term of 10 years, and was ordered to pay $6,325.00 in restitution. The assaults were photographed, and the photos were placed on the Internet and spread around the world. Nobody really knows who photographed the assaults or placed them on the Internet, and it is impossible to know how many people viewed them or shared them with others. When Amy was older, she learned that thousands of people were viewing these images, and said that it made her feel that the abuse was re-occurring and would never end.

A federal statute requires defendants in child porn cases to pay the full amount of restitution to victims such as Amy. On its face, the statute arguably requires each defendant to make full payment notwithstanding the portion of harm they actually caused. Amy eventually retained an attorney who computed the full amount of restitution due her at $3.4 million. Her attorney began serving restitution demands for $3.4 million on child porn defendants everywhere, regardless of how many pictures of Amy were implicated in their respective cases, or whether they were convicted of simple possession, as opposed to distribution.

Doyle Randall Paroline of Texas subsequently pleaded guilty to possession of child pornography, and received a two-year term and ten years of supervised release. Two of the 300 images discovered on his computer hard drive were of Amy. As a result, Amy’s attorney served him with a demand for $3.4 million in restitution. Paroline’s attorney argued recently before the US Supreme Court that his client, who was convicted of possession, as opposed to production and/or distribution, should not have to pay that much because it was out of all proportion to any harm Amy sustained from his conduct. Amy’s attorney argued that the statute literally requires full payment from each defendant.