The KGB Didn't Die in 1991 It Went Online

0:00
Lubyanka Square, Moscow, August the
0:03
22nd,
0:05
1991.
0:07
The statue came down at night with ropes
0:10
and a crowd. Felix Dzerzhinsky,
0:14
the founder of the Soviet secret police,
0:18
had watched over the square for 33
0:21
years. That night, the crowd pulled him
0:25
from his pedestal, and the soldiers
0:28
stationed behind him did nothing.
0:31
Behind the empty pedestal stood the
0:34
building the world called the Lubyanka,
0:37
headquarters of the KGB,
0:40
the largest intelligence machine on
0:42
Earth.
0:43
The statue fell in less than an hour.
0:46
The machine took a little longer. This
0:49
account draws on court records,
0:51
declassified files, published reporting.
0:55
Where uncertain, we say so.
0:58
To understand what happened next, hold
1:02
that image for a moment. The KGB of the
1:06
late Soviet Union employed, by most
1:08
estimates, close to half a million
1:12
people, including
1:14
border troops, signals intelligence, and
1:17
a foreign espionage service that reached
1:19
into every capital in the world.
1:22
In December of 1991,
1:26
the state those people served ceased to
1:29
exist. The agency was split into pieces,
1:33
a foreign intelligence service, an
1:35
internal security service, a
1:38
communications intelligence service, and
1:41
the pieces were smaller, poorer, and
1:43
suddenly
1:45
unsure whose orders they answered to.
1:48
Tens of thousands of officers and
1:51
analysts walked out of the machine in
1:53
the first years after the collapse.
1:56
Some retired, some vanished into the new
2:00
economy.
2:01
The rest, no one counted them.
2:05
That was the problem.
2:09
Almost immediately, the tradecraft went
2:12
on the market. The men who had spent
2:15
their careers inside the KGB's special
2:18
services did not disappear. They formed
2:22
security firms. They ran private armies.
2:25
They sold protection, surveillance, and
2:28
information. The same products
2:31
repackaged for the new economy.
2:34
Even the elite units, the Alpha Group,
2:37
the Vympel Detachment, were reorganized
2:41
and their veterans drifted into the
2:43
private world. In the Russia of the
2:46
1990s,
2:47
the surest customers were the men the
2:50
state now called criminals.
2:52
Journalists who covered the period
2:55
described the same scene in city after
2:58
city.
2:59
Former officers selling their skills to
3:01
the very networks the state had once
3:04
hunted. The line between guarding the
3:07
state and guarding its enemies dissolved
3:11
and nobody moved to redraw it. The
3:13
collapse did not destroy the tradecraft.
3:17
It auctioned it.
3:19
Wiretapping became a commodity you could
3:22
buy by the week. Dossiers changed hands
3:25
the way invoices did. The men who had
3:28
once read the mail of an entire country
3:31
began reading the mail of anyone who
3:34
could pay.
3:35
Those who documented the exodus agree on
3:38
one detail.
3:40
The most dangerous cargo carried out of
3:42
the collapse was never written down.
3:46
Access codes,
3:48
Interception methods, the architecture
3:51
of state systems held in memory by men
3:55
no registry could track.
3:58
What the archives cannot fully show is
4:00
the scale, the point at which individual
4:03
betrayal became an economy.
4:06
But the pattern in retrospect is
4:09
unmistakable. The skills did not vanish
4:12
with the state. They were rented out in
4:15
pieces to whoever needed them most. One
4:19
former officer who later ran a private
4:22
security firm in Moscow
4:24
and who spoke to journalists years
4:27
afterward on condition that his name
4:30
never appear in print, described those
4:33
years in words to this effect.
4:36
>> We were trained to be invisible. After
4:39
the collapse, we discovered that
4:42
invisibility had a price and everyone
4:46
wanted to buy it.
4:49
>> The officer did not say he regretted it.
4:52
That was not the kind of thing men like
4:55
him said.
4:56
But he said something else. He said the
4:59
state had created a generation of
5:01
specialists who knew every secret of the
5:04
old world and owed nothing to the new
5:07
one. The cost of that auction was not
5:10
paid all at once. All at once, nothing
5:14
ever is.
5:15
It was paid in small, ordinary
5:17
transactions. A tapped telephone here, a
5:21
stolen file there, a bodyguard service
5:24
that protected a dealer one year and his
5:27
killer the next.
5:29
By the mid-90s, the mafia of the old
5:32
Soviet world had absorbed the methods of
5:35
the state it had outlived. Informers,
5:38
surveillance,
5:40
disinformation,
5:42
the classic craft now in service of the
5:45
classic racket.
5:47
And in one particular city, the
5:49
machine's final gift was about to be
5:52
delivered to a man who had never carried
5:55
a weapon.
6:00
St. Petersburg,
6:02
1994.
6:04
The city that had fed the Soviet state's
6:07
research machine was now a city of empty
6:10
factories and open markets.
6:13
And in a gray apartment at the end of a
6:16
telephone line,
6:17
a young computer specialist was about to
6:20
do something no one had ever done
6:23
before.
6:24
He was not an intelligence officer. He
6:27
was not a gangster.
6:29
He had simply learned, in the last years
6:32
of the state system, how to make a
6:34
machine do what its owners did not
6:36
expect. His name was Vladimir Levin.
6:41
And in less than a year, he would become
6:43
the first man to rob a major bank
6:46
without leaving his apartment. Here is
6:48
what is known about the apartment.
6:51
It stood in St. Petersburg in the
6:54
mid-90s
6:55
among buildings that had not been
6:57
painted since the state ran out of
6:59
paint.
7:01
Levin was a biochemist by training, a
7:03
computer specialist who had worked
7:05
inside the state's own research system
7:08
before it collapsed.
7:10
Investigators would later describe him
7:13
as quiet, precise, and patient, the
7:16
qualities of a laboratory scientist.
7:20
What he was doing with those qualities,
7:22
no one knew.
7:24
For months, he dialed into the telephone
7:27
lines that connected Citibank in New
7:29
York to its largest corporate customers.
7:32
And the system answered. Consider the
7:35
two ends of that line.
7:38
One end, the most guarded financial
7:41
systems on Earth in the glass towers of
7:44
New York. The other, an apartment with
7:47
peeling wallpaper, a modem, and a man
7:50
trained inside a dying state.
7:53
The entire history of digital crime fits
7:56
in the space between those two rooms.
7:59
The method, as investigators later
8:02
reconstructed it, was less like a heist
8:06
and more like a key left in a lock.
8:09
Citibank's customers called in to manage
8:12
their accounts, moving money with
8:14
account numbers and passwords spoken
8:17
over the line.
8:18
listened, then used what he heard.
8:22
Between June and August of 1994, on at
8:25
least 18 occasions, money moved out of
8:28
accounts at Citibank in New York into
8:32
accounts controlled by his accomplices
8:34
in Finland, the United States, the
8:37
Netherlands, Germany, and Israel. The
8:41
total,
8:42
roughly 10 million dollars in transfer
8:45
requests. The amount actually withdrawn,
8:49
about 400,000.
8:51
The rest was frozen by the time the bank
8:54
understood what was happening. But, the
8:57
damage was already measured in something
9:00
more expensive than money, fear.
9:06
Inside Citibank, the first reaction was
9:09
disbelief. A bank that moved billions
9:12
every day could not be robbed through a
9:15
telephone. That was the assumption, and
9:18
the assumption had a hole in it the size
9:21
of a man in an apartment in St.
9:23
Petersburg. The trail began with the
9:26
phone records.
9:28
Federal agents and Russian investigators
9:31
followed the calls from the bank's lines
9:33
across the Atlantic through the
9:36
switching equipment, and finally to an
9:39
apartment block on the far side of the
9:41
city.
9:42
The evidence scene is unglamorous.
9:46
A stack of call records, a map of
9:48
numbers and names.
9:50
But for the FBI, the case was a
9:53
landmark. The criminal had committed the
9:55
crime
9:56
and had never once left his chair. An
9:59
investigator who worked the case and who
10:02
later described the operation in
10:04
interviews, recalled the strangest
10:07
detail in words to this effect.
10:10
>> Everyone expected a gang, guns, dark
10:14
rooms, boxes of cash. We found one man
10:17
and a telephone bill.
10:20
His
10:21
>> The investigator paused.
10:24
>> That bill was the most expensive
10:26
telephone bill any of us had ever seen.
10:29
>> When agents finally entered the
10:32
apartment, they found a computer, a
10:35
modem, and nothing that looked like a
10:37
crime,
10:39
which the investigator said was the
10:41
point.
10:43
The arrest, when it came, happened far
10:47
from St. Petersburg.
10:49
In March of 1995,
10:52
Levin flew to London and was taken off
10:55
the plane at Heathrow Airport by British
10:58
police acting on an American request.
11:02
He fought extradition for more than 2
11:05
years.
11:06
In January of 1998,
11:09
he pleaded
11:11
guilty in a federal court in New York to
11:14
conspiring to defraud Citibank. Four
11:18
accomplices had already pleaded guilty
11:22
before him.
11:24
In February of that year, the judge
11:28
sentenced him to 36 months in prison
11:32
and ordered him to repay the bank
11:34
roughly $240,000.
11:39
The story, as it was told at the time,
11:42
made him famous.
11:43
The part of the story that mattered came
11:46
later. A security researcher who studied
11:49
the case in the years that followed put
11:52
it plainly.
11:54
Words to this effect:
11:57
>> Levin was a warning the industry refused
12:00
to read correctly. The lesson was not
12:03
that he was brilliant. The lesson was
12:06
that he was ordinary.
12:08
>> Ordinary.
12:10
And remote.
12:12
The newspapers had a simpler story to
12:15
tell. They called him a computer genius,
12:18
a phantom, the first of a new breed.
12:22
That breed had a name before long.
12:26
The Russian hacker.
12:28
It was a label that would follow an
12:30
entire generation of programmers around
12:33
the world, whether they had ever touched
12:36
a bank or not. Here is where the record
12:39
begins to argue with itself. Security
12:43
experts pointed out, almost immediately,
12:47
that Levin had not used the internet at
12:49
all. He had used telephone systems,
12:52
dialing in, listening, and
12:55
reconstructing codes from what he heard.
12:58
The first internet bank robbery, the
13:01
label that made the headlines, was by
13:04
this reading a mistake. It was not a
13:07
hack. It was a wiretap with a bank
13:10
attached.
13:12
The distinction matters because it
13:14
changes the story.
13:16
The first great digital bank heist was
13:18
not committed by a genius breaking
13:21
through walls. It was committed by a
13:24
patient man listening through a door
13:26
that had been left open.
13:28
Both versions of the story are true. The
13:31
files simply do not agree on which one
13:34
matters.
13:40
The strange part of this record is not
13:42
what Leven did. It is how ordinary the
13:46
method looks in hindsight.
13:49
Everything that would define the shadow
13:51
economy of the next 30 years was already
13:54
present in that apartment. Remote
13:57
access, stolen credentials, money moved
14:01
across borders, accomplices who never
14:04
met.
14:05
The tools changed. Encryption replaced
14:08
telephone lines. Cryptocurrency replaced
14:12
numbered accounts.
14:13
The shape of the crime did not change at
14:16
all.
14:22
Seda Bank fixed its systems and spent
14:25
years insisting, correctly, that
14:28
customer accounts had been protected.
14:32
The world moved on.
14:34
Leven served his time and disappeared
14:37
from the record.
14:38
But, the template did not disappear with
14:41
him.
14:42
Within a few years, the skills in that
14:45
apartment had migrated to the one place
14:48
they could not be traced, interrupted,
14:51
or closed. The internet itself.
14:55
And the internet, as it turned out, had
14:58
no central building and no address.
15:02
It had something better.
15:04
It had landlords.
15:06
Every mafia needs territory.
15:09
In the old world, territory was a
15:11
street, a port, a neighborhood, ground
15:14
you could walk on and defend.
15:17
In the new world, the mafia's territory
15:21
was a server that ignored complaints.
15:24
The industry even had a name for it.
15:27
Bulletproof hosting.
15:29
A bulletproof host is an internet
15:31
provider that does what no legitimate
15:34
provider will do. Keeps a client online
15:38
no matter what is said about them.
15:40
Abuse reports ignored. Take down
15:43
requests answered with silence.
15:46
You do not pay a bulletproof host to be
15:48
fast. You pay them to be blind.
15:52
It is the protection racket of the
15:54
internet. And in the 2000s, the racket
15:57
built an empire.
16:03
San Jose, California, November 2008.
16:08
In an unremarkable building, a small
16:11
hosting company called McColo was
16:14
quietly carrying what security
16:16
researchers believed to be a staggering
16:19
share of the world's spam.
16:22
Not the annoying kind. The criminal
16:24
kind. Phishing, malware, botnet command,
16:28
the plumbing of the global racket.
16:31
For years, complaints about McColo's
16:33
customers went nowhere. The company had
16:36
learned that the internet runs on
16:38
paperwork, and that paperwork can be
16:41
ignored.
16:42
Then, a reporter began pulling the
16:44
threads.
16:46
The takedown, when it came, was blunt.
16:49
The companies that supplied McColo's
16:52
connection to the internet cut it off.
16:55
Within hours, the volume of spam
16:57
crossing the planet dropped. By one
17:00
widely cited estimate, by roughly 2/3.
17:04
One building in San Jose
17:07
had been carrying a significant part of
17:10
the entire world's criminal mail.
17:16
A security researcher who tracked the
17:19
takedown at the time described what the
17:22
moment revealed. Words to this effect.
17:27
>> We always imagined the criminal internet
17:30
as something hidden. McColo showed us it
17:34
was just a hosting company with a policy
17:36
of looking the other way.
17:39
>> The researcher paused and added,
17:42
"The most dangerous part of the criminal
17:44
internet is not the encryption.
17:47
It is the paperwork. Everything runs on
17:50
companies that refuse to read it.
17:53
McColo was gone by the end of the week.
17:57
The customers were not. They simply
17:59
moved and took their lesson with them.
18:02
Their next stop was a name that became a
18:04
legend inside security circles. The
18:08
Russian Business Network, known by its
18:10
initials, the RBN.
18:13
The network was registered around 2006
18:17
in St. Petersburg and for several years
18:20
it operated as a kind of dark city
18:23
inside the internet, hosting malware,
18:26
phishing, stolen card shops, and worse.
18:30
When researchers at the security firm
18:32
iDefense published a study of it in
18:35
2007,
18:37
they described something that looked
18:39
less like a company and more like a
18:42
neighborhood. A neighborhood with no
18:44
police.
18:46
The RBN was never fully dismantled. It
18:49
fragmented, evolved, and seeded the next
18:53
generation.
18:54
But, its real contribution was
18:57
architectural.
18:59
It proved that the entire criminal
19:01
internet could be organized around a
19:03
single principle.
19:05
A server that never asks questions. By
19:09
2009,
19:11
that principle had been industrialized.
19:14
The operation that came to define it was
19:16
called Avalanche, a network built to do
19:19
one thing,
19:21
keep criminal infrastructure online,
19:23
hidden, and interchangeable.
19:26
Avalanche used a technique called fast
19:28
flux, constantly changing the addresses
19:31
that pointed to its servers, so that no
19:34
single location could be seized, traced,
19:37
or shut down.
19:39
The malware families that ran on it read
19:42
like a ledger of the era's digital
19:44
rackets,
19:46
the Citadel banking Trojan, the VM Zeus
19:49
family, the Tesla Crypt ransomware, and
19:52
others. For 7 years, investigators
19:56
tracked it.
19:57
The scale they eventually uncovered
20:00
would be measured in millions of
20:02
infected computers, and in damage that
20:05
Europol estimated at hundreds of
20:08
millions of euros worldwide. On the 1st
20:11
of December, 2016,
20:14
the network was taken down in a
20:16
coordinated operation spanning more than
20:19
30 countries.
20:21
Five arrests,
20:23
37 premises searched, 39 servers seized,
20:27
and more than 800,000 internet domains
20:30
seized, blocked, or taken over. The
20:33
largest operation of its kind ever
20:35
conducted.
20:37
An investigator who worked on the
20:38
takedown remembered the moment in The
20:41
Hague, words to this effect,
20:44
>> "We had spent years watching them
20:46
rebuild after every blow. This time, we
20:50
took the ground they stood on."
20:52
>> The investigator did not claim victory.
20:56
>> "They will rebuild again. They always
20:58
do."
20:59
>> The infrastructure, in other words, was
21:02
not the target. The infrastructure was
21:05
the business model, and the business
21:08
model had survived.
21:11
Here is the part of the story that the
21:13
takedown reports did not emphasize.
21:17
The same bulletproof networks that
21:20
carried criminal malware were also
21:22
carrying the work of intelligence
21:24
agencies. Researchers mapping the
21:27
infrastructure of state-sponsored
21:29
hacking repeatedly found it running on
21:32
the same providers, the same registrars,
21:36
the same indifference, sometimes the
21:38
same servers.
21:40
The clean division, criminals on one
21:43
side, states on the other, was a public
21:46
fiction.
21:48
The criminal cloud and the state cloud
21:51
shared the same walls.
21:53
And by 2017,
21:56
the walls had begun to open.
22:00
Takedown one provider and the network
22:03
moves within days.
22:05
The McColo takedown proved it. The
22:07
Avalanche takedown proved it again.
22:10
By then,
22:12
investigators on both sides of the
22:14
Atlantic had started asking a different
22:17
question. Not where the servers were,
22:20
but who was protecting them.
22:23
The answer, when it finally surfaced,
22:26
was not a company.
22:28
It was a state. Moscow,
22:31
2016.
22:34
Inside the FSB, Russia's internal
22:37
security service, stood a unit most of
22:40
the world had never heard of. The
22:43
Information Security Center.
22:46
Its official job was to monitor and to
22:48
fight the country's cyber threats. The
22:51
state's hackers were its enemy.
22:54
Officially, that was the story.
22:57
By 2016,
23:00
American investigators had begun to
23:03
assemble evidence that some of those
23:06
enemies were not enemies at all.
23:10
They were employees. Case that opened
23:12
the door was Yahoo.
23:14
In early 2014,
23:17
hackers broke into the company systems
23:19
and eventually gained access to
23:21
information from more than 500 million
23:24
accounts.
23:26
It was at the time one of the largest
23:29
data thefts ever disclosed.
23:32
The American indictment that followed in
23:34
March of 2017
23:37
named four men.
23:39
Two were hackers with long criminal
23:41
records.
23:42
Alexsey Belan, who had been on the FBI's
23:46
most wanted cyber list, and Karim
23:48
Baratov, a young man living in Canada.
23:53
And two were officers of the FSB.
23:56
Dmitry Dokuchaev and his superior, Igor
24:01
Sushchin.
24:02
According to the indictment, the
24:04
officers protected, directed,
24:08
facilitated, and paid the hackers.
24:12
The state, in other words, was not
24:14
hunting them. It was running them.
24:21
Washington,
24:23
March the 15th, 2017.
24:27
The indictment, a dry document, as
24:31
indictments are, entered the public
24:34
record like a weapon.
24:36
It was the first time the United States
24:38
had charged serving Russian intelligence
24:41
officers with hacking.
24:43
The targets it described were not only
24:46
ordinary users. The indictment alleged
24:49
the conspirators had used the stolen
24:51
data to reach into the accounts of
24:54
Russian journalists and American
24:56
officials. The purpose was not money
24:59
alone. It was intelligence gathered in
25:02
part by a man the FSB was nominally
25:05
supposed to arrest. Prosecutors
25:08
summarized the arrangement in four
25:11
words, protection in exchange for
25:14
capability.
25:15
The rest of the story would not fit on a
25:18
charging document. An investigator who
25:21
worked on the case described the
25:23
reaction inside the American side words
25:27
to this effect.
25:29
>> For years we told the world these were
25:31
two separate worlds, intelligence and
25:34
crime. The Yahoo case is where the two
25:37
worlds turned out to be one building.
25:41
>> The investigator added words to this
25:44
effect.
25:45
>> Belyan was a wanted man in every
25:48
jurisdiction that mattered. He was still
25:51
working for the state. That is not a
25:53
coincidence. That is a contract.
25:56
>> Nobody, the investigator said, expected
26:00
Moscow to answer for it.
26:02
Moscow did answer, but not in the way
26:06
Washington expected. In the winter of
26:10
2016,
26:12
months before the American indictment
26:15
was made public,
26:17
Russian authorities
26:20
arrested their own.
26:22
Sergey Mikhailov, the deputy head of the
26:25
very FSB unit that was supposed to
26:29
police hackers, was taken into custody
26:33
along with his subordinates, including
26:36
Dmitry Dokuchayev,
26:39
the officer named in the American case.
26:43
The charges were treason.
26:45
In February of 2019,
26:48
after a closed trial, Mikhailov was
26:52
sentenced to 22 years in a penal colony.
26:55
A former employee of the security firm
26:58
Kaspersky, Ruslan Stoyanov, received 14.
27:03
The details of the case remain
27:05
classified.
27:07
But the lesson was visible anyway.
27:10
The state gives immunity with one hand
27:14
and handcuffs with the other.
27:16
And it decides alone which hand you
27:19
meet. A former intelligence officer who
27:22
worked inside the Russian security
27:24
services in those years,
27:27
and who spoke to journalists on
27:29
condition of anonymity, described the
27:32
arrangement as those inside it
27:34
understood it. Words to this effect.
27:38
>> The state does not employ the hackers.
27:42
It never has. That would be too clean,
27:46
too visible, too easy to answer for. It
27:50
lets them operate and it watches.
27:54
>> He paused and added, "When the state
27:57
needs something done, it does not call
27:59
them. They call it. They always know the
28:02
number."
28:03
The officer was not cynical about this.
28:07
He was matter-of-fact.
28:09
>> In our trade, deniability is not a lie.
28:14
It is a design.
28:16
>> By the middle of the 2010s,
28:20
the pattern was hard to miss.
28:23
In June of 2016,
28:26
Russian police announced the arrests of
28:28
dozens of members of a hacking gang
28:31
called Lurk, a group accused of stealing
28:35
hundreds of millions of rubles from
28:38
Russian banks.
28:39
The arrests were real. The bank accounts
28:42
were real.
28:43
But the reporting around them kept
28:46
pointing somewhere stranger.
28:49
That some of the arrested hackers had
28:52
been approached years earlier by state
28:55
recruiters.
28:57
The claims were never proven in public.
29:00
The files were never opened.
29:03
Former insiders repeated the same story
29:06
in interviews.
29:08
The state did not need to recruit
29:11
hackers. It needed them to believe they
29:14
were free.
29:15
A hacker who believes he is a criminal
29:18
will work harder, ask less, and never
29:21
ask for a pension. In December of 2019,
29:26
Washington went further than it ever had
29:29
before.
29:31
The Treasury Department and the Justice
29:33
Department moved together against a
29:36
group that called itself Evil Corp,
29:40
operators of malware that had stolen, by
29:43
the indictment's estimate, more than a
29:46
hundred million dollars from companies
29:50
and individuals around the world.
29:53
The group's leader, Maksim Yakubets,
29:56
drove a Lamborghini and used the
29:58
nickname Aqua.
30:00
He also, according to the Treasury,
30:03
worked for the FSB,
30:06
tasked, in the official language, to
30:09
work on projects for the Russian state.
30:13
The reward offered for his arrest, five
30:16
million dollars, the largest ever
30:19
offered for a cybercriminal.
30:21
The indictment made the arrangement
30:24
explicit.
30:25
The state that pretended not to know the
30:28
gang was the state that used the gang.
30:31
In the old world, the state paid spies
30:35
to infiltrate the mafia.
30:37
In the new world, it leased the mafia to
30:41
do what it no longer wanted to be seen
30:44
doing itself.
30:45
The logic was perfect and perfectly
30:48
deniable.
30:49
If the hackers were criminals, the state
30:52
could arrest them.
30:53
Or not.
30:55
At its convenience. If they were caught,
30:58
they were private actors beyond state
31:01
control. If they succeeded, the state
31:04
collected the information, the chaos, or
31:07
the pressure without a single signature
31:10
on a single document.
31:12
It was the oldest trick in the
31:14
intelligence trade applied to the newest
31:18
machines on Earth.
31:20
And the machine did not care.
31:27
By the end of the 2010s,
31:30
the shadow protocol was complete. The
31:33
criminals provided capability, the state
31:36
provided protection, both provided
31:38
denial. The deal was never written down.
31:42
No one signed it. No one could.
31:46
Which is exactly why it could never be
31:49
denied. And why in 2021,
31:52
the entire structure was about to be
31:55
tested in public. In 2021,
31:58
the shadow economy came into the open
32:01
because it had become too big to hide.
32:05
Ransomware. Software that locks a
32:07
victim's data and sells back the key had
32:11
transformed from a nuisance into an
32:13
industry.
32:15
The structure was the mafia's own.
32:18
A core group builds the weapon then
32:20
rents it to affiliates, crews who do the
32:23
breaking in and split the profits. The
32:26
old family franchise rebuilt on
32:29
encryption.
32:30
The numbers were beginning to look like
32:32
a state budget. In the first 6 months of
32:35
2021 alone, financial institutions
32:39
reported more than half a billion
32:42
dollars in suspected ransom payments,
32:45
more than the entire previous year.
32:47
And the industry had a brand. On the 7th
32:50
of May, 2021,
32:53
a group calling itself DarkSide broke
32:55
into the networks of Colonial Pipeline.
32:59
The company that carries roughly 45% of
33:02
the fuel used along the Eastern Seaboard
33:05
of the United States. Colonial shut the
33:08
pipeline down. The shutdown lasted days.
33:12
The effect was immediate and visible.
33:15
Gas stations closed, prices climbed, and
33:19
along the Eastern coast, drivers queued
33:22
for fuel in scenes that looked more like
33:25
a blackout than a computer problem.
33:28
The ransom demand was paid, 4.4 million
33:32
dollars in Bitcoin.
33:35
DarkSide, for its part, posted a
33:37
statement insisting it was apolitical,
33:40
that it only wanted money, that it was a
33:42
business.
33:44
It was, in that sense, completely
33:46
honest. On the 8th of June, 2021,
33:51
the chief executive of Colonial
33:54
Pipeline, Joseph Blount, sat before a
33:57
committee of the United States Senate.
34:00
He had authorized the payment. He did
34:03
not hide it.
34:05
To the senators, he said,
34:07
>> "I made the decision to pay, and I made
34:10
the decision to keep the information
34:12
about the payment as confidential as
34:15
possible."
34:16
>> Then, he added,
34:18
>> "It was the hardest decision I've made
34:20
in my 39 years in the energy industry."
34:24
>> The committee room went quiet. The kind
34:27
of quiet that happens when a powerful
34:30
man admits
34:32
that a criminal network held his company
34:35
and his country hostage in exchange for
34:39
digital coins. The story did not end
34:42
with the payment.
34:43
A month later the FBI announced it had
34:47
recovered more than two million dollars
34:50
of the ransom, 2.3 million in
34:53
cryptocurrency
34:55
after following the digital money as it
34:58
moved.
34:59
It was the first time American
35:02
authorities had publicly clawed back a
35:05
ransom in the new currency of the
35:08
underworld.
35:10
And in November of 2021
35:12
the State Department offered 10 million
35:16
dollars for information about the
35:18
leaders of DarkSide.
35:20
The group had already evaporated. Its
35:23
site gone, its members scattered.
35:26
But the money trail was the revelation.
35:30
The ransom economy, it turned out, was
35:33
not untraceable.
35:35
It was just fast.
35:37
By then the largest of the ransom houses
35:40
had already overreached.
35:43
In July of 2021, the group REvil
35:46
attacked the software company Kaseya and
35:49
through it as many as 1,500 businesses
35:52
around the world in a single stroke. The
35:55
demand was staggering, 70 million
35:59
dollars. One of the largest ransom
36:01
demands ever made public.
36:03
Then the group did something strange. It
36:06
published an open letter to the former
36:09
American president offering a deal,
36:12
apologizing. Public performance of a
36:15
criminal organization that believed it
36:18
had become too valuable to touch.
36:21
It was wrong. By the end of the year one
36:25
member had been arrested in Ukraine at
36:28
Washington's request.
36:30
And on the 14th of January, 2022,
36:34
Russia's FSB announced that it had
36:37
arrested 14 members of REvil, raiding 25
36:42
addresses, seizing cryptocurrency, cash,
36:46
and 20 luxury cars bought with the
36:49
proceeds. The arrests were made, the FSB
36:53
said, at Washington's request.
36:56
Analysts were divided on what they
36:58
meant. A researcher who spent years
37:01
studying the group described the arrests
37:04
in careful, deliberate terms. Words to
37:08
this effect:
37:09
>> It was either the most effective
37:11
counterterrorism in a decade or the most
37:15
efficient public relations with the FSB.
37:19
The two are usually the same operation.
37:23
>> The researcher went on,
37:25
>> notice what they did not arrest. No one
37:28
who worked for the state, no one who
37:30
protected the group, only the criminals.
37:33
>> The message, the researcher said, was
37:36
aimed at two audiences at once. At
37:40
Washington to show action and at the
37:42
gangs to show who still held the lease.
37:46
Three weeks later, the second largest
37:50
ransom house collapsed from the inside.
37:54
In late February of 2022,
37:57
the group Conti, responsible for attacks
38:00
on hospitals and government agencies,
38:02
posted a message backing the Russian
38:05
invasion of Ukraine and threatening to
38:08
use all its resources against any state
38:11
that attacked Russia.
38:13
The response came from inside the group
38:16
itself.
38:17
A Ukrainian security researcher who had
38:20
spent time inside the organization's
38:22
chat rooms, leaked tens of thousands of
38:26
internal messages.
38:28
The chats covered 13 months of the
38:30
group's life, and they showed the new
38:32
mafia in its own words. Salaries,
38:36
organizational charts, negotiators
38:39
trained in scripts, a help desk, a human
38:42
resources department. Conti ran like a
38:45
corporation.
38:47
It felt like a family
38:49
with betrayal, suspicion, and money
38:52
fights leaking out in real time.
38:55
The victims of that corporation were not
38:58
abstractions.
39:00
In May of 2021, Conti struck the Health
39:03
Service of Ireland, the HSE.
39:06
And the attack crippled hospitals,
39:09
canceled appointments, and shut down the
39:12
systems that doctors needed to treat
39:14
patients for weeks.
39:16
In April of 2022,
39:19
the group hit Costa Rica so hard that
39:22
the government declared a national
39:24
emergency.
39:26
The ransomware mafia did not shoot
39:29
anyone. It did not need to.
39:32
It held the systems that keep people
39:34
alive and auctioned them back to the
39:37
people who needed them.
39:39
That was the new protection racket. No
39:42
enforcers on the street, just a
39:44
countdown, a wallet, and the knowledge
39:47
that someone, somewhere would pay.
39:54
The gangs, one by one, went down.
39:57
Conti disbanded. REvil was arrested.
40:01
DarkSide vanished.
40:03
And still the payments grew
40:05
because the ecosystem did not depend on
40:09
any one group. It depended on the
40:11
infrastructure, the immunity, the
40:13
laundering, the silence that had been
40:16
built around them.
40:18
They ran it like a company. They were
40:20
destroyed like a gang.
40:22
And the difference between those two
40:24
things was never the crime. It was the
40:28
protection.
40:30
The gangs could be taken down. The
40:32
ecosystem could not.
40:35
Because the ecosystem had a landlord.
40:40
Which brings us to the doctrine, the
40:42
oldest part of the story.
40:45
Every state that ever used a criminal
40:48
denied it. Kings denied their
40:50
privateers. Empires denied their
40:52
mercenaries. The Soviet Union denied its
40:55
agents.
40:57
The digital age did not invent
40:59
deniability. It perfected it.
41:03
Because in cyberspace, the state can
41:06
launch an attack that looks exactly like
41:08
a crime. And then point at the criminals
41:12
and ask with perfect composure, "How can
41:15
you prove it was us?"
41:18
The criminals, meanwhile, point back at
41:20
the state and ask the same question.
41:24
Plausible deniability is the
41:26
load-bearing wall of the entire shadow
41:29
protocol.
41:31
And twice in recent years, the wall has
41:34
shown its exact dimensions. In June of
41:36
2017,
41:38
a piece of software called NotPetya
41:41
swept through companies around the
41:42
world. It looked like ransomware. It
41:46
demanded payment. It behaved like a
41:49
crime.
41:50
But it was not a crime. It was a weapon.
41:54
A destructive program designed to erase
41:57
data disguised as a shakedown.
42:01
The attack, which spread from Ukraine
42:03
across Europe, the Americas, and Asia,
42:07
caused damage that analysts estimated at
42:10
roughly $10 billion. dollars. The
42:13
shipping giant Maersk, the drug maker
42:15
Merck, and the delivery firm FedEx lost
42:18
hundreds of millions each. In February
42:21
of 2018, the White House made the
42:24
attribution official.
42:26
The attack had been launched, it said,
42:28
by the Russian military. The most
42:30
destructive and costly cyber attack in
42:33
history, in the statement's words.
42:37
The disguise had held long enough.
42:40
The state had worn the criminal's mask,
42:42
and the mask, not the attack, was the
42:45
point. In December of 2020,
42:48
the same architecture was visible again.
42:52
But, this time, the state did not borrow
42:55
the criminal's tools. It used its own.
43:00
Hackers working for Russia's foreign
43:02
intelligence service broke into the
43:04
company SolarWinds
43:06
and hid their access inside a software
43:09
update, which was then downloaded in
43:13
good faith by thousands of organizations
43:16
around the world, including agencies of
43:20
the United States government.
43:22
The operation sat inside its victims for
43:26
months before it was found.
43:29
When Western governments finally
43:31
attributed it in early 2021,
43:34
they named the service openly.
43:37
The lesson was the same as NotPetya in
43:40
reverse. The state did not need the
43:43
mafia to be deniable. It could be
43:46
deniable alone.
43:48
But, the state and the mafia shared one
43:51
more thing. The infrastructure, the
43:53
method, and the silence.
43:56
In June of 2021 in Geneva, the two
44:01
presidents met.
44:03
The American president, we now know,
44:06
handed the Russian president a list of
44:08
16 critical infrastructure sectors,
44:11
pipelines, power grids, water systems,
44:14
and told him they were off-limits.
44:17
The Russian president replied publicly
44:20
that Russia had nothing to do with the
44:22
ransomware attacks, that the criminals
44:25
acted on their own, that his country was
44:28
ready to cooperate. The choreography was
44:31
perfect. Accusation without proof,
44:35
denial without detail, a handshake for
44:38
the cameras.
44:40
The most important exchange of that
44:42
summit happened in the room,
44:45
not on the stage.
44:47
And the public record of it, the part
44:49
the world was allowed to see, says
44:52
nothing at all about the real
44:53
arrangement.
45:02
Years later, two men who had lived
45:04
inside the system described it to
45:06
journalists, separately, on condition
45:09
that their names never appear, in words
45:13
to this effect. The first was an
45:16
investigator who had spent a decade
45:19
hunting the gangs.
45:21
>> We can name the unit. We can trace the
45:23
server. We can show you the money. What
45:26
we cannot name is the order. No order
45:29
was ever written.
45:31
>> The second was the former officer.
45:34
>> We have protected.
45:36
No.
45:37
That is the wrong word. The state does
45:41
not protect them. The state simply does
45:45
not see them. It is a very disciplined
45:48
kind of blindness.
45:50
>> The investigator nodded at that and
45:53
added,
45:54
>> "That is the system. No one lies. No one
45:57
confesses. The machine denies itself,
46:00
and everyone inside it is safe.
46:05
Then, both men said the same thing in
46:08
different words.
46:09
The question was not whether the state
46:12
controlled the gangs. The question was
46:15
why it had never needed to. In May of
46:18
2023,
46:20
the FBI announced that it had dismantled
46:23
one of the most advanced espionage
46:25
networks ever found, a system of
46:28
communication called Snake, run by
46:31
Russia's foreign intelligence service,
46:34
hidden inside computers around the world
46:37
for nearly two decades. The Bureau named
46:41
the operation Medusa.
46:43
The network was gone. The capability was
46:46
not.
46:48
And this is where the story returns to
46:50
where it began.
46:52
The statue of Dzerzhinsky,
46:54
pulled down in 1991,
46:57
was not destroyed. It was moved to a
47:01
park in Moscow built for fallen
47:04
monuments,
47:05
where it stands among the other statues
47:08
of the old order, toppled and silent.
47:13
The building behind the pedestal never
47:16
moved at all.
47:18
The machine did not die in 1991.
47:22
It changed address. The record of this
47:25
story closes with a question it cannot
47:29
answer.
47:30
Who runs who?
47:32
Are the gangs the state's contractors,
47:35
or the state's cover story? Is the
47:38
tolerance deliberate policy, or the
47:41
helplessness of an institution too weak
47:44
to control its own shadows? The archives
47:47
do not say. The indictments describe the
47:50
crimes, but not the orders. The
47:53
testimony describes the meetings, but
47:56
not the men who were not there.
47:58
In the intelligence world, the most
48:01
important document is the one that was
48:05
never written. That is not a metaphor.
48:08
It is a discipline.
48:10
The old machine is gone. The new one
48:13
runs on money, encryption, and the
48:16
careful art of looking away.
48:19
And somewhere
48:20
in a city that once taught the world the
48:23
trade, a young programmer is learning
48:26
that the state has room for exactly two
48:28
kinds of people, those it protects and
48:32
those it uses.
48:34
In June of 2021,
48:36
in a villa beside the lake in Geneva,
48:40
two men shook hands for the cameras. The
48:43
code did not stop for the handshake. It
48:46
was already moving from one address to
48:49
the next before the cameras finished
48:52
flashing.
48:53
Because in the shadow protocol, nothing
48:56
ends. It only changes address.
49:00
The statue fell in 1991.
49:03
The machine never left.

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