How the US government is using blockchain to fight fraud | Kathryn Haun | TEDxSanFrancisco

any technology worth adopting is often adopted first by criminals I mean criminals are some of the greatest beta technology beta testers of new technologies think about it although we all now use the internet every day for everything way back when some of the first adopters of the internet were fraudsters and child pornographers and the digital currency Bitcoin and the technology underlying it the blockchain there really no different I mean after all this technology did get its renown by helping to helping drug dealers sell drugs on the darknet but it turns out that like all great technologies the blockchain is no different and it turns out that the blockchain can end up doing a lot more good than bad it can help solve crime and it can help stop fraud how do I know well although I'm here in my personal capacity I've been a federal prosecutor for over a decade and in that time I have put murderers organized criminals cartels white-collar thieves and cyber criminals behind bars in fact I prosecuted some of the earliest Bitcoin criminals let me tell you the story but it involves a twist because it involves the blockchain being used for bad but ultimately being used for good to catch the bad guys and the bad guys aren't who you might think in this story this story is a story about a failed murder-for-hire plot the Silk Road and a pair of corrupt federal agents who tried to destroy evidence to hide their crimes they couldn't escape the blockchain many of you already know the story of the Silk Road and basically for those who don't just in summary the Silk Road was a darknet marketplace where you could buy everything from heroin to fake passports criminal enterprise or libertarian paradise that depends on your perspective but the one thing we can all agree on is that without technologies like Bitcoin and like blockchain these darknet sites like the Silk Road and those that followed them wouldn't be possible and in fact these anonymizing technologies were making it really hard for the government to find out who was running the Silk Road the government had a federal task force it had a couple task forces and one of them was back outside of the Washington DC area the federal Silk Road task force comprised of all of these agencies up here all of some of the ones that you just heard about but they couldn't find out who was running the Silk Road all they knew at this time was that that person went by the moniker DPR for Dread Pirate Roberts from the movie The Princess Bride the government had a secret weapon it had an undercover federal agent a DEA agent whose cover was knob a knob his cover story was that he was a drug lord with connections to the criminal underworld and his mission was to identify to become a close online confidant of dpr in an effort to identify him and find out where he was so that he could be arrested now 2013 was not a good year for the Silk Road a couple things were going on first someone named death from above says these are online monikers of course someone named death from above was extorting DPR demanding hundreds of thousands of dollars or else death from above would reveal the PRS true identity to law enforcement and another online persona French made French maid I can't make this up French maid was selling DPR information into the government's case also hundreds of thousands of dollars the payments of course were in Bitcoin and then amidst all this in 2013 another bad thing happened and that is that 21,000 Bitcoin which at its height Bitcoin is volatile and fluctuates dramatically in price but at its height this 21,000 Bitcoin would have been worth 25 million dollars and overnight this went missing from Silk Road vendor accounts who did it dpr conducts an investigation and pretty quickly determines it's his right-hand man one of the Silk Road administrators a man by the name of Curtis green who's living in Utah at the time and so DPR orders a hit on green ironically turning to nob to do the hits nob is our undercover federal agent unbeknownst to DPR also unbeknownst to DPR was that by this point curtis green was already cooperating with the feds with nob and with that entire federal Silk Road task force outside of Washington DC and as part of that cooperation curtis green had already turned over his passwords his credentials and his username and computer to the feds so when the 25 million dollars worth a Bitcoin goes missing the feds confront green and they say we know he had took the money you better just fess up but Green was insistent he did nothing wrong he pointed out he didn't have a computer he turned it over the morning of the seft to the task force to the feds so nob in the task force go about staging greens murder and they take photos of green supposedly being tortured and executed now I'll spare you the photos they're pretty disgusting but they provide those photos to dpr and then later in 2013 fast forward the government uncovers that dpr is actually rasul brooked and as many of you know Ross Ulbricht was tried and prosecuted in New York as part of a different case as for being the mastermind of the Silk Road but some mysteries persisted even after this trial first of all who'd stolen the twenty five million dollars worth of Bitcoin and who'd been extorting obrecht as death from above and who'd been selling him information into the government's cases French made well in 2014 I was sitting here in San Francisco in my office where I said and I got a tip the tip caused me to look into nob that undercover agent the tip was not about the Silk Road though the tip was the gist of it was knobs moving around a lot of Bitcoin yaahh to look into it and you know that's not a crime to own Bitcoin and move it around so I thought well what can we do we can look into it we look into it because of the severity of the allegation of course he's a federal agent and I find that he's liquidating hundreds of thousands of dollars a month in Bitcoin to his own personal bank accounts and I also find that then using his agent status he's asked those exchanges who are doing the liquidating to destroy all the transaction history so now I'm intrigued by this tip here's where the blockchain comes in what is the blockchain well for our purposes think of the blockchain as a vast global database spread out over millions of computers all over the world and it stores transactions of value or it represents transactions of value of any kind of thing of value money information any asset and the thing about the blockchain is that it's public it's transparent you can hop right onto the Internet turns out and track things through the blockchain it's immutable and permanent and in this way it acts like a digital timestamp any information about a transaction that gets onto the blockchain can't get rid of it it's there forever it's also highly reliable through some cryptographic wizardry that I will not explain to you right now I don't think you want to government it a lawyer explaining to you cryptography but just take my word for it that because of this cryptographic wizardry once the info gets on the blockchain you can rely upon it and trust it because we all have copies of these data this data base that I described and all those copies match of the data base millions all over the world it's also decentralized and this makes it harder it makes it tamper proof and harder to hack imagine a bank vault somewhere in the world and that bank vault has in it tons of money and information let's just say the world all of the world's information and money in this one vault if thieves break in they can take everything but now think of millions of individual vaults all over the world each holding information and assets and thieves would have to break in to each one of those vaults to get all information and they'd have to do it all at once that's the blockchain for you in a nutshell and so this is what we were learning back in these days this is what's up on your screen here is the blockchain this is the product of what we were looking into I told you it's public so we were able to hop right online which was important because it's a sensitive thing to investigate an agent who's been a federal agent for 15 years I mean these people are absolute heroes to us 99.99999% of them are and so it was important to us to use blockchain we had this public database and here's knob down in the corner and using this immutable permanent record we traced the source of Nobbs bitcoins and imagine our surprise we traced where it led back to the Silk Road it turns out that knob had been death from above extorting Ross Ulbricht it turns out that knob had also been French made selling Ross Ulbricht information into the government's investigation but we still had a mystery who's told the 25 million dollars from the Silk Road vendor accounts the Bitcoin go back let's talk about this mystery I know what you're all thinking it must be nob he's done all this other stuff of course he must have done this too that's kind of what we were all thinking but we have this public database that we can go look to and we look at it and we see up on the screen here these patterns don't quite look the same on the blockchain as Nobbs patterns of theft look ok so we trace using this immutable database we trace back the funds that were gone missing from the Silk Road and we trace them to mount docks which was an online digital currency exchange in Japan now unfortunately by this time in our investigation Mount GOx had gone belly-up and so its records weren't easily accessible to us but remember what I told you about the blockchain it's permanent and it's immutable and it's records cannot be erased or tampered with so we use the blockchain to follow the funds from mouth ox to a US bank account held in a shell company name and imagine our surprise when we found out who owned the shell company another federal agent on the Silk Road task force with the Secret Service he was the government's expert in cryptocurrency and tor the amazing thing is there's no evidence suggesting he and his Co case agent nob we're even working together The Secret Service agent had also been at that session where curtis green had turned over his passwords in his computer and that night he'd taken those passwords and computer and he drained about 25 million dollars worth of Bitcoin staging and framing Curtis green in the process and sitting by the next day while the feds accused Curtis green of doing this and knowing that there had been a hit put out on him so dadada last year my office indicted these federal agents for crimes ranging from extortion to embezzlement obstruction money laundering you name it it's stuff out of a movie and in fact believe it or not some of the guys in this story had 20th Century Fox movie deals but here's the thing will they play guilty and they're now sitting in prison for for many years those agents right now but just barely because we almost didn't catch him because these guys were the perfect criminals they knew how to cover their tracks they were able to use their agent status to get other people and companies unwittingly to destroy evidence but they couldn't escape from that permanent immutable public transparent database the blockchain they couldn't tamper with that like they destroyed other forms of evidence and they tinkered with other government databases in this case but they couldn't do that with the blockchain and we also would have without the blockchain kept we wouldn't kept looking once we got to knob until we saw those patterns on the blockchain that it wasn't the same so the point I want to leave you with is that without the blockchain these guys would still be federal agents today instead of in the federal penitentiary now aside from its salacious facts this case is notable because it's one of the first examples if not the first example of the US government actually actually using innovating and using the blockchain to solve a crime and it's also one of the first examples or might be the first example of the government using it for public good to end some public corruption and strengthen government accountability and and guess what since this case we have used the block team to solve a number of other major frauds and hacks most of those haven't yet been announced many of them wouldn't have been solved without this blockchain turns out we can use the blockchain to do a lot more public good in the area of Public Records because right now we live in a world where a central authority of some type typically the government tells us who owns what and who has rights to what the DMV has got your title for your car the County Recorder who tells who owns your house if you want to register the fact of a birth a marriage or death you got to head down to City Hall and you got a standard line and take a number what's the problem with that well aside from being inefficient and slow which we can all relate to the thing that concerns me most as a prosecutor is that it's rife with possibilities for tampering and for fraud for tampering in 2008 the city of San Francisco's head network administrator became disgruntled after getting some poor performance reviews so what did he do he took the entire city's network hostage changing the passwords to lock out all of the other people in the process don't mess with the IT guy anyone needing public records from San Francisco for those days were kind of out of luck but what about forgery this is a really big problem in all of the cases I've prosecuted over the years from the Hells Angels to human trafficking to fraud to bank robbery they all have one thing in common somewhere along the way they all involved a fraud of proj not even a word afford forged fraudulent or counterfeit or stolen public record of some type first difficut death certificate title phony documents and it's easy to see why with advances in technology birth certificates are a great example did you know that over 6500 different entities in this country alone issue birth certificates using over 14,000 different forms I mean the department's of California Department of real estate and the Department of Health and Homeland Services they've all helped in human services they've sounded the alarm bell on all of these fraudulent certificates being out there and it's really a big problem birth certificates are a great example because you get a fake birth certificate you go down to the DMV you get your picture taken wallah you've got a driver's license next you take those documents you go get a passport and with those documents folks you can do pretty much any kind of crime you want what's the solution you knew I was going to say this the solution is the blockchain because imagine if we could put our public records onto the blockchain so that a hospital could record a fact of a baby's birth or a car dealer could record the fact of a car sale it would be highly reliable it wouldn't be paper documents anymore because of that cryptographic wizardry we know we could trust these transactions because they'd be verified they'd also be decentralized so it'd be hard for people to tamper with or hack this system would also be immutable and permanent right and finally public so government these functions could be more self-service of having to go take a line and wait in some government office you point who's ever asking to the fact of the blockchain and in this way it brings some tools to the people and gets government out of the business of being an intermediary for storing public records and lets it get back to tax it's actually better at I often get asked what about privacy well I'm talking here though about public records so they're not private they're public if you want to talk about private records let's talk about things like medical records it turns out they're not as private as you might think did you know that on the darknet your medical information sells for ten to twenty times what your financial or credit card information sells for and did you know that already a hundred and fifty million patient records have been compromised as a result of things like the anthem data breach why because thieves use these health information records to fake bill insurance companies or to take your patient profile and order medical equipment and drugs and then resell them so at the same time the information is valuable it's not particularly secure because doctors and hospitals focuses our on patient care not as much on cyber security so going back to my bank fold example your patient records are in very few bankfull and they're guarded by the equivalent of drunk teenagers which is why people are really excited by what some researchers are doing right now at MIT with the blockchain they're looking at encrypting private records like medical data and putting it onto the blockchain with a key based system encryption so that thieves would not have a central repository or repositories to hack into but would have to hack everyone's private individual keys and then have to do it all at once so what I said at the beginning technology can be used for good or for bad the technology is neutral but we're not and we already know some of the bad uses of these technologies you can go on the darknet today and buy a machine gun we're just starting though to find out all of the good that these technologies can do like solve crime and help prevent fraud and as someone who has been dealing with criminals every day for over a decade and I kind of now know how a lot of them are thinking I can tell you we need a serious operating system upgrade because right now those thieves those forgers and fraudsters and cyber criminals they are hacking into our centralized records systems and they're doing it every day at great societal cost to all of us and I hope that I've given you some inkling today of how this technology that many of us originally were associating with criminal uses can actually be used to turn it on its head and stop some of those criminal uses and provide that much needed upgrade thank you so much

Channel: TEDx Talks

Views: 180,745

Keywords: TEDxTalks, English, United States, Technology, Bitcoin, Corruption, Crime, Criminal justice, Cyber, Government, Innovation, Law, Money

Id: 507wn9VcSAE

Length: 22min 38sec (1358 seconds)

Published: Wed Oct 26 2016