#210 - Cyber Letters of Marque

Jacob Robinson (0:03)

It's estimated that only about 15% of victims ever report online scams and cybercrime, which makes the FBI's report of $20 billion in losses to online scams, the tip of the iceberg in what's a huge issue. If you do the math, you're looking at a problem closer to $200 billion. So imagine a company like Goldman Sachs basically being stolen from Americans every year. That's before the widespread adoption of AI agents that can scam people 24-7. This episode is about online scams and one way that the government, particularly in the US, could defend against them. My goal and I think your goal by listening to this podcast is to take your understanding of Letters of Mark, the cyber version, what might be the best solution to this problem, to the 99th percentile regardless of where you're starting from. So even if you've never heard of Letters of Mark, I promise you'll finish this podcast understanding the history there, including the role that these played in the American Revolution. Some have called them more important than any other document in American history. It's really important and really interesting stuff here. You also understand how Letters of Mark work, which laws apply to them and how it changes the risk profile for private actors.

Welcome to the Law of Code podcast where we cover the legal layer of emerging tech. I'm a former regulatory lawyer. My name is Jacob Robinson. My mission is to understand the rules that shape our world. This episode is sponsored by Altitude, whom you'll hear more about later. Now, for this episode, I spoke to people who saw this coming years before it happened. Chris Perkins is the president of Franklin Crypto at Franklin Templeton. He's a Naval Academy graduate and a Marine Corps veteran. Airy Redboard is the global head of policy at TRM Labs and a federal prosecutor of 11 years. Michael Coates is the CISO of the Solana Foundation, who was previously Twitter's first CISO. Camelia Lopez Shoemaker is a Holland & Knight attorney who served in the US Department of Justice's Office of Overseas Prosecutorial Development Assistance and Training. She was basically the sole global attorney advisor for dark web and crypto matters. And Nelson Rosario, an IP and emerging tech lawyer who, like Chris and Airy, proposed the idea of digital privateers, Cyber Letters of Mark, years ago. Here's Airy Redboard of TRM Labs, who spent over a decade as a federal prosecutor on why the math on this problem is about to get much, much scarier.

Ari Redbord (2:25)

AI has supercharged all of our activity, right? It allows an individual person to do so much more than we could do even a few months ago. And it's also true with cyber criminals. And criminals are always early adopters of transformative technology, right? One of my favorite stories is that in 1908, the Model T Ford rolled off the assembly line. And that was the year that we realized that we also needed to create a federal police force. We called it the Bureau of Investigation. It's the modern FBI.

And that's because criminals could now move faster across borders than they ever could before. Think Bonnie and Clyde and Machine Gun Kelly and Al Capone. And what we realized is that policing wasn't local anymore. It wasn't for towns or even states. We needed a federal police force to also drive those cars across state lines and track bad guys. That's the world we're living in today, but supercharged. You don't need thousands of scammers anymore. And we saw about 5,000 targets last year. The majority of ransomware attacks involve hospital systems.

Imagine a world where you don't need individuals to deploy malware anymore. You use technology. So if 5,000 attacks grows to 5 million attacks and 50 million attacks on hospital systems, water plants, electric grids, that's a civilization level threat, right? That's not a law enforcement thing or even national security. That's like people in the streets.

Jacob Robinson (3:53)

Now, Ari is one of the most optimistic people I know. And for him to talk about a civilization level threat sort of resonated with me. It changed how I think about online scams. And if you're listening to this podcast, that means you have internet connection and a smartphone. And if you have that, you've definitely gotten those texts checking in on how you're doing from some random person and random number that you've never seen before. Here's Ari on where those messages lead.

Ari Redbord (4:18)

Basically, every one of us, Jacob gets these text messages every day. I'll probably pick up my phone after our recording and have three or four, hey, how are you doing? Want to meet up? What are you having for dinner? Some really mundane comment that they hope to connect you into a conversation. And in that conversation, we'll often begin with romance and can take weeks or even longer to develop this sort of online romantic relationship. And then we'll inevitably shift to an investment opportunity. Oh, I just bought my mother a house or I just bought a fancy car. Oh, how did you do that? Well, I have this great crypto investment opportunity and then it kind of starts. And what will ultimately happen is the scammer will have a victim send funds. They send a smaller amount. Oftentimes, the scammer will send a much larger return back to the victim to show, hey, like I'm getting 10x returns in a week on your investment. So they send more and more and more. And ultimately, that's sort of where this terrible term pig butchering comes from because you've now fattened up the pig. And once you have enough, oftentimes it's people's life savings, it's college funds, it's their mortgage payments, the scammer will take those funds and go.