Going After the Good Guys: The Government’s Ransomware Identity Crisis
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Going After the Good Guys: The Government’s Ransomware Identity Crisis

Why fixing that ransomware attack might get you indicted

Editor’s Note: We’re pleased to publish this article from attorney Ryan Blanch, sharing an expert perspective on some of the legal issues in the cybersecurity industry.

When it comes to ransomware, malware, and hackers, the government is finding it difficult to keep pace with the quickly evolving landscape of cybercrime. And sometimes, the government seems to be going after the good guys instead of the bad guys, as evidenced by the recent CoalFire debacle in which Iowa arrested and charged the same cybersecurity professionals it had contracted to try to breach the state’s security systems.

As a criminal defense attorney, I’ve been involved in myriad cybercrime cases. There were the DDoS attacks on the Church of Scientology, and then the infamous Blackshades malware allegedly used to spy on Miss Teen USA. We defended a sports gambling software company accused of conspiring with the mob abroad, which went to trial and was ultimately dismissed. Later, we handled a cryptocurrency hacking case, an online currency arbitrage platform; and, more recently, the allegedly illegal deployment of scores of Bitcoin ATM machines around high crime neighborhoods – to name a few.

In most cases, it’s at least apparent why prosecutors are focusing on our client. But in other cases, prosecutors are barking up the wrong tree—they’re going after the targets they can find instead of looking for the actual bad guys. After all, career hackers can be nearly impossible to track down and apprehend. In the sports gambling case I handled, my client reported that the New York district attorney’s office wanted to strongarm him into hacking into his clients’ systems to turn over personal data on gamblers and their bookmakers who may be involved in illegal gambling.

Another area where prosecutors seem to be struggling to find and prosecute the right parties is with ransomware attacks. If you should fall victim to a ransomware attack, be very careful how you navigate your crisis. And that goes double for those who try to help you. The government may be looking to indict you both. And the penalties are steep.

Let’s hash it out.

How Ransomware Attacks Work: From Attack to Prosecution

Ransomware brings companies to their knees in an instant as it encrypts user data and files irretrievably. In some cases, the only way to resume business as usual is to pay the ransom outright and most of them only take crypto.

Phase 1: The Attack

Fake FBI screen from ransomware

You show up to work to find a message like this one filling all 100+ displays of your company’s employee workstations. Your CTO and IT administrator are in a panic. Your entire company has been locked out of its servers, computers and files. The company stands to lose hundreds of thousands of dollars each week that this persists. There is a countdown clock on the monitor, and IT cannot find any way to access the system. All you can think is, ‘What would Kiefer Sutherland do?’ 

Phase 2: The Fallout

It’s day two and the losses have already exceeded $40K. Clients are taking flight as they fear the worst. Employees are asking whether they should come to work, and the IT department is pulling its collective hair out.  You wonder what you have them around for if they can’t fix your computer-related problems. Arnie, Head of IT (for now), has resorted to Googling (from his personal cell phone) “ransomware help” to look for outside companies that might be able to lend a hand. 

The 5 bitcoin demanded hasn’t yet increased, but it might as well have because the volatile bitcoin market has already added $5,753 to the price (some companies are starting to keep an emergency bitcoin account to offset the risk of price fluctuations).  

Someone reminds you that you have business insurance that may cover this sort of thing. You call your insurer. They do in fact cover ransomware attacks and have a list of “approved providers” aka cybersecurity firms who can help.

Phase 3: The White Knight Arrives

It looks as though all that panic-driven Googling may have paid off. Arnie has already found a cyber security firm and is on the line with them. As luck would have it, this firm is also on your insurance company’s “approved provider” list.  The firm thinks they may be able to resolve the problem remotely. But when asked, they admit that no one can actually decrypt the files.  More pointedly, if you were to marshall the combined forces of Homeland Security, the NSA, M.I.T., Kaspersky Labs and Elliot Gunton to the singular purpose of retrieving the electronic files of your trading house and photos of your mini labradoodle wearing a tutu, they would all wind up with zilch. That’s how hard it is to unencrypt what’s been properly encrypted.

So how can this cybersecurity firm help?

Pay the ransom, of course.

So then, what good are they? Well, for starters, they have a bitcoin wallet on the ready. You don’t. Secondly, they actually know how to deploy a decryption key. You don’t (and neither does Arnie).

Turns out most ransomware, eh hem, artists don’t restore your files for you when you pay the ransom. They merely send you a key. Technical support doesn’t exist. It’s do it yourself. And you wouldn’t want your attackers fixing it for you even if they offered.

Here is why it makes sense to hire the cyber security firm rather than pay the ransom yourself in a nutshell:

  1. They can pay immediately.
  2. They may be able to get the attackers to lower the ransom. Probably not enough to decrease your cost but enough to offset the cost of the firm’s fee.
  3. You shouldn’t be dealing with your attackers. They may expand the problem to other systems if you let the wrong information slip.
  4. Once you get the key, if you don’t deploy it correctly you could corrupt your files forever. Some of these keys require several steps to deploy them. And you need to make sure you back up your files first, etc.
  5. After you get your files back you need to close the proverbial back door. Your attackers could come back if you don’t. The honor of your extortionist ends with the promise to send you the key. It does not include a promise to never return.
  6. The best firms will issue and update a white paper to make sure that you continue to follow best practices to avoid subsequent attacks.
  7. An honest firm will tell you if the strain of your ransomware variant is actually undecryptable. Some variants are old, and the decryption key has already been disseminated publicly. If your firm has the key, they may just deploy it for you at little or no cost.
Ransomware screen

Phase 4:  The White Knight Gets Indicted

All good? Not so fast. Now the cyber security firm’s principals and employees are contacted by the FBI’s Cyber Division. The U.S. Attorney’s Office wants to talk about a turn-in date and because they know this is a real company with generally law-abiding individuals, they wanted to call and invite them in to “self-surrender” so they can forgo the unpleasantness that comes with a 3AM home arrest warrant execution.  

Looks like your company’s savior is going to need to hire a great criminal defense attorney.

Why? Turns out the government doesn’t look kindly on paying ransoms. The reasons themselves are not objectionable:

  •  The money could go straight to terrorist organizations and other criminal cartels
  •  The money is difficult to trace when transferred through bitcoin.

But the government also knows that juries don’t like to convict victims for paying their extortionist. It’s like arresting the mother of a kidnapped child for paying the kidnappers their ransom to get her baby back.

It would never fly.

How The Government Views Paying Computer Ransoms

Lost computer files, lost business revenue and even stolen intimate photos are less sympathetic reasons to sponsor a crime cartel than say, getting a real live child back. But, just the same, the DOJ doesn’t like to lose. And prosecuting victims is a losing strategy. So, for now, victims can (probably) pay ransoms back directly (as ill-advised as that is) to their attackers.

But if you hire an intermediary, that’s where the government is testing a prosecutorial theory. The theory is if they can prosecute the cyber firms who pay the ransoms then they can get a pelt for what they view as an ugly business. Hey, somebody has to pay. Cybercrime is the new bank robbery and it’s turning into an epidemic. The government’s so-called ransomware “experts” are in the stone ages. But prosecuting cyber security firms makes it look like they are doing something about this epidemic (spoiler alert: they aren’t).

Strangely enough, the FBI has made multiple statements encouraging or allowing companies to pay off ransomware attacks:

  • Joseph Bonavolonta, Assistant Special Agent of the FBI’s Cyber and Counterintelligence Program, said that in most cases, because the FBI can’t help these companies recover files, their agents often end up recommending them to pay the ransom to get their data back.
  • An official statement from the FBI said they don’t “advocate” paying ransoms, but that the “FBI understands that when businesses are faced with an inability to function, executives will evaluate all options to protect their shareholders, employees, and customers.”

They haven’t yet publicly announced a policy of indicting companies for paying ransoms or started issuing mass indictments. But they are hovering around the periphery, looking for instances where they think they might be able to dirty-up the white knight cyber security firm to make them a public example of the perils of paying ransoms as a business model.

What if they succeed? What does that accomplish? It doesn’t stop the ransomware attacks. It doesn’t stop the victims from paying those ransoms directly. But it takes out a middle man would-be protector, leaving the victim to their own devices.

Making the Good Guys Prosecutable: Dirtying up the White Knight

If juries don’t like to convict victims, how would they feel about their heroes? As a matter of public policy, do we want to criminally prosecute the saviors of those who have otherwise irretrievably lost their businesses?  

The answer is it depends. We should not criminalize the only people that offer any protection whatsoever to the victims of ransomware. They also provide a mechanism for insurance companies to insure the losses of such an attack. The government is putting this in jeopardy (more on this to come). In order to make a white knight prosecutable, the government needs to shift our view of them. The prosecution will want the jury’s perception of the white knight to be that of an opportunistic broker of shattered dreams. Instead of saving their victims from further attack, they provide a surcharge to further exploit them. As ridiculous as this sounds, this is what in fact is being kicked around at DOJ offices everywhere.

The Insurance Companies as Co-Conspirators?

So, if the cybersecurity firm is recommended and, in some instances, paid for by the victim’s insurance company, doesn’t that make said insurance company an accomplice in the conspiracy to pay ransoms to possible crime cartels?  After all, the insurance company knows exactly how the cyber security firm addresses the problem – by paying ransoms. So, will the government start prosecuting Allstate for providing ransomware protection to its insureds?

Probably not.

But, by taking the cyber security firm out of the equation, it would force the insurance company to pay the ransom to the insureds or even worse, pay it directly to their attackers. Knowing that would result in potential prosecution, they would have to stop insuring businesses and individuals from ransom attacks all together, compounding the victim’s losses exponentially.

No Good Deed Goes Unpunished

So if the reasons listed above are all valid reasons why you SHOULD hire a cyber security firm in a ransomware attack and if billion dollar insurance companies are recommending that their insureds hire these companies (knowing full well that those companies will pay the ransoms), then how in the world can the government look to criminally charge these very same companies for doing what it has failed to do – rescue victims of ransomware?

For now, the government is limiting its prosecutorial powers to low hanging fruit; looking at smaller cyber security outfits that they believe make easy targets to test-flex their muscles.  They have yet to rope in the insurance companies who refer them business. And their internal (and informal) policy of the moment seems to militate against charging ransomware victims who pay ransoms directly.   

But it’s ‘victim beware’ when it comes to paying ransoms. You don’t know where the money is going—and the U.S Treasury’s Office of Foreign Assets Control (OFAC) maintains a nearly incomprehensible and ever changing list of thousands of countries, individuals and entities to whom it’s a crime to send funds.

The takeaway: If you fall victim to ransomware, hire a cyber security firm to handle it.  If you are such a firm, proceed with caution and consult with legal counsel about best practices.


Ryan Blanch

Ryan is a NY defense attorney at The Blanch Law Firm, representing individuals and entities in complex cyberlaw situations around the country. While based in Manhattan, his practice has taken him to the far reaches--from Alabama and Florida to Alaska, Hawaii and Guam in the defense of his clients.