Midshipmen at US Naval Academy Under Investigation for Dark Web Drug Trafficking

Reports estimate that between 10 to as much as two dozen midshipmen based at the US Naval Academy in Annapolis, MD, near Washington, D.C., were part of an elaborate scheme to supply their peers with illicit drugs including cocaine, LSD, and ketamine. As reported by Fox News, the criminal ring used Bitcoin to purchase the drugs on the dark web.

Sources from within the academy (who spoke on the condition of anonymity) told Fox News that as many as two-dozen midshipmen are under investigation. The investigation is still unfolding, so as of yet, no formal or pending charges have been brought against the accused.

Naval Academy spokesman David Mckinney was quoted as saying that the “command-assisted investigation” was opened after the Naval Academy and the Naval Criminal Investigative Service (NCIS) received “a midshipman report of alleged recreational drug use within the Brigade.”

“The results of the investigation are still pending. We are continuing to work with NCIS on these reported allegations. The Navy has a zero tolerance for drug abuse and takes all allegations of misconduct very seriously,” Mckinney said.

Despite not releasing their names, two of the accused are prior enlisted midshipmen who had spent time in the fleet before gaining appointment to the Naval Academy, which educates and trains officers for the Navy and the Marine Corps. One of the midshipmen tested positive on a drug test in early January after returning from Christmas break.

Between 2010 and 2011, according to the Annapolis Capital, “NCIS conducted an 11-month investigation into the use of synthetic marijuana, or spice, by midshipmen. That investigation ended the careers of at least 27 midshipmen.” Further, naval officials have confirmed from 2010 through 2017, seven midshipmen were expelled for drugs.

Dark Web

This news comes at a time when governments around the world are pointing an accusatory finger at cryptocurrencies for their alleged role in online drug marketplaces and money laundering operations, despite the fact that recent studies have shown that money laundering cases associated with cryptocurrencies account for less than one percent of the total.

The dark web is a part of the World Wide Web that is only accessible by means of special software called a Tor browser. This permits users and website operators to remain anonymous and untraceable, making it a fitting environment for a sort of online, open-air drug market.

The Silk Road, one of the most infamous sites on the dark web, was the first of these modern darknet markets, used as a platform for selling illegal drugs and weapons. In October 2013, the FBI shut down the website and arrested Ross William Ulbricht on charges of being the site’s pseudonymous founder “Dread Pirate Roberts.”


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Beijing-based start-up Bitmain now dominates the Bitcoin mining industry. Last year it is estimated the company made as much money as chipmaker Nvidia did, according to estimates from researchers at Wall Street analyst Bernstein.

Based on conservative estimates, the analysts calculate that Bitmain made $3 to $4 billion in operating profit last year. Bernstein’s U.S. semiconductor team estimates Nvidia’s profit was $3 billion during the same period. What’s particularly striking is that Bitmain achieved this in a mere four years, while it took Nvidia 24 years, the Bernstein analysts said in a report published Wednesday, February 21st.

Mining

Crypto mining as an industry has gained significant traction as of late thanks to the frenzy seen in crypto markets. The technology behind these chips is also undergoing changes, with a focus on reducing the electrical energy consumption for every coin that is mined. On the sidelines, huge tracts of land are also being bought by different businesses across the globe to host data centers that support the crypto mining activity.

Just a few years ago, Bitcoin-enthusiasts could use normal graphic processing units (GPUs) to process the computations needed to mine the cryptocurrency. But Bitmain helped turn Bitcoin mining into a specialized process: In 2013 it began selling application-specific integrated circuits, or ASIC — GPUs that can mine Bitcoin up to 50 times faster than traditional cards.

Today, the company sells Antminer Bitcoin mining rigs that can cost several hundred to a few thousand dollars each. The company also operates mining pools, where participants collaborate on mining in attempts to cut costs. As a result, Bernstein estimates Bitmain has 70 to 80% of market share in Bitcoin miners and ASICs.

Bitmain

Bitmain has taken strategic steps to stay ahead of the game. The company launched a mining pool subsidiary last April in Israel and is opening mining farms in Canada and Switzerland, and regional headquarters in Singapore, according to the Bernstein report. Bitmain is also expanding its business to other cryptocurrencies like Ethereum and Monero.

The analysts estimate that most of Bitmain’s revenue was generated by selling miners powered by the company’s chips: “The rest was largely generated by mining itself and, to a much lesser extent, by collecting management fees from the mining pools it operates and renting out the mining power of its mining farms through cloud services.” Bernstein also indicated that Bitmain shrewdly adjusts the prices of its miners according to current Bitcoin prices.

Japan’s National Police Agency said today that they received reports on 669 cases of suspected money laundering linked to cryptocurrencies from exchange operators between April and December of last year; This is just a tiny fraction of the total, as 347,000 money laundering cases were reported by traditional banks in the same time frame.

The data came after cryptocurrency exchange operators were ordered to report transactions suspected of involving money laundering following a revision last April to a law that intends to prevent the transfer of criminal proceeds. 

Of the 669 cases, it is likely that many involved “questionable transactions repeated frequently in a short span of time,” Nikkei reports. And it’s worth considering that these crackdowns are not necessarily a bad thing: Punishment that comes as a result of these charges could result in removing bad actors in the crypto-space.

Currently, in Japan, 16 cryptocurrency exchange operators are registered based on the revised law on payment services. Ensuring security measures has been a challenge in the industry. Just last month, Coincheck — which was waiting for government approval of its registration — failed to protect its users from the theft of around $540 million worth of NEM digital currency.

The Numbers

The proportion of suspected money laundering cases involving cryptocurrency in Japan — 669 — is a fraction of the fiat total for 2017. The large majority of cases came from banks and other financial institutions, totaling 346,595 cases, followed by credit card companies at 15,448 cases, and credit unions at 13,259 cases.

The figures are promising in the battle against international governments who claims that money laundering is a key sector to be targeted by increased regulations.

This news comes as Japanese Finance Minister Taro Aso is speaking on the inspections taking place within the exchanges, as the government continues to look for weaknesses in the system and attempt to determine the viability of blockchain technology going forward. According to Aso, inspections are mainly used to determine the internal management structure of organizations and are taking place “impartially,” as Japanese officials are trying to not impede the growth of the sector.

There have also been self-regulation talks within the crypto-space: It was reported just over a week ago that Japan’s two cryptocurrency industry groups are working together to form a self-regulating body. The Japan Blockchain Association and the Japan Cryptocurrency Business Association are expected to merge as early as April, with the intention of implementing further safeguards to protect traders and investors.

Employees at the Colorado Department of Transportation (CDOT) spent the second day offline today, while security officials — including the FBI — continue to investigate a ransomware virus that hijacked computer files and demanded payment in Bitcoin for their return.

According to Amy Ford, a CDOT spokeswoman, only employee computers running Windows and equipped with McAfee security software were impacted.

“No one is back online. What we’re doing is working offline. All our critical services are still online — cameras, variable message boards, CoTrip, alerts on traffic. They are running on separate systems,” Ford said. “The message I’m sharing [with employees] is CDOT operated for a long time without computers so we’ll use pen and paper.”

SamSam

The ordeal began on Wednesday morning when CDOT shut down more than 2,000 employee computers and began investigating the attack. The malicious code was a variant of ransomware called SamSam, according to Brandi Simmons of the Governor’s Office of Information Technology (OIT). Later in the day, in attempts to prevent further damage, McAfee, the security software used by the CDOT computers, provided a software patch to stop the execution of the ransomware.

“This ransomware virus was a variant and the state worked with its antivirus software provider to implement a fix today. The state has robust backup and security tools and has no intention of paying ransomware. Teams will continue to monitor the situation closely and will be working into the night,” said OIT chief technology officer David McCurdy in a statement.

The OIT, which reached out to the FBI for assistance, are still investigating the attack and have not paid a cent to attackers — nor do they plan to according to Simmons:

“No payments have been made or will be made. We are still investigating to see whether or not files were damaged or recovered,” she said in an email.

As noted, the ransomware was a variant of SamSam, which last made headlines in January after targeting the healthcare industry. It encrypted files and renamed them “I’m sorry,” according to a report by security firm TrendMicro. One hospital in Indiana, Hancock Health, paid $55,000 to get its files back. To make things worse, a growing problem is that paying cyber-jackers in itself isn’t always easy— sometimes other hackers hijack the ransom payments before they are received and redirect them into their own cryptocurrency wallets.

These remote hacks are becoming more and more common — just last week Elon Musk’s cloud was hacked. In this case, though, the cyber-attackers didn’t steal information: They used his computer system’s power to mine cryptocurrencies, deeming it more profitable than extracting files and demanding ransom.  

Russian celebrity, organic food fan, cryptocurrency enthusiast, and co-creator of BioCoin, Boris Akimov, has decided to “tokenize” himself. Akimov, founder of Russian online organic food exchange LavkaLavka, will launch his own cryptocurrency, Akimov coin, on the Waves Platform, a blockchain system developed in Moscow. As of today, Waves has not issued any further details about the coin or its pre-sale date.

“It’s a simple idea in principle,” he says. “I have certain skills, knowledge, and experience, as well as my time — and that is what will be tokenized.”

Akimov coin owners are basically getting discount services for his agribusiness and e-commerce expertise. If demand for his time goes up, so does the value of his coin; If less people requires his time and services, then his coin gets priced accordingly.

“Let’s say I tokenize two days a week of my time, or 16 hours per week, for 832 hours per year. And let’s say that the token expires after four years. That’s 3,328 hours or 12 million seconds. So the plan is to create 12 million tokens, each of which can be redeemed for a second of my time and skills!” he says.

BioCoin

Akimov is one of the creators of Russia’s BioCoin, a so-called utility token that gives users discounts on organic foods and locally farmed products. As per the company, “BioCoin is a token that can help anyone build green future for the whole planet.”

According to its website, BioCoin can be exchanged for products and services in all stores and cafes that are members of the loyalty program. All customers of these companies receive BioCoins as rewards for the purchases of the companies’ products — as coins go up in value, customers benefit. Further, the company asserts that BioCoin can be integrated with many international loyalty systems and “turn” rewards given to clients into BIO token.

“Tokenizing”

Alexey Ivanov, CEO of crypto-investors Polynom Crypto Capital in Moscow described Akimov’s undertaking as follows:

“It’s like buying the time of a popular consultant,” he says. “It’s the old basic principle of economy — time is money. He is tokenizing his time and selling it in advance.”

Akimov’s idea is certainly novel, but he’s not the first to “tokenize.” Moscow-based TokenStars (ACE), launched last year, uses a similar concept to tokenize celebrities and athletes. ACE token holders are investing in the time or the knowledge of athletes like tennis player Tommy Haas or footballer Giancarlo Zambrotta.

“We help promising talents raise funds by tokenizing their income, talent support and time,” says Pavel Stukolov, CEO of TokenStars. “A celebrity’s time is a precious and limited resource, which is a fundamental growth factor. They can do their own personal coin offering and get upfront payment for various exclusive interactions with fans,” he says. After obtaining a person’s token, fans can redeem them for things like meet and greets, lectures, or one-on-one training.

The Tezos ICO raised $232 million last July for the blockchain startup. Seven months later, after progress was delayed due to infighting between the founders, the project’s tokens are finally set to launch “in the next few weeks.”

The Tezos foundation raised funds to develop a new cryptocurrency last July through an initial coin offering (ICO) that generated $232 million. While the ICO remains one of the largest by amount raised, contributors have yet to receive the new cryptocurrency because the project’s release has been delayed by infighting between the project’s founders, Kathleen and Arthur Breitman and Johann Gevers.

Gevers, president of the Tezos Foundation — which was set up to oversee the launch and development of the blockchain project — stepped down from his post Thursday following the disputes with the Breitmans. The two had called for the resignation of the foundation trustee last fall, after accusing him of attempting to embezzle money and acting “as a roadblock to the mission.” The Foundation said in a statement that Gevers had stepped down voluntarily, to “optimally support” the mission and was “committed to the success” of the project.

Ryan Jesperson and Michel Mauny will now join the board of the Tezos Foundation, replacing Gevers as well as Diego Olivier Fernandez Pons. Jesperson, who invested in the Tezos ICO, started an international petition last year to oust Gevers; Earlier this month he set up a rival group, the T2 Foundation, to pursue the launch of the Tezos network. Manuny is also a member of the T2 Foundation.

“With the appointment of the two new members to the Board, the Foundation is preparing itself to assist in the timely launch of the Tezos network,” the Tezos Foundation said in a statement.

Moving Forward

This shakeup in leadership clears the way for Tezos to release the tokens, which will facilitate a blockchain network for smart contracts that aims to rival Ethereum. In fact, the price for pre-launch tokens surged more than 10% after the announcement today. Gerves posted on Twitter “TEZOS ACHIEVES IMPORTANT MILESTONE,” sharing the news of the changes.

“After months of very hard work under extremely difficult conditions, I’m very happy that we’ve achieved a good resolution that optimally serves the interests of the Tezos project and the wider crypto ecosystem,” he said.

Tezos had been looking to a February release date for the coins, a deadline that now seems within reach. Speaking at a UCLA event on February 18th, CEO Kathleen Breitman said the company was planning on “going rogue” and releasing the tezzies (as the tokens are known) “in the next few weeks.”

The resolution of the dispute with Gevers also takes some pressure off the project, which ran into other legal problems as a result of the delays and ongoing battle. Tezos has been deflecting rumors of an investigation into the company by the U.S. SEC, and also has been hit with class action lawsuits alleging securities fraud as a result of the delays.

Now, investors are watching with anticipation to see if Tezos and the new leaders of its governing body can deliver — something which seems closer than ever following these announcements and a reinvigoration of the team. 

Power Block Coin, LLC’s proposal to invest $251 million to build a cryptocurrency mining farm in Montana Connections, a special tax district west of the city of Butte, has been given the green light.

This Wednesday, Butte-Silver Bow Council of Commissioners voted unanimously (9-0) to allow Utah-based Power Block Coin, LLC — a subsidiary of Blue Castle Holdings Inc. — to build a campus of high-powered data centres in special tax district Montana Connections. The company plans to spend $251 million on improvements to the site over 36 months.

The Campus

Power Block Coin plans to harness 135-megawatts of power on its campus. As per the proposal to the county, the company will do this by building a substation at Montana Connections, which will be built in two phases over 24 months. Out of the $251 million total, $8 to $10 million will be spent on this new electric infrastructure. The company also plans to spend $60 million on between 70 to 200 separate mining units, each of which would use large amounts of power transmitted through the new substation. The size of these units will vary from larger warehouse buildings to small shipping containers.

The reason for the creation of this campus is primarily to mine digital currency mining, like Bitcoin. In addition, the infrastructure the company builds will also be able to support other businesses that need large amounts of power, such medical research, and artificial intelligence.

“Bitcoin is the fastest growing segment of cryptocurrency. If it tanks, the same processors can be used for medical research or AI (artificial intelligence),” Aaron Tilton, President and CEO of Blue Castle Holdings, said.

Moving Forward

According to Tilton’s interview with The Montana Standard, the jobs available at the campus won’t all begin at once. He estimates they will hire about 15 employees before the end of the year — that number will jump up to about 50 by the time the project is up and running. Salaries are estimated to range from $37,000 per year to $48,000 per year. Tilton said the company hopes to break ground this summer. After that, they expect to have the first data center up and running within 30 to 60 days, and by the end of the year, Power Block Coin anticipates it will have 30-megawatts of power at its campus.

County administrator Kristen Rosa said the county will reimburse Power Block Coin for their infrastructure through the taxes the company generates at Montana Connections — adding that it would only be based on what the company itself invests.

“Power Block Coin has to invest their money, build a substation, they’ll be a big power user,” Rosa said. “It’s not just a Bitcoin facility. We’re not buying into Bitcoin. They’re an aggregator, a campus to allow additional users to come in and use power.”

Data centers are key to the broader Bitcoin project going forward, as fewer coins are available to be mined and computation becomes ever more difficult. The climate of Montana is conducive to mining operations: Located in the West and Northern-most part of the U.S., along the border with Canada, Montana is very cold for a substantial part of the year, which can save miners money on cooling costs (mining operations generate a substantial amount of heat — sometimes leading to disaster).

Power Block Coin’s operation will be the second largest mining operation to find Montana in recent years. Back in 2016, Project Spokane, LLC launched its site near Missoula. It’s already one of the largest energy consumers in the region, housing a 20-megawatt facility and employing at least 25 locals.

Today, the U.S. Securities and Exchange Commission (SEC) brought charges against Jon E. Montroll and his exchange BitFunder for operating an unregistered securities exchange and defrauding users. On top of that, the agency also charged the operator — Montroll — with making false and misleading statements in connection with an unregistered offering of securities. BitFunder was a platform that permitted users to buy and sell virtual “shares” of various digital currency-related enterprises in exchange for Bitcoin.

“We allege that BitFunder operated unlawfully as an unregistered securities exchange.  Platforms that engage in the activity of a national securities exchange, regardless of whether that activity involves digital assets, tokens, or coins, must register with the SEC or operate pursuant to an exemption.  We will continue to focus on these types of platforms to protect investors and ensure compliance with the securities laws,” said Marc Berger, Director of the SEC’s New York Regional Office.

The SEC’s complaint, filed in federal district court in Manhattan, charges Montroll and BitFunder with violations of the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctions and disgorgement plus interest and penalties. 

The agency alleges Montroll operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their Bitcoin, and also for failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 Bitcoin. Going off the price of Bitcoin today, that’s about $61,800,000.

“As alleged in the complaint, Montroll defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on the exchange’s system and the resulting bitcoin theft.  We will continue to vigorously police conduct involving distributed ledger technology and ensure that bad actors who commit fraud in this space are held accountable,” said Lara S. Mehraban, Associate Regional Director of the SEC’s New York Regional Office.

Unfortunately for Montroll, his legal troubles don’t stop with the SEC: Also today, in a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York filed a complaint against him for perjury and obstruction of justice during the SEC’s investigation. This implies that Montroll, in some way, must have not fully cooperated with the SEC during the agency’s investigation.

This case comes as the SEC is cracking down on other companies and individuals it believes are partaking in shady business within the crypto-space. In January of this year, the agency advised people to “exercise caution” with Bitcoin and other digital currencies.

Late last year, it was reported that the Iranian government was interested in utilizing Bitcoin and other cryptocurrencies as a way of bypassing economic sanctions levied against the country. But the government has apparently changed its mind: Today, the Central Bank of Iran announced that it has never recognized Bitcoin as an official currency and conducts no transactions in it or other cryptocurrencies.

According to Iran Front Page, the country’s central bank has denied ever recognizing Bitcoin as an official currency, along with the idea that it was actively facilitating Bitcoin transactions. The bank also warned Iranian citizens about the high risks of making investments in the potentially volatile market, saying that there’s a chance they “may lose their financial assets.” Moving ahead, the organization is cooperating with other institutions to develop mechanisms to control and prevent the use of digital currencies in the country. The bank put it as follows:

“The wild fluctuations of the digital currencies along with competitive business activities underway via network marketing and pyramid scheme have made the market of these currencies highly unreliable and risky,”

Countries Creating Their Own Coins

Despite all the FUD that accompanies announcements such as these, there are some positive developments. Iran’s Information and Communications Technology (ICT) Minister Mohammad-Javad Azari Jahromi also declared today that Iran’s Post Bank is working on a locally developed cryptocurrency, which will need to be tested by the ICT. It’s unclear exactly how far into research or development the bank is in creating this new coin.

Iran would not be the first country to develop its own digital currency as a way of bypassing financial blockades. Just yesterday Venezuela launched its new coin, the Petro, which is backed by the South American country’s oil reserves.

Late last week, Europe’s newest digital currency, the Korona — which runs on the Lightning Network and is being touted as more stable, safer, and cheaper to use than its competitors — was launched in Budapest, Hungary. Jean-Marc Stiegemeier, Korona’s CEO, is optimistic about the future of the crypto-industry:

“Over the next few years we are going to see a revolution in the banking sector,” Stiegemeier, said. “Within ten years cryptocurrency will be used and accepted worldwide.”

Although sanctions on Iran are not as heavy as they were before the 2015 nuclear deal with the West, the country is still, for the most part, cut off from major international payment networks like Visa, Mastercard, and PayPal. As is the case in other parts of the world, such as Africa, this economic stalemate is making decentralized payment methods like Bitcoin more and more appealing.

Union Catholic High School in Scotch Plains, New Jersey is teaching its students about cryptocurrencies. Mr. Tim Breza’s Business and Personal Finance Class is the focus of a CNBC documentary that is showcasing how cryptocurrencies like Bitcoin and associated blockchain technologies are being introduced and taught in high school and college classrooms.

Mr. Breza, a 28-year-old history and financial literacy teacher, first considered adding cryptocurrencies to his Business and Personal Finance class at the beginning of this school year after a few students approached him in September and October. The students were interested in learning more about the industry and began asking him what he knew about Bitcoin and other digital currencies.

“If one student’s talking about it, many of them are talking about it,” Breza said. “So I figured we needed to include it.”

Juniors and seniors are eligible to take his elective course, in which students learn about budgeting, credit cards, taxes, investing, entrepreneurship, and how to create business plans. After receiving approval, Breza has added a section on cryptocurrencies — focusing on the history of cryptography and the applications of blockchain technology.

“I’ve very excited that the students and Union Catholic is being exposed to this… and that the UC administration supported teaching this to our students,’’ said Breza. “Not too many schools are even thinking about teaching about cryptocurrency. We’re not teaching it in the sense that you have to invest it, we are just giving the facts of it. Blockchain is the key to all of this. That’s the revolutionary piece to it.’’

What do the students think?

Despite Breza’s assertion that the class is not teaching about cryptocurrencies from an investing standpoint, some students have chosen to do their own research. Junior Max Berg, for example, chose to buy Bitcoin last year. When the digital currency hit $19,000 in December, he cashed out, using his profits as seed money to start a retail business — buying Supreme clothes and accessories and selling them on to his peers.

“UC is always on the edge of new technology with our laptops and other things, so this is just that next step of teaching what the future of investments are going to be,’’ said Berg. “It’s been a hobby of mine for years now, and it’s cool to see how big it has gotten and that the school is open to teaching about is great.’’

Another student in the class, senior Thomas Monahan, believes his progressive teachers are to thank for introducing the high schoolers to the new technology:

“The teachers and administrators at Union Catholic always find ways to give us an edge and help us learn and make us better than other high schools,’’ said Monahan. “They teach us valuable things about life things that will help us in the future.”

While this subject may be new to high schools, it’s already a popular topic at universities across the country — and the job market for the crypto-space is booming, too.  LinkedIn says there are now 28 times as many people citing “cryptocurrency” skills on their profiles and 5.5 times as many people with “Bitcoin” skills than there were just five years ago.