U.S. corporations that have long resisted bending to the demands of computer hackers who take their networks hostage are increasingly stockpiling bitcoin, the digital currency, so that they can quickly meet ransom demands rather than lose valuable corporate data.

The companies are responding to cybersecurity experts who recently have changed their advice on how to deal with the growing problem of extortionists taking control of the computers.

"It's a moral dilemma. If you pay, you are helping the bad guys," said Paula Long, chief executive of DataGravity, a Nashua, N.H., company that helps clients secure corporate data. But, she added, "You can't go to the moral high ground and put your company at risk."

"A lot of companies are doing that as part of their incident response planning," said Chris Pogue, chief information security officer at Nuix, a company that provides information management technologies. "They are setting up bitcoin wallets."

Pogue said he believed thousands of U.S. companies had prepared strategies for dealing with hacker extortion demands, and numerous law firms have stepped in to facilitate negotiations with hackers, many of whom operate from the other side of the globe.

Symantec, a Mountain View, Calif., company that makes security and storage software, estimates that ransom demands to companies average between $10,000 and $75,000 for hackers to provide keys to decrypt frozen networks. Individuals whose computers get hit pay as little as $100 to $300 to unlock their encrypted files.

Companies that analyze cyber threats say the use of ransomware has exploded, and payments have soared. Recorded Future, a Somerville, Mass., threat intelligence firm, says ransom payments skyrocketed 4,000 percent last year, reaching $1 billion. Another firm, Kaspersky Lab, estimates that a new business is attacked with ransomware every 40 seconds.

"If you're hit by ransomware today, you have only two options: You either pay the criminals or you lose your data," said Raj Samani, chief technical officer at Intel Security for Europe, the Middle East and Africa. "We underestimated the scale of the issue."

Hackers often send out email with tainted hyperlinks to broad targets, say, an entire company. All it takes is one computer user in a company to click on the infected link to allow hackers to get a foothold in the broader network, leading to hostile encryption.

"At least one employee will click on anything," said Robert Gibbons, chief technology officer at Datto, a Connecticut company that offers digital disaster recovery services.

Law enforcement counsels U.S. businesses not to succumb to ransom demands, urging them to keep backup copies of their data in case of hostile encryption.

"The official FBI policy is that you shouldn't pay the ransom," said Leo Taddeo, chief security officer for Crypt-zone, a Waltham, Mass., company that provides network security. Until 2015, Taddeo ran the cyber division of the FBI's New York City office.

But practical considerations increasingly are dictating a different approach. "It's an option to pay the ransom to get back up and running. Sometimes it's the only option," Taddeo said.

"But it has downsides," he added. "Paying ransom just invites the next attack."

Moreover, 1 in 4 companies that pay ransoms never get their files restored, Gibbons said.

The idea of rewarding extortionists with payment makes some technologists see red.

"That makes me super mad," said Lior Div, chief executive of Cybereason, a Boston-area cybersecurity company. "There are things that are unacceptable, and we need to fight them."

Div and his company have done something about the extortion epidemic. They built a product called RansomFree that claims to detect 99 percent of all ransomware strains.

So far, the free software has been downloaded 125,000 times, the company says.

As extortionists get more sophisticated, researchers say, they are modifying their malicious code, their infection strategies and the way they collect payments.

Once they weasel their way into your network, they now take a look around.

"They'll actually explore your system to see how much money they can squeeze from you," said Andrei Barysevich, director of advanced collection at Recorded Future.

And they won't offer any sympathy, no matter how valuable the encrypted data, even if lives are at stake, say, in a health care network. They may even say they are doing nothing evil.

"They actually think they are on the moral high ground. They think the companies should have paid more for security," said Barysevich, who spoke at a presentation this week at the annual RSA cybersecurity conference in San Francisco, which bills itself as the world's leading gathering of cybersecurity specialists.

One of the reasons midsize and large companies are storing bitcoin for emergency use is that extortionists, once they succeed at penetrating a system, commonly give a deadline for payment before destroying data. But victims can't rush out and buy bitcoin in a day or two.

"It takes at times a week for (brokers) to process you," Barysevich said.

Setting up the wallet ahead of time, Pogue said, allows businesses an option that is quick, although perhaps repugnant.

"If they need to go to it, they are not spinning their wheels standing up a bitcoin wallet," Pogue said.

2017 The Star Democrat under contract with NewsEdge/Acquire Media. All rights reserved.

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Spooked by Cyber Extortion Spike, Businesses Stockpile Bitcoin - NewsFactor Network

Its been a volatile year so far for bitcoin. The value of the cryptocurrency jumped 20 percent in the first trading week of the year to a record high of $1,161 per virtual coin. Its value then plunged by more than a third over seven days, to $750, before climbing back up to top $1,200 on Friday.

Traders said the main cause of this roller coaster ride has been China, where the countrys central bank put domestic bitcoin exchanges on notice early last month that they needed to do more to tighten foreign exchange controls. China has been trying to curb the practice of using bitcoin to circumvent rules limiting the amount of money Chinese mainlanders can send abroad, which is currently capped at $50,000 a year.

This capital flight has caused a drop in the value of the renminbi and Chinese regulators have connected the dots between last years drop in the value of the countrys currency and a corresponding rise in the value of bitcoin. Bitcoin bought in renminbi accounted for a staggering 98 percent of all bitcoin trading activity in the last six months of 2016, according to bitcoinity.org.

Eager to convert the Chinese currency into a more stable global currency and stash that wealth abroad, many Chinese mainlanders have been buying bitcoin locally in renminbi and then, using bitcoins blockchain technology, which allows users to safely transmit bitcoin through the Internet, theyre sending bitcoin to other countries where recipients (family members, friends or other contacts) convert bitcoin back into a local currency which can then be used to make investments outside of the country.

But why isnt China simply clamping down hard on the whole bitcoin thing?

You have a government that likes to retain control, and bitcoin is a decentralized currency outside of the control of any nation-state, Christopher Burniske, blockchain products analyst at New York-based ARK Investment Management, told Salon. So that right there is a bit threatening, but at the same time China is working to be recognized as a global leader in technology and economics and the political fallout from outright banning or confiscating bitcoin is arguably too great.

Burniske said China may have other motives for not taking a hardline stance, such as working to develop its own form of digital currency, informally known as ChinaCoin. Early last year, the countrys central banksaid it was mulling a rollout of its own digital currency.

Theamount of bitcoin bought using the Chinese yuan has plummeted to less than 5 percent this week, thank to efforts by domestic exchanges to cool bitcoin trading activity with a one-month ban on making withdrawals and per-transaction fees that went into effect this month. Traders expect Chinas central bank to eventually impose regulations on local bitcoin trading, too, which helped to push the price of bitcoin down. Currently the market is unregulated in China, but traditional financial institutions are barred from dealing in bitcoin.

With so much less bitcoin trading activity from mainland China, why has the value of the currency bounced back to a record high?

Some of it has to do with traders betting the U.S. Securities and Exchange Commission will approve at least one of three proposed exchange-traded funds based on bitcoin trading before a March 11 deadline. Though its uncertain whetherU.S. regulators would actually allow trading securities based on the fluctuation in the value of bitcoin, some less cautious investors are buying bitcoin hoping the value will jump after an announcement is made. The other reason is that bitcoin has become a alternative safe-harbor investment, like gold or U.S. Treasury bonds. U.S. inflation is expected to rise this year and bitcoin is being used by some to hedge against a drop in the value of the U.S. dollar. Global political uncertainty may also be playing a role.

Whatever the case may be, bitcoins quick rebound from the China scare could be a sign that the cryptocurrency is becoming more mainstream, according to Burniske, being used more frequently to buy goods and services from merchants that accept it.

This is a sign of global traction for bitcoin, he said. You now have more bitcoin being transacted as a means of exchange than traded as astore of value. Im seeing this as a positive indication of bitcoins globally distributed support, that its not as reliant on China as many people believed it was just a few months ago.

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Bitcoin is devaluing China's currency but the country won't do much about it - Salon

Bitbond, a German peer-to-peer bitcoin loan platform closed an equity funding round of $1.2 million in new capital as it looks to fuel user growth in potential markets.

As a platform to connect lenders and borrowers, Bitbond facilitates loans in bitcoin by checking the credit-worthiness of applicants while studying the purpose of the loan to determine the interest rate for the loan. Notably, the platform uses the Bitcoin blockchain for payment processing to facilitate cross-border lending.

A large proportion of Bitbonds borrowers are usually online sellers with storefronts on e-commerce sites like Amazon or eBay. The borrowed sums are used for inventory and working capital. Credit checks are performed based on the revenue data of merchants.

Berlin-based Bitbond has now raised a total of $2.3 million in funding. The latest founding round was led by ekip Can Gkalp, who formerly founded Turkish mobile ad network Mobilike. Other angel investors participating in the funding round included mobile advertising firm Fybers founders Janis Zech and Andreas Bodczek as well as Alexander Graubner-Mller, CEO and co-founder of German online lender and Fintech firm Kreditech.

Bitbond founder and CEO Radoslav Albrecht stated:

The additional resources will help us to continue realizing our mission which is to make lending and borrowing globally accessible. We are happy to have such experiences investors supporting us on this exciting journey.

The bitcoin startup received EUR600,000 in an angel funding round in mid-2015 following its launch in 2013. The company has come a long way since. Over 1,600 loans worth $1.2 million have originated on Bitbond since its launch and the platform claims to service 76,600 registered users from 120 countries.

In previous comments to CCN, Bitbond representative Chris Grundy added that the platform also follows up with measures to ensure repayment of loans. This starts with emails and phone calls, in thecase of late repayments, and can culminate in the involvement of debt collectors to regain the owed sum, Grundy revealed.

Bitbonds growth in the global bitcoin P2P lending market is in contrast to that of another lending platform BitLendingClub, which cited regulatory hurdles as the reason behind its decision to shut down a number of services. Meanwhile, Bitbond is now operating with a regulatory license issued by Germanys financial regulator BaFin, issued in October 2016. The license allows the bitcoin startup to operate independently of banks.

Image from Shutterstock.

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Bitcoin P2P Lending Platform Bitbond Raises $1.2 Million in Equity Funding - CryptoCoinsNews

Danish law enforcement have arrested drug traffickers after an investigation that included surveilling the blockchain, according to the regional publication Berlingske. The Danish polices cyber crime unit NC3 claim they have made arrests based on criminal activity tracked via bitcoin transactions.

Law enforcement officials are indeed working with blockchain surveillance software globally, and even warning against the use of digital currency mixers.

Also read:Basel Institute: Take Action Against Digital Currency Mixers/Tumblers

The chief of the Danish cyber crime unit, Kim Aarenstrup, has revealed authorities in the region created a tracking system that analyzes bitcoin transactions. Aarenstrup details the tool has helped police with two narcotics convictions. One arrest took place in January when Danish police arrested a young man for purchasing ketamine, cocaine, and amphetamines on darknet marketplaces. (DNM)

Bitcoin and virtual currency in general is used a lot for trafficking in weapons and drugs, ransom cases and extortion cases, Aarenstrup said. It has become a heavily used tool for criminals. We are pretty much unique in the world at this point because theyre not really any others who have managed to use these trails as evidence.

The Danish prosecutor who worked on the convictions, Jesper Klyve, explained their blockchain analysis worked because the drug traffickers had correlatedbitcoin transactions. Many services that offer bitcoin purchasing platforms follow strict KYC policies and buyers typically have to verify their identification.

Aarenstrup told the press the new blockchain surveillance system was ground-breaking.

The Danish cyber crime unit is not the only agency utilizing blockchain surveillance software to capture criminals. There are four known startups using bitcoin transaction analysis tools and collaborating with law enforcement worldwide. Companies utilizing blockchain surveillance software include Elliptic, Chainalysis, Numisight, and Skry. Both Elliptic and Chainalysis have been working with law enforcement agencies like the FBI, Interpol, Europol and KYC/AML platform providers.

Last summer, Chainalysis detailed that the company was working with global authorities to combat ransomware. Michael Gronager, CEO and co-founder of Chainalysis,said at the time, Expect to see some arrests soon as law enforcement agencies wrap up their investigations into several ransomware operations.

In January, the Basel Institute on Governance, Europol, Interpol, and officialsfrom Qatar warned against the use of bitcoin transaction mixers.

All countries are advised to take action against digital currency mixers/tumblers, theyexplained.

Alongside the rise of startups and law enforcement deploying blockchain surveillance, software developers are also creating privacy-centric transaction tools and concepts for Bitcoin. Ideas like Tumblebit, Schnorr signatures, confidential transactions, and other protocols are being developed. There are also in-production mixing services like Joinmarket, and anonymizing wallets like Samourai.

The privacy activists behind the Samourai wallet recently introduced features like Ricochet, and reusable payment codes. Samourai rebukes warnings made by bureaucrats and law enforcement against privacy-enhancing tools. In a recent blog post called The Bureaucrats Are Coming, the privacy-centric wallet developers explain they are ready to fight the state.

Samourai will not cower to these ivory tower elites We will actively work to destroy the effectiveness of any legislation or policy that is produced.

What do you think about law enforcement officials tracking bitcoin transactions? Let us know in the comments below.

Images courtesy of Shutterstock, Danish Cyber Crime Unit, and Chainalysis.

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