Policy

judge-mulls-sanctions-over-google’s-“shocking”-destruction-of-internal-chats

Judge mulls sanctions over Google’s “shocking” destruction of internal chats

Kenneth Dintzer, litigator for the US Department of Justice, exits federal court in Washington, DC, on September 20, 2023, during the antitrust trial to determine if Alphabet Inc.'s Google maintains a monopoly in the online search business.

Enlarge / Kenneth Dintzer, litigator for the US Department of Justice, exits federal court in Washington, DC, on September 20, 2023, during the antitrust trial to determine if Alphabet Inc.’s Google maintains a monopoly in the online search business.

Near the end of the second day of closing arguments in the Google monopoly trial, US district judge Amit Mehta weighed whether sanctions were warranted over what the US Department of Justice described as Google’s “routine, regular, and normal destruction” of evidence.

Google was accused of enacting a policy instructing employees to turn chat history off by default when discussing sensitive topics, including Google’s revenue-sharing and mobile application distribution agreements. These agreements, the DOJ and state attorneys general argued, work to maintain Google’s monopoly over search.

According to the DOJ, Google destroyed potentially hundreds of thousands of chat sessions not just during their investigation but also during litigation. Google only stopped the practice after the DOJ discovered the policy. DOJ’s attorney Kenneth Dintzer told Mehta Friday that the DOJ believed the court should “conclude that communicating with history off shows anti-competitive intent to hide information because they knew they were violating antitrust law.”

Mehta at least agreed that “Google’s document retention policy leaves a lot to be desired,” expressing shock and surprise that a large company like Google would ever enact such a policy as best practice.

Google’s attorney Colette Connor told Mehta that the DOJ should have been aware of Google’s policy long before the DOJ challenged the conduct. Google had explicitly disclosed the policy to Texas’ attorney general, who was involved in DOJ’s antitrust suit over both Google’s search and adtech businesses, Connor said.

Connor also argued that Google’s conduct wasn’t sanctionable because there is no evidence that any of the missing chats would’ve shed any new light on the case. Mehta challenged this somewhat, telling Connor, “We just want to know what we don’t know. We don’t know if there was a treasure trove of material that was destroyed.”

During rebuttal, Dintzer told Mehta that Google’s decision to tell Texas about the policy but not the federal government did not satisfy their disclosure obligation under federal rules of civil procedure in the case. That rule says that “only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may” the court “presume that the lost information was unfavorable to the party.”

The DOJ has asked the court to make that ruling and issue four orders sanctioning Google. They want the court to order the “presumption that deleted chats were unfavorable,” the “presumption that Google’s proffered justification” for deleting chats “is pretextual” (concealing Google’s true rationale), and the “presumption that Google intended” to delete chats to “maintain its monopoly.” The government also wants a “prohibition on argument by Google that the absence of evidence is evidence of adverse inference,” which would stop Google from arguing that the DOJ is just assuming the deleted chats are unfavorable to Google.

Mehta asked Connor if she would agree that, at “minimum,” it was “negligent” of Google to leave it to employees to preserve chats on sensitive discussions, but Connor disagreed. She argued that “given the typical use of chat,” Google’s history-off policy was “reasonable.”

Connor told Mehta that the DOJ must prove that Google intended to hide evidence for the court to order sanctions.

That intent could be demonstrated another way, Mehta suggested, recalling that “Google has been very deliberate in advising employees about what to say and what not to say” in discussions that could indicate monopolistic behaviors. That included telling employees, “Don’t use the term markets,” Mehta told Connor, asking if that kind of conduct could be interpreted as Google’s intent to hide evidence.

But Connor disagreed again.

“No, we don’t think you can use it as evidence,” Connor said. “It’s not relevant to the claims in this case.”

But during rebuttal, Dintzer argued that there was evidence of its relevance. He said that testimony from Google employees showed that Google’s chat policy “was uniformly used as a way of communicating without creating discoverable information” intentionally to hide the alleged antitrust violations.

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at&t-announces-$7-monthly-add-on-fee-for-“turbo”-5g-speeds

AT&T announces $7 monthly add-on fee for “Turbo” 5G speeds

A pedestrian walks past a large AT&T logo on the glass exterior of an AT&T store.

Getty Images | Bloomberg

AT&T is now charging mobile customers an extra $7 per month for faster wireless data speeds. AT&T says the Turbo add-on, available starting today, is “built to support high-performance mobile applications, like gaming, social video broadcasting and live video conferencing, with optimized data while customers are on the go.”

While Turbo “boosts all the high-speed and hotspot data on a user’s connection,” AT&T said the difference will be more noticeable for certain kinds of applications. For example, gaming applications using Turbo will experience “less freezing or stuttering and lower latency,” AT&T said.

The $7 charge is for each line. Adding Turbo to multiple lines on the same account requires paying the extra fee for each line. AT&T said that Turbo lets users “optimize their plan’s high-speed (premium) and hotspot data allotments” and provides better data performance “even during busy times on the network.”

Turbo is only available for 5G phones on certain “unlimited” plans. AT&T notes that “Turbo does not provide extra data” and that “if you exceed your existing allotments your normal network management applies.”

“On AT&T Unlimited Extra EL after 75GB, AT&T may temporarily slow data speeds if the network is busy,” the company says. “On each eligible plan, after you exceed your hotspot allotment, your hotspot speeds are slowed to a maximum of 128Kbps.”

People who pay extra for Turbo might want to look at their video settings. By default, AT&T limits video streaming to DVD quality, but customers can turn on high-definition video at the expense of using more data.

Quality of service

An article by The Mobile Report said that AT&T will differentiate between users who pay for Turbo and those who don’t with Quality of Service Class Identifiers, or QCIs. “We’re told that, basically, all eligible plans are now moved to QCI 8, and get the privilege of buying their way back into QCI 7,” the article said. QCI 6 is reportedly reserved for public safety professionals on the FirstNet service built by AT&T under a government contract.

AT&T confirmed to Ars today that Turbo “is assigned to a QCI to which some of our consumer traffic was previously assigned.” But AT&T said it has “materially modified it and increased network resources and relative weighting for AT&T Turbo traffic, thereby creating a higher level of performance than we’ve ever before offered to consumers.”

AT&T also said that QCIs “are simply a number assigned to a class of service,” and that the “treatment and performance of traffic in a particular class is affected by a range of variables that can be tuned to provide different experiences.” AT&T said that last summer, it “rationalized and streamlined how our plans are mapped to QCI levels” and that “these changes helped optimize network performance for our overall customer base.”

The current version of Turbo may be followed by other paid extras that enhance performance, as AT&T called it the “first step in modernizing and preparing our mobile network for future innovative use cases… Latency-sensitive applications will continue to need more enhanced network technologies to perform their best, so we plan to continue to advance and evolve AT&T Turbo.”

AT&T announces $7 monthly add-on fee for “Turbo” 5G speeds Read More »

apple-deal-could-have-been-“suicide”-for-google,-company-lawyer-says

Apple deal could have been “suicide” for Google, company lawyer says

Woulda coulda shoulda? —

Judge: What should Google have done to avoid the DOJ’s crosshairs?

John Schmidtlein, partner at Williams & Connolly LLP and lead litigator for Alphabet Inc.'s Google, arrives to federal court in Washington, DC, US, on Monday, Oct. 2, 2023.

Enlarge / John Schmidtlein, partner at Williams & Connolly LLP and lead litigator for Alphabet Inc.’s Google, arrives to federal court in Washington, DC, US, on Monday, Oct. 2, 2023.

Halfway through the first day of closing arguments in the Department of Justice’s big antitrust trial against Google, US District Judge Amit Mehta posed the question that likely many Google users have pondered over years of DOJ claims that Google’s market dominance has harmed users.

“What should Google have done to remain outside the crosshairs of the DOJ?” Mehta asked plaintiffs halfway through the first of two full days of closing arguments.

According to the DOJ and state attorneys general suing, Google has diminished search quality everywhere online, primarily by locking rivals out of default positions on devices and in browsers. By paying billions for default placements that the government has argued allowed Google to hoard traffic and profits, Google allegedly made it nearly impossible for rivals to secure enough traffic to compete, ultimately decreasing competition and innovation in search by limiting the number of viable search engines in the market.

The DOJ’s lead litigator, Kenneth Dintzer, told Mehta that what Google should have done was acknowledge that the search giant had an enormous market share and consider its duties more carefully under antitrust law. Instead, Dintzer alleged, Google chose the route of “hiding” and “destroying documents” because it was aware of conflicts with antitrust law.

“What should Google have done?” Dintzer told Mehta. “They should have recognized that by demanding locking down every default that they were opening themselves up to a challenge on the conduct.”

The most controversial default agreement that Google has made is a 21-year deal with Apple that Mehta has described as the “heart” of the government’s case against Google. During the trial, a witness accidentally blurted out Google’s carefully guarded secret of just how highly it values the Apple deal, revealing that Google pays 36 percent of its search advertising revenue from Safari just to remain the default search tool in Apple’s browser. In 2022 alone, trial documents revealed that Google paid Apple $20 billion for the deal, Bloomberg reported.

That’s in stark contrast to the 12 percent of revenue that Android manufacturers get from their default deals with Google. The government wants the court to consider all these default deals to be anti-competitive, with Dintzer suggesting during closing arguments that they are the “centerpiece” of “a lot” of Google’s exclusionary behavior that ultimately allowed Google to become the best search engine today—by “capturing the default and preventing rivals from getting access to those defaults.”

Google’s lawyers have argued that Google succeeds on its merits. Today, lead litigator John Schmidtlein repeatedly pointed out that antitrust law is designed to protect the competitive process, not specific competitors who fail to invest and innovate—as Microsoft did by failing to recognize how crucial mobile search would become.

“Merely getting advantages by winning on quality, they may have an effect on a rival, but the question is, does it have an anti-competitive effect?” Schmidtlein argued, noting that the DOJ hadn’t “shown that absent the agreements, Microsoft would have toppled Google.”

But Dintzer argued that “a mistake by one rival doesn’t mean that Google gets to monopolize this market forever.” When asked to explain why everyone—including some of Google’s rivals—testified that Google won contracts purely because it was the best search engine, Dintzer warned Mehta that the fact that Google’s rivals “may be happy cashing Google’s checks doesn’t tell us anything.”

According to Schmidtlein, Google could have crossed the line with the Apple deal, but it didn’t.

“Google didn’t go on to say to Apple, if you don’t make us the default, no Google search on Apple devices at all,” Schmidtlein argued. “That would be suicide for Google.”

It’s still unclear how Mehta may be leaning in this case, interrogating both sides with care and making it clear that he expects all his biggest questions to be answered after closing arguments conclude Friday evening.

But Mehta did suggest at one point today that it seemed potentially “impossible” for anyone to compete with Google for default placements.

“How would anybody be able to spend billions and billions of dollars to possibly dislodge Google?” Mehta asked. “Is there any real competition for the default spot?”

According to Schmidtlein, that is precisely what “competition on the merits” looks like.

“Google is winning because it’s better, and Apple is deciding Google is better for users,” Schmidtlein argued. “The antitrust laws are not designed to ensure a competitive market. They’re designed to ensure a competitive process.”

Proving the potential anti-competitive effects of Google’s default agreements, particularly the Apple deal, has long been regarded as the most critical point in order to win the government’s case. So it’s no surprise that the attorney representing state attorneys general, Bill Cavanaugh, praised Mehta for asking, “What should Google have done?” According to Cavanaugh, that was the “right question” to pose in this trial.

“What should they have done 10 years ago when there was a recognition” that “we’re monopolists” and “we have substantial control in markets” is ask, “How should we proceed with our contracts?” Cavanaugh argued. “That’s the question that they answered, but they answered it in the wrong way.”

Seemingly if Google’s default contracts posed fewer exclusionary concerns, the government seems to be arguing, there would be more competition and therefore more investment and innovation in search. But as long as Google controls the general search market, the government alleged that users won’t be able to search the web the way that they want.

Google is hoping that Mehta will reject the government’s theories and instead rule that Google has done nothing to stop rivals from improving the search landscape. Early in the day, Mehta told the DOJ that he was “struggling to see” how Google has either stopped innovating or degraded its search engine as a result of lack of competition.

Closing arguments continue on Friday. Mehta is not expected to rule until late summer or early fall.

Apple deal could have been “suicide” for Google, company lawyer says Read More »

congress-lets-broadband-funding-run-out,-ending-$30-low-income-discounts

Congress lets broadband funding run out, ending $30 low-income discounts

Affordable Connectivity Program —

ACP gave out last $30 discounts in April; only partial discounts available in May.

Illustration of fiber Internet cables

Getty Images | Yuichiro Chino

The Federal Communications Commission chair today made a final plea to Congress, asking for money to continue a broadband-affordability program that gave out its last round of $30 discounts to people with low incomes in April.

The Affordable Connectivity Program (ACP) has lowered monthly Internet bills for people who qualify for benefits, but Congress allowed funding to run out. People may receive up to $14 in May if their ISP opted into offering a partial discount during the program’s final month. After that there will be no financial help for the 23 million households enrolled in the program.

“Additional funding from Congress is the only near-term solution for keeping the ACP going,” FCC Chairwoman Jessica Rosenworcel wrote in a letter to members of Congress today. “If additional funding is not promptly appropriated, the one in six households nationwide that rely on this program will face rising bills and increasing disconnection. In fact, according to our survey of ACP beneficiaries, 77 percent of participating households report that losing this benefit would disrupt their service by making them change their plan or lead to them dropping Internet service entirely.”

The ACP started with $14.2 billion allocated by Congress in late 2021. The $30 monthly ACP benefit replaced the previous $50 monthly subsidy from the Emergency Broadband Benefit Program.

Biden urges Republicans to support funding

Some Republican members of Congress have called the program “wasteful” and complained that most people using the discounts had broadband access before the subsidy was available. Rosenworcel’s letter today said the FCC survey found that “68 percent of ACP households stated they had inconsistent or zero connectivity prior to ACP.”

Senate Commerce Committee Chair Maria Cantwell (D-Wash.) included $7 billion for the program in a draft spectrum auction bill on Friday, but previous proposals from Democrats to extend funding have fizzled out. The White House today urged Congress to fund the program and blamed Republicans for not supporting funding proposals.

“President Biden is once again calling on Republicans in Congress to join their Democratic colleagues in support of extending funding for the Affordable Connectivity Program,” the White House said.

Some consumer advocates have called on the FCC to fund the ACP by increasing Universal Service Fund collections, which could involve raising fees on phone service or imposing Universal Service fees on broadband for the first time. Rosenworcel has instead looked to Congress to allocate funding for the ACP.

“Time is running out,” Rosenworcel’s letter said. “Additional funding is needed immediately to avoid the disruption millions of ACP households that rely on this program for essential connectivity are already starting to experience.”

Congress lets broadband funding run out, ending $30 low-income discounts Read More »

email-microsoft-didn’t-want-seen-reveals-rushed-decision-to-invest-in-openai

Email Microsoft didn’t want seen reveals rushed decision to invest in OpenAI

I’ve made a huge mistake —

Microsoft CTO made a “mistake” dismissing Google’s AI as a “game-playing stunt.”

Email Microsoft didn’t want seen reveals rushed decision to invest in OpenAI

In mid-June 2019, Microsoft co-founder Bill Gates and CEO Satya Nadella received a rude awakening in an email warning that Google had officially gotten too far ahead on AI and that Microsoft may never catch up without investing in OpenAI.

With the subject line “Thoughts on OpenAI,” the email came from Microsoft’s chief technology officer, Kevin Scott, who is also the company’s executive vice president of AI. In it, Scott said that he was “very, very worried” that he had made “a mistake” by dismissing Google’s initial AI efforts as a “game-playing stunt.”

It turned out, Scott suggested, that instead of goofing around, Google had been building critical AI infrastructure that was already paying off, according to a competitive analysis of Google’s products that Scott said showed that Google was competing even more effectively in search. Scott realized that while Google was already moving on to production for “larger scale, more interesting” AI models, it might take Microsoft “multiple years” before it could even attempt to compete with Google.

As just one example, Scott warned, “their auto-complete in Gmail, which is especially useful in the mobile app, is getting scarily good.”

Microsoft had tried to keep this internal email hidden, but late Tuesday it was made public as part of the US Justice Department’s antitrust trial over Google’s alleged search monopoly. The email was initially sealed because Microsoft argued that it contained confidential business information, but The New York Times intervened to get it unsealed, arguing that Microsoft’s privacy interests did not outweigh the need for public disclosure.

In an order unsealing the email among other documents requested by The Times, US District Judge Amit Mehta allowed to be redacted some of the “sensitive statements in the email concerning Microsoft’s business strategies that weigh against disclosure”—which included basically all of Scott’s “thoughts on OpenAI.” But other statements “should be disclosed because they shed light on Google’s defense concerning relative investments by Google and Microsoft in search,” Mehta wrote.

At the trial, Google sought to convince Mehta that Microsoft, for example, had failed to significantly invest in mobile early on, giving Google a competitive advantage in mobile search that it still enjoys today. Scott’s email seems to suggest that Microsoft was similarly dragging its feet on investing in AI until Scott’s wakeup call.

Nadella’s response to the email was immediate. He promptly forwarded the email to Microsoft’s chief financial officer, Amy Hood, on the same day that he received it. Scott’s “very good email,” Nadella told Hood, explained “why I want us to do this.” By “this,” Nadella presumably meant exploring investment opportunities in OpenAI.

Mere weeks later, Microsoft had invested $1 billion into OpenAI, and there have been billions more invested since through an extended partnership agreement. In 2024, the two companies’ finances appeared so intertwined that the European Union suspected Microsoft was quietly controlling OpenAI and began investigating whether the companies still operate independently. Ultimately, the EU dismissed the probe, deciding that Microsoft’s $13 billion in investments did not amount to an acquisition, Reuters reported.

Officially, Microsoft has said that its OpenAI partnership was formed “to accelerate AI breakthroughs to ensure these benefits are broadly shared with the world”—not to keep up with Google.

But at the Google trial, Nadella testified about the email, saying that partnering with companies like OpenAI ensured that Microsoft could continue innovating in search, as well as in other Microsoft services.

On the stand, Nadella also admitted that he had overhyped AI-powered Bing as potentially shaking up the search market, backing up the DOJ by testifying that in Silicon Valley, Internet search is “the biggest no-fly zone.” Even after partnering with OpenAI, Nadella said that for Microsoft to compete with Google in search, there are “limits to how much artificial intelligence can reshape the market as it exists today.”

During the Google trial, the DOJ argued that Google’s alleged search market dominance had hindered OpenAI’s efforts to innovate, too. “OpenAI’s ChatGPT and other innovations may have been released years ago if Google hadn’t monopolized the search market,” the DOJ argued, according to a Bloomberg report.

Closing arguments in the Google trial start tomorrow, with two days of final remarks scheduled, during which Mehta will have ample opportunity to ask lawyers on both sides the rest of his biggest remaining questions.

It’s somewhat obvious what Google will argue. Google has spent years defending its search business as competing on the merits—essentially arguing that Google dominates search simply because it’s the best search engine.

Yesterday, the US district court also unsealed Google’s proposed legal conclusions, which suggest that Mehta should reject all of the DOJ’s monopoly claims, partly due to the government’s allegedly “fatally flawed” market definitions. Throughout the trial, Google has maintained that the US government has failed to show that Google has a monopoly in any market.

According to Google, even its allegedly anticompetitive default browser agreement with Apple—which Mehta deemed the “heart” of the DOJ’s monopoly case—is not proof of monopoly powers. Rather, Google insisted, default browser agreements benefit competition by providing another avenue through which its rivals can compete.

The DOJ hopes to prove Google wrong, arguing that Google has gone to great lengths to block rivals from default placements and hide evidence of its alleged monopoly—including training employees to avoid using words that monopolists use.

Mehta has not yet disclosed when to expect his ruling, but it could come late this summer or early fall, AP News reported.

If Google loses, the search giant may be forced to change its business practices or potentially even break up its business. Nobody knows what that would entail, but when the trial started, a coalition of 20 civil society and advocacy groups recommended some potentially drastic remedies, including the “separation of various Google products from parent company Alphabet, including breakouts of Google Chrome, Android, Waze, or Google’s artificial intelligence lab Deepmind.”

Email Microsoft didn’t want seen reveals rushed decision to invest in OpenAI Read More »

dea-to-reclassify-marijuana-as-a-lower-risk-drug,-reports-say

DEA to reclassify marijuana as a lower-risk drug, reports say

downgrade —

Marijuana to move from Schedule 1, the most dangerous drug group, to Schedule 3.

Medical marijuana growing in a facility in Canada.

Enlarge / Medical marijuana growing in a facility in Canada.

The US Drug Enforcement Administration is preparing to reclassify marijuana to a lower-risk drug category, a major federal policy change that is in line with recommendations from the US health department last year. The upcoming move was first reported by the Associated Press on Tuesday afternoon and has since been confirmed by several other outlets.

The DEA currently designates marijuana as a Schedule 1 drug, defined as drugs “with no currently accepted medical use and a high potential for abuse.” It puts marijuana in league with LSD and heroin. According to the reports today, the DEA is moving to reclassify it as a Schedule 3 drug, defined as having “a moderate to low potential for physical and psychological dependence.” The move would place marijuana in the ranks of ketamine, testosterone, and products containing less than 90 milligrams of codeine.

Marijuana’s rescheduling would be a nod to its potential medical benefits and would shift federal policy in line with many states. To date, 38 states have already legalized medical marijuana.

In August, the Department of Health and Human Services advised the DEA to move marijuana from Schedule 1 to Schedule 3 based on a review of data by the Food and Drug Administration. The recommendation came after the FDA, in August, granted the first approval of a marijuana-based drug. The drug, Epidiolex (cannabidiol), is approved to treat rare and severe forms of epilepsy. The approval was expected to spur the DEA to downgrade marijuana’s scheduling, though some had predicted it would have occurred earlier. Independent expert advisors for the FDA voted unanimously in favor of approval, convinced by data from three high-quality clinical trials that indicated benefits and a “negligible abuse potential.”

The shift may have a limited effect on consumers in states that have already eased access to marijuana. In addition to the 38 states with medical marijuana access, 24 states have legalized recreational use. But, as a Schedule 3 drug, marijuana would still be regulated by the DEA. The Associated Press notes that the rule change means that roughly 15,000 dispensaries would need to register with the DEA, much like pharmacies, and follow strict reporting requirements.

One area that will clearly benefit from the change is scientific research on marijuana’s effects. Many academic scientists are federally funded and, as such, they must follow federal regulations. Researching a Schedule 1 drug carries extensive restrictions and rules, even for researchers in states where marijuana is legalized. A lower scheduling will allow researchers better access to conduct long-awaited studies.

It’s unclear exactly when the move will be announced and finalized. The DEA must get sign-off from the White House Office of Management and Budget (OMB) before proceeding. A source for NBC News said Attorney General Merrick Garland may submit the rescheduling to the OMB as early as Tuesday afternoon. After that, the DEA will open a public comment period before it can finalize the rule.

The US Department of Justice told several outlets that it “continues to work on this rule. We have no further comment at this time.”

DEA to reclassify marijuana as a lower-risk drug, reports say Read More »

binance’s-billionaire-founder-gets-4-months-for-violating-money-laundering-law

Binance’s billionaire founder gets 4 months for violating money laundering law

Binance founder sentencing —

US prosecutors sought 3-year sentence for Binance founder Changpeng Zhao.

Former Binance CEO Changpeng Zhao walking outside a court house.

Enlarge / Former Binance CEO Changpeng Zhao arrives at federal court in Seattle for sentencing on Tuesday, April 30, 2024.

Getty Images | Changpeng Zhao

Binance founder Changpeng Zhao was sentenced today to four months in prison after pleading guilty of failing to take effective measures against money laundering. The billionaire who formerly ran the world’s largest cryptocurrency exchange previously agreed to a plea deal that also required him to pay a $50 million fine.

The US government’s sentencing request asked for three years in prison. Zhao’s sentencing memorandum asked for probation without any prison time.

Forbes estimates Zhao’s net worth at $33 billion. He pleaded guilty to failure to maintain an effective anti-money laundering program.

Zhao’s cooperation with law enforcement was cited by US District Judge Richard Jones as a reason for imposing a significantly lower sentence than was requested by prosecutors, according to The Verge.

“Before handing down the sentence, Jones faulted Zhao for putting growth and profits before complying with US laws,” Reuters wrote. The sentencing hearing was in federal court in Seattle.

Jones was quoted as saying to Zhao that “you had the wherewithal, the finance capabilities, and the people power to make sure that every single regulation had to be complied with, and so you failed at that opportunity.”

US: Zhao willfully violated law

The government’s sentencing recommendation said that “Zhao’s willful violation of US law was no accident or oversight. He made a business decision that violating US law was the best way to attract users, build his company, and line his pockets.”

The US said Zhao bragged that if Binance complied with US law, it would not be “as big as we are today.”

“Despite knowing Binance was required to comply with US law, Zhao chose not to register the company with US regulators; he chose not to comply with fundamental US anti-money-laundering (AML) requirements; he chose not to implement and maintain an effective know-your-customer (KYC) system, which prevented effective transaction monitoring and allowed suspicious and criminal users to transact through Binance,” the US said.

Zhao also “directed Binance employees in a sophisticated scheme to disguise their customers’ locations in an effort to deceive regulators about Binance’s client base,” the US told the court.

Zhao’s sentencing memorandum denied criminal intent. “Generalized knowledge that the Company’s compliance program did not eliminate all risk of criminal activity does not mean that Mr. Zhao knew or intended for any funds to be criminally derived (he manifestly did not),” the filing said.

Zhao traveled to the US from his home in the United Arab Emirates to take responsibility, his legal team’s filing said. “He is a first-time, non-violent offender who committed an offense with no intention to harm anyone. He presents no risk of recidivism. He has appeared in this country voluntarily to accept responsibility,” the plea for lenience said.

Binance’s billionaire founder gets 4 months for violating money laundering law Read More »

critics-question-tech-heavy-lineup-of-new-homeland-security-ai-safety-board

Critics question tech-heavy lineup of new Homeland Security AI safety board

Adventures in 21st century regulation —

CEO-heavy board to tackle elusive AI safety concept and apply it to US infrastructure.

A modified photo of a 1956 scientist carefully bottling

On Friday, the US Department of Homeland Security announced the formation of an Artificial Intelligence Safety and Security Board that consists of 22 members pulled from the tech industry, government, academia, and civil rights organizations. But given the nebulous nature of the term “AI,” which can apply to a broad spectrum of computer technology, it’s unclear if this group will even be able to agree on what exactly they are safeguarding us from.

President Biden directed DHS Secretary Alejandro Mayorkas to establish the board, which will meet for the first time in early May and subsequently on a quarterly basis.

The fundamental assumption posed by the board’s existence, and reflected in Biden’s AI executive order from October, is that AI is an inherently risky technology and that American citizens and businesses need to be protected from its misuse. Along those lines, the goal of the group is to help guard against foreign adversaries using AI to disrupt US infrastructure; develop recommendations to ensure the safe adoption of AI tech into transportation, energy, and Internet services; foster cross-sector collaboration between government and businesses; and create a forum where AI leaders to share information on AI security risks with the DHS.

It’s worth noting that the ill-defined nature of the term “Artificial Intelligence” does the new board no favors regarding scope and focus. AI can mean many different things: It can power a chatbot, fly an airplane, control the ghosts in Pac-Man, regulate the temperature of a nuclear reactor, or play a great game of chess. It can be all those things and more, and since many of those applications of AI work very differently, there’s no guarantee any two people on the board will be thinking about the same type of AI.

This confusion is reflected in the quotes provided by the DHS press release from new board members, some of whom are already talking about different types of AI. While OpenAI, Microsoft, and Anthropic are monetizing generative AI systems like ChatGPT based on large language models (LLMs), Ed Bastian, the CEO of Delta Air Lines, refers to entirely different classes of machine learning when he says, “By driving innovative tools like crew resourcing and turbulence prediction, AI is already making significant contributions to the reliability of our nation’s air travel system.”

So, defining the scope of what AI exactly means—and which applications of AI are new or dangerous—might be one of the key challenges for the new board.

A roundtable of Big Tech CEOs attracts criticism

For the inaugural meeting of the AI Safety and Security Board, the DHS selected a tech industry-heavy group, populated with CEOs of four major AI vendors (Sam Altman of OpenAI, Satya Nadella of Microsoft, Sundar Pichai of Alphabet, and Dario Amodei of Anthopic), CEO Jensen Huang of top AI chipmaker Nvidia, and representatives from other major tech companies like IBM, Adobe, Amazon, Cisco, and AMD. There are also reps from big aerospace and aviation: Northrop Grumman and Delta Air Lines.

Upon reading the announcement, some critics took issue with the board composition. On LinkedIn, founder of The Distributed AI Research Institute (DAIR) Timnit Gebru especially criticized OpenAI’s presence on the board and wrote, “I’ve now seen the full list and it is hilarious. Foxes guarding the hen house is an understatement.”

Critics question tech-heavy lineup of new Homeland Security AI safety board Read More »

fcc-fines-big-three-carriers-$196m-for-selling-users’-real-time-location-data

FCC fines big three carriers $196M for selling users’ real-time location data

Illustration with a Verizon logo displayed on a smartphone in front of stock market percentages in the background.

Getty Images | SOPA Images

The Federal Communications Commission today said it fined T-Mobile, AT&T, and Verizon $196 million “for illegally sharing access to customers’ location information without consent and without taking reasonable measures to protect that information against unauthorized disclosure.”

The fines relate to sharing of real-time location data that was revealed in 2018. The FCC proposed the fines in 2020, when the commission had a Republican majority, and finalized them today.

All three major carriers vowed to appeal the fines after they were announced today. The three carriers also said they discontinued the data-sharing programs that the fines relate to.

The fines are $80.1 million for T-Mobile, $57.3 million for AT&T, and $46.9 million for Verizon. T-Mobile is also on the hook for a $12.2 million fine issued to Sprint, which was bought by T-Mobile shortly after the penalties were proposed over four years ago.

Today, the FCC summarized its findings as follows:

The FCC Enforcement Bureau investigations of the four carriers found that each carrier sold access to its customers’ location information to “aggregators,” who then resold access to such information to third-party location-based service providers. In doing so, each carrier attempted to offload its obligations to obtain customer consent onto downstream recipients of location information, which in many instances meant that no valid customer consent was obtained. This initial failure was compounded when, after becoming aware that their safeguards were ineffective, the carriers continued to sell access to location information without taking reasonable measures to protect it from unauthorized access.

“Shady actors” got hold of data

The problem first came to light with reports of customer location data “being disclosed by the largest American wireless carriers without customer consent or other legal authorization to a Missouri Sheriff through a ‘location-finding service’ operated by Securus, a provider of communications services to correctional facilities, to track the location of numerous individuals,” the FCC said.

Chairwoman Jessica Rosenworcel said that news reports in 2018 “revealed that the largest wireless carriers in the country were selling our real-time location information to data aggregators, allowing this highly sensitive data to wind up in the hands of bail-bond companies, bounty hunters, and other shady actors. This ugly practice violates the law—specifically Section 222 of the Communications Act, which protects the privacy of consumer data.”

For a time after the 2018 reports, “all four carriers continued to operate their programs without putting in place reasonable safeguards to ensure that the dozens of location-based service providers with access to their customers’ location information were actually obtaining customer consent,” the FCC said.

The three carriers are ready to challenge the fines in court. “This industry-wide third-party aggregator location-based services program was discontinued more than five years ago after we took steps to ensure that critical services like roadside assistance, fraud protection and emergency response would not be disrupted,” T-Mobile said in a statement provided to Ars. “We take our responsibility to keep customer data secure very seriously and have always supported the FCC’s commitment to protecting consumers, but this decision is wrong, and the fine is excessive. We intend to challenge it.”

FCC fines big three carriers $196M for selling users’ real-time location data Read More »

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UK outlaws awful default passwords on connected devices

Tacking an S onto IoT —

The law aims to prevent global-scale botnet attacks.

UK outlaws awful default passwords on connected devices

Getty Images

If you build a gadget that connects to the Internet and sell it in the United Kingdom, you can no longer make the default password “password.” In fact, you’re not supposed to have default passwords at all.

A new version of the 2022 Product Security and Telecommunications Infrastructure Act (PTSI) is now in effect, covering just about everything that a consumer can buy that connects to the web. Under the guidelines, even the tiniest Wi-Fi board must either have a randomized password or else generate a password upon initialization (through a smartphone app or other means). This password can’t be incremental (“password1,” “password54”), and it can’t be “related in an obvious way to public information,” such as MAC addresses or Wi-Fi network names. A device should be sufficiently strong against brute-force access attacks, including credential stuffing, and should have a “simple mechanism” for changing the password.

There’s more, and it’s just as head-noddingly obvious. Software components, where reasonable, “should be securely updateable,” should actually check for updates, and should update either automatically or in a way “simple for the user to apply.” Perhaps most importantly, device owners can report security issues and expect to hear back about how that report is being handled.

Violations of the new device laws can result in fines up to 10 million pounds (roughly $12.5 million) or 4 percent of related worldwide revenue, whichever is higher.

Besides giving consumers better devices, these regulations are aimed squarely at malware like Mirai, which can conscript devices like routers, cable modems, and DVRs into armies capable of performing distributed denial-of-service attacks (DDoS) on various targets.

As noted by The Record, the European Union’s Cyber Resilience Act has been shaped but not yet passed and enforced, and even if it does pass, would not take effect until 2027. In the US, there is the Cyber Trust Mark, which would at least give customers the choice of buying decently secured or genially abandoned devices. But the particulars of that label are under debate and seemingly a ways from implementation. At the federal level, a 2020 bill tasked the National Institutes of Standard and Technology with applying related standards to connected devices deployed by the feds.

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Court upholds New York law that says ISPs must offer $15 broadband

A judge's gavel resting on a pile of one-dollar bills

Getty Images | Creativeye99

A federal appeals court today reversed a ruling that prevented New York from enforcing a law requiring Internet service providers to sell $15 broadband plans to low-income consumers. The ruling is a loss for six trade groups that represent ISPs, although it isn’t clear right now whether the law will be enforced.

New York’s Affordable Broadband Act (ABA) was blocked in June 2021 by a US District Court judge who ruled that the state law is rate regulation and preempted by federal law. Today, the US Court of Appeals for the 2nd Circuit reversed the ruling and vacated the permanent injunction that barred enforcement of the state law.

For consumers who qualify for means-tested government benefits, the state law requires ISPs to offer “broadband at no more than $15 per month for service of 25Mbps, or $20 per month for high-speed service of 200Mbps,” the ruling noted. The law allows for price increases every few years and makes exemptions available to ISPs with fewer than 20,000 customers.

“First, the ABA is not field-preempted by the Communications Act of 1934 (as amended by the Telecommunications Act of 1996), because the Act does not establish a framework of rate regulation that is sufficiently comprehensive to imply that Congress intended to exclude the states from entering the field,” a panel of appeals court judges stated in a 2-1 opinion.

Trade groups claimed the state law is preempted by former Federal Communications Commission Chairman Ajit Pai’s repeal of net neutrality rules. Pai’s repeal placed ISPs under the more forgiving Title I regulatory framework instead of the common-carrier framework in Title II of the Communications Act.

2nd Circuit judges did not find this argument convincing:

Second, the ABA is not conflict-preempted by the Federal Communications Commission’s 2018 order classifying broadband as an information service. That order stripped the agency of its authority to regulate the rates charged for broadband Internet, and a federal agency cannot exclude states from regulating in an area where the agency itself lacks regulatory authority. Accordingly, we REVERSE the judgment of the district court and VACATE the permanent injunction.

Be careful what you lobby for

The judges’ reasoning is similar to what a different appeals court said in 2019 when it rejected Pai’s attempt to preempt all state net neutrality laws. In that case, the US Court of Appeals for the District of Columbia Circuit said that “in any area where the Commission lacks the authority to regulate, it equally lacks the power to preempt state law.” In a related case, ISPs were unable to block a California net neutrality law.

Several of the trade groups that sued New York “vociferously lobbied the FCC to classify broadband Internet as a Title I service in order to prevent the FCC from having the authority to regulate them,” today’s 2nd Circuit ruling said. “At that time, Supreme Court precedent was already clear that when a federal agency lacks the power to regulate, it also lacks the power to preempt. The Plaintiffs now ask us to save them from the foreseeable legal consequences of their own strategic decisions. We cannot.”

Judges noted that there are several options for ISPs to try to avoid regulation:

If they believe a requirement to provide Internet to low-income families at a reduced price is unfair or misguided, they have several pathways available to them. They could take it up with the New York State Legislature. They could ask Congress to change the scope of the FCC’s Title I authority under the Communications Act. They could ask the FCC to revisit its classification decision, as it has done several times before But they cannot ask this Court to distort well-established principles of administrative law and federalism to strike down a state law they do not like.

Coincidentally, the 2nd Circuit issued its opinion one day after current FCC leadership reclassified broadband again in order to restore net neutrality rules. ISPs might now have a better case for preempting the New York law. The FCC itself won’t necessarily try to preempt New York’s law, but the agency’s net neutrality order does specifically reject rate regulation at the federal level.

Court upholds New York law that says ISPs must offer $15 broadband Read More »

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Message-scraping, user-tracking service Spy Pet shut down by Discord

Discord message privacy —

Bot-driven service was also connected to targeted harassment site Kiwi Farms.

Image of various message topics locked away in a wireframe box, with a Discord logo and lock icon nearby.

Discord

Spy Pet, a service that sold access to a rich database of allegedly more than 3 billion Discord messages and details on more than 600 million users, has seemingly been shut down.

404 Media, which broke the story of Spy Pet’s offerings, reports that Spy Pet seems mostly shut down. Spy Pet’s website was unavailable as of this writing. A Discord spokesperson told Ars that the company’s safety team had been “diligently investigating” Spy Pet and that it had banned accounts affiliated with it.

“Scraping our services and self-botting are violations of our Terms of Service and Community Guidelines,” the spokesperson wrote. “In addition to banning the affiliated accounts, we are considering appropriate legal action.” The spokesperson noted that Discord server administrators can adjust server permissions to prevent future such monitoring on otherwise public servers.

Kiwi Farms ties, GDPR violations

The number of servers monitored by Spy Pet had been fluctuating in recent days. The site’s administrator told 404 Media’s Joseph Cox that they were rewriting part of the service while admitting that Discord had banned a number of bots. The administrator had also told 404 Media that he did not “intend for my tool to be used for harassment,” despite a likely related user offering Spy Pet data on Kiwi Farms, a notorious hub for doxxing and online harassment campaigns that frequently targets trans and non-binary people, members of the LGBTQ community, and women.

Even if Spy Pet can somehow work past Discord’s bans or survive legal action, the site’s very nature runs against a number of other Internet regulations across the globe. It’s almost certainly in violation of the European Union’s General Data Protection Regulation (GDPR). As pointed out by StackDiary, Spy Pet and services like it seem to violate at least three articles of the GDPR, including the “right to be forgotten” in Article 17.

In Article 8 of the GDPR and likely in the eyes of the FTC, gathering data from what could be children’s accounts and profiting from them is almost certainly to draw scrutiny, if not legal action.

Ars was unsuccessful in reaching the administrator of Spy Pet by email and Telegram message. Their last message on Telegram stated that their domain had been suspended and a backup domain was being set up. “TL;DR: Never trust the Germans,” they wrote.

Message-scraping, user-tracking service Spy Pet shut down by Discord Read More »