War, Sanctions and Crypto’s Big Moment

DINA TEMPLE-RASTON: Look out at the skyline of St. Petersburg, Russia, and it’s hard not to
notice that something has changed.

There are flags, Russian flags, everywhere.

STANISLAV: Only I can see the flags. Russian flags on every building, on the school, on the
libraries everywhere.

TEMPLE-RASTON: So, for patriotism?

STANISLAV: Yes, I think so. I think so.

TEMPLE-RASTON: That’s Stanislav.

He owns a marketing business in St. Petersburg, and he specializes in search engine

optimization. He’s asked us to just use his first name.

He’s 37 years old, bearded, and shaves his head.

And he’s been noticing lots of changes around him lately, like this big Z symbol that popped
up a month ago.

STANISLAV: A big Z like Zorro.

TEMPLE-RASTON: He first saw the Big Zorro-like Z painted on the tanks rumbling across the
border into Ukraine.

And now he sees it everywhere: on stickers, on dusty car windshields, and then, most
recently, stylishly inserted into words on State TV. And even on the jersey of a Russian
Olympian.

It is supposed to be a sign of unity. I’m with you, it is meant to say, and you and I are
supporting the fight against the Ukrainian government.

Stanislav – who is half-Russian, half-Ukrainian – says it feels more sinister than that.
STANISLAV: It means like you are working for the war, so like you’re supporting it… But it is
the same as the German swastika…

TEMPLE-RASTON: Swastika.

STANISLAV: I think for me, for me, it means the same thing.

TEMPLE-RASTON: This is supposed to bring Russians together, but Stanislav finds it

unsettling.

STANISLAV: Our kids are in private school now, but in the government schools [there] are
already some, I don't know how to say…there is one hour of patriotic education…

TEMPLE-RASTON: Patriotic education, he says…

STANISLAV: …and they are talking about like, uh, it's not a war, but this is, like, a special
operation to free Ukraine and so on.

TEMPLE-RASTON: This seems to be telling him something about the future.

But maybe the biggest challenge for Stanislav are the changes he’s seeing in his bank
account.

STANISLAV: The problem is, my business was generating for me, like for example 6,000
Euro a month for me and my family.

TEMPLE-RASTON: He was getting paid in rubles.

But now business is down. Way down.

STANISLAV: But now it is like four instead of six. In one month, I expect a decrease like 50
percent. So some clients will stop their marketing budgets…

TEMPLE-RASTON: Stanislav is struggling to survive in an economy the world is shunning.

Visa and Mastercard have frozen Russian credit card card transactions.
The value of the Ruble has fallen by nearly a half.

And if things keep going this way, he doesn’t know how he can survive.

STANISLAV: You will just pay with this money for, for the apartment, some food and that's it.
So it wouldn't be comfortable.

TEMPLE-RASTON: So Stanislav has to work around an economy in mid-collapse. And his

solution…

STANISLAV: I'm into cryptocurrency. Um, I have some, uh, knowledge of how to use it.

(MUSIC)

TEMPLE-RASTON: I’m Dina Temple-Raston and this is Click Here, a podcast about all things
cyber and intelligence.

Today, cryptocurrency’s big moment.

For years, advocates have claimed that digital currencies would democratize the global
marketplace and pave the way for finance — without The Man.

That theory is now being tested in a way it never has before: in Russia.

Stay with us.

(MIDROLL)

TEMPLE-RASTON: Stanislav wasn’t the only one noticing the unsettling signs of change in
St. Petersburg.

All his friends were too, and they were leaving.

STANISLAV: It's very hard when you see that all your friends — 90 percent of the friends
who understand what's going on are in shock. I think, already, five or six families of mine
have already left the country, um, by car, by airplane…
TEMPLE-RASTON: He said it’s scary because he can’t leave. His wife is nine months pregnant
and she can’t travel.

This isn’t the way they envisioned these last months playing out.

STANISLAV: We cannot fly. We cannot use the car to cross the border. And also there is —
there are some problems with the payments.

TEMPLE-RASTON: What he means is, sanctions are making it impossible for him to get paid.

STANISLAV: I have some clients from, uh, Netherlands, from Israel. They cannot even pay for
my services right now because my bank is blocked by sanctions. So I'm trying to find a
solution.

TEMPLE-RASTON: And that solution is crypto. Currencies like Bitcoin or Ethereum.

Unlike other financial institutions, crypto exchanges have chosen not to suspend service in
Russia.

They say they have stayed so that everyday Russians, like Stanislav, can try to keep going
even under sanctions.

It’s been small things. Crypto lets him pay for things like Netflix or his company’s Slack
subscription.

But it’s just a stopgap measure because crypto isn’t really designed to pay monthly bills.
There are commissions and transaction fees.

And it gets pricey.

STANISLAV: If you are trying to transfer someone $1,000, you can spend about $30 or $40
dollars for a commission. So it is a bit expensive, but, uh, like if you don't have any other
option, why don't you?

TEMPLE-RASTON: So running a small business on crypto is a bit of a pain.

But for Russians who are leaving with no intention of returning, converting all their ruble
savings into a digital currency can be a godsend — a Western Union Money transfer on
steroids…

…Which has led to another change in Stanislav’s life.

He’s become a kind of crypto guru, teaching friends and family how to use digital
currencies.

Case in point: His sister. She left Russia weeks ago; she’s in Egypt with his mom.

STANISLAV: So I'm trying to explain to her how to use [it] and some other friends of mine…

TEMPLE-RASTON: He’s explaining digital wallets, and how to set up foreign debit cards, and
how to put Bitcoin into overseas accounts.

STANISLAV: You take some rubles here, you buy some USDT on Binance.

TEMPLE-RASTON: USDT, that’s a cryptocurrency that is pegged to the US dollar.

And Binance is an online cryptocurrency exchange.

STANISLAV: You can use a peer to peer.

TEMPLE-RASTON: Essentially you know a guy, who knows a guy, who will trade crypto with
you.

STANISLAV: Even, you can go to the cafe and just sit with him by the table. You will send
them the transaction and they will give you the cash.

TEMPLE-RASTON: It’s working for his sister in Egypt. He’s been sending her money there.

STANISLAV: I'm trying to help my sister to have a job, uh, from outside of the country.

TEMPLE-RASTON: But she only has bank accounts in Russia, which are blocked from
international transactions. So, even if she finds a job, her paychecks can’t go into her
regular account.
STANISLAV: So the only way is for us to use the crypto currency.

TEMPLE-RASTON: But as we said before, crypto is a temporary fix.

It helps his sister while she tries to get set up in Egypt, but Stanislav can’t really go
invoice-to-invoice and paycheck-to-paycheck only using crypto.

And things look like they’ll get worse before they get better.

STANISLAV: The, the quality of, uh, of my life here, uh, will be radically decreased. So you
cannot buy the parts for your car, you cannot buy things for a newborn. You cannot buy any
furniture. So it will be like, I dunno. It's like we are decreasing, like, 20 years.

(MUSIC)

TEMPLE-RASTON: While crypto isn’t an ideal solution for Stanislav and his business, there is
one group it could be perfect for: Oligarchs.

When we come back, why Russia’s super rich are in love with crypto.

Stay with us.

(MIDROLL)

TEMPLE-RASTON: I’m Dina Temple-Raston, and this is Click Here. Welcome back.

When the United States dropped massive, historic sanctions on Russia, it was targeting
people who were supporting Russian president Vladimir Putin: the oligarchs.

Russia’s super rich who need access to the world economy.

ALEX STAMOS: So if you're a Russian oligarch, you're a billionaire, you have goods and
services you want to sell. There are lots of things you want to buy. You want to buy parts for
your yacht that hopefully for you has not been seized. You need to pay off your mistress in
Paris, uh, and pay for her apartment…

TEMPLE-RASTON: That’s Alex Stamos from Stanford University’s Internet Observatory and
the Krebs-Stamos group.

And he says this all makes sense: With the sanctions in place, you can’t use the traditional
banking system to do all that, so you turn to crypto.

And people are finding crypto wallets that seem to be full of oligarch money.

How they are moving money is under investigation, but the thinking is they are tapping into
a very specific group of Russians who have the skill set to help them: the local ransomware
gangs.

They’ve been collecting ransoms in cryptocurrency for years. They know how the system
works, and they know how to cover their tracks.

So, if you’re a well connected oligarch…

STAMOS: Maybe you get hooked up with somebody who has experience laundering Bitcoin
or other cryptocurrencies based upon ransomware.

(MUSIC)

But the U.S. Treasury, which is trying to enforce these sanctions, has gotten wise to this and
actually keeps a list of suspicious wallet numbers and tracks them.

STAMOS: And so I think one of the things that folks are gonna have to keep an eye on is a
pattern of transactions where money is being moved for many, many different smaller
wallets that have never existed before and then start to get consolidated.

TEMPLE-RASTON: Which makes you wonder, if crypto can help Stanislav keep his family fed
and help oligarchs — at least for now — maintain their lavish lifestyles, can it work for a
whole economy?

(MUSIC)
The short answer is no.

The reason? Cryptocurrency exchanges just can’t handle that kind of volume.

JUAN ZARATE: And I don't think the infrastructure's there to have the crypto ecosystem,
especially in Russia, sort of become an alternate financial universe that is used by the state
or by entities to transact.

TEMPLE-RASTON: That’s Juan Zarate.

He set up a sanctions and anti money-laundering office at the U.S. Treasury after 9/11. And
he says he can’t see how cryptocurrency exchanges could process enough transactions to
keep an entire economy humming — even if there weren’t sanctions in place.

In fact, no one has even attempted to do that for a sector of the economy, though people are
thinking about it. More about that in a minute.

ZARATE: It's very hard, I think, to do it systemically and at scale and the way that the
Russians would need. You know, that might be possible in three, four, five years from now,
but it's not possible now.

TEMPLE-RASTON: There’s another big reason why crypto isn’t going to help Russia work
around the sanctions, and we alluded to it before.

While there is something underworldly and mysterious about crypto, its transactions are
very transparent.

Every trade is recorded on an electronic ledger – known as the blockchain — and everyone
can see it.

That’s why authorities are finding oligarch wallets, and why they believe they would spot
any wholesale Russian attempt to use crypto to get around sanctions.

But Stamos says this is all uncharted territory. We’ve never just unplugged a major world
economy before, and there are bound to be surprises.

STAMOS: We don't really have any examples of taking such an important part of the world
economy and then turning them into North Korea and, uh, just the amount of money
sloshing around and kind of the deep integrations here. I think it poses a huge host of
challenges even outside the cryptocurrency world.

TEMPLE-RASTON: Last week, Russia announced that it might be willing to accept Bitcoin
from friendly countries as payment for its oil and gas exports.

(Pavel Zavalny, chair of Russia’s Duma committee on energy, speaking at a news

conference)

That’s the head of a committee on energy in the Duma, and he says Russia is willing to be
more flexible about the way it gets paid…

…kind of like Stanislav was willing to be.

Though he’s pretty realistic about what lies ahead. He knows he has to leave with his family,
and start somewhere else.

STANISLAV: Maybe in two, three months [we] go somewhere to the neutral side, like Turkey.
This is it.

This is it. No, no happy news. No optimism right now. I have to do what I can right now.

Ok, that’s it. Bye.

(MUSIC)

This is Click Here.

(BREAK)

TEMPLE-RASTON: We’re going to take a step back from Russia and Ukraine for a moment to
discuss another big name in cyber news this past week.

A rather unlikely one actually. I’m talking about Grimes.

(“OBLIVION” by Grimes)
I never walk about after dark
It's my point of view
'Cause someone could break your neck

TEMPLE-RASTON: Her real name is Claire Boucher.

She’s a Canadian musician, on-again-off-again girlfriend to Elon Musk, and apparently — if

she’s to be believed — the person behind a pretty infamous hack in the indie music world.

GRIMES VANITY FAIR: Oh yeah. Okay. So this one's funny, cause I always wanted to tell the
story about this one. Like back in the day, I actually got canceled for this…

TEMPLE-RASTON: That’s Grimes during a Vanity Fair interview earlier this month, and the
“this” she’s referring to is a photo of her kissing another woman at a party.

It appeared in the celebrity gossip blog Hipster Runoff about ten years ago. And it went
viral, which upset Grimes.

GRIMES VANITY FAIR: And it was like, ‘Grimes Gone Wild’ or something…

TEMPLE-RASTON: The reason we’re telling this story is because of what happened next:
Grimes says she talked to a computer savvy friend and…

GRIMES VANITY FAIR: We were actually able to DDoSs Hipster Runoff and, um, basically
blackmail them. We were like, like, we're not gonna let you run your, put your site back up
until you take the story down. And he did in fact, take the story down. And it was my coolest
hacker moment.

JACKIE SINGH: I was just absolutely floored to hear her essentially admitting to a crime and
doing so in such a nonchalant manner.

TEMPLE-RASTON: That’s Jackie Singh. She works in information security and writes a blog
called Hacking But Legal.

SINGH: It was impressive, to be honest. That didn't really seem like she understood what it
was that she was sharing with the world.

TEMPLE-RASTON: But here’s the thing. Even though Grimes has more than a million
followers on social media and the Vanity Fair interview was up for about a week, no one
really reacted to the news…except for Jackie Singh, who decided to write about it.
SINGH: Well, she used the word ‘blackmail,’ which is a little futher and really a different
characterization of this incident beyond the denial of service or distributed denial of service
that she indicated that she was involved in.

TEMPLE-RASTON: So to put this all in context, back in the 2000s the Hipster Runoff blog
was a big deal. It called itself the ‘blog worth blogging about.’

And it made fun of alternative culture and the indie music world, sometimes in a mean way.

Think TMZ, but a blog.

SINGH: The person running the site was pseudonymous. And so they would attack
celebrities and, um, local indie music scene artists and, you know, essentially pass judgment
on them in a way that maybe it wasn't very nice and had racist and sexist overtones.

TEMPLE-RASTON: Then the blog took aim at Grimes. Not just with that photo we mentioned
before, but with other things, too.

SINGH: Some of the headlines were quite ugly. Things like ‘Ohio school shooting teen TJ
Lane listened to Grimes. Has fringe indie become the sound of teenage angst?’

TEMPLE-RASTON: And then the Hipster Runoff blog gets hacked.

And not in a small way. It wasn’t just a simple distributed denial of service attack. The hack
did some real damage.

SINGH: The disc had crashed, the remote backups were sabotaged, you know, all of their
previous backups of the site, all of the data that they had, all of the posts on the site had
been removed. They had to completely redo the site. They had to use a new server and
rebuild from scratch. And, eventually, the site sold very soon after that.

TEMPLE-RASTON: And there are some other clues that suggest that Grimes isn’t just
making up this cool hacker moment.

After the hack, the blog seemed to avoid covering her.

SINGH: From April 2012 all the way through to October 2013, based on the posts I saw on
[Link] and the searches I performed, I wasn't able to find anything else about Grimes.
And so it kind of seemed like she became a topic that they wouldn't touch, which in my
opinion lends some credence to the thought that they may actually have been blackmailed.

For years, the question of who hacked and helped shut down Hipster Runoff was a lingering
question.

And now — 10 years later — we come to find out that Grimes says it was her.

SINGH: And so it's, um, pretty interesting that someone who's ranting about cancel culture
and wokeness had taken it upon herself to essentially apply, cancel culture to someone else
by force.

(MUSIC)

(HEADLINES MUSIC)

ARCHIVAL SOUND: NEWS ON THE MARCH!

TEMPLE-RASTON: Here are some of the important cyber and intelligence headlines this
week:

The Justice Department unsealed indictments against four Russian nationals revealing a
widespread campaign to hack energy companies around the world.

The men used Triton malware on a refinery’s Schneider Electric safety systems between May
and September 2017 and took aim at the industrial control systems of a number of global
energy facilities, with the intention of physically damaging them.

Mustang Panda, the advanced persistent threat group that made a name for itself hacking
the Vatican a couple of years ago, is at it again. ESET research found the group targeted
research entities, internet service providers and European diplomatic missions located in
East and Southeast Asia.

And to entice their victims, Panda used files that promised the latest news in Ukraine,
changes to COVID-19 travel restrictions, and an update on regulations from the European
Parliament.
The Senate Armed Services Committee has advanced President Joe Biden’s pick to lead the
U.S. Army’s Cyber Command. The Record first reported in December that Biden would select
Maj. Gen. Maria Barrett as the first female chief of the service’s digital warfare unit. Her
nomination is winding its way through the approval process.

And finally, the White House continues to warn U.S. companies that they could be in the
crosshairs for a cyberattack from Russia.

Deputy National Security Advisor Anne Neuberger called on U.S. companies to gird
themselves.

ANNE NEUBERGER: The steps that are needed to lock our digital doors need to be done
across every sector of critical infrastructure. And even those sectors that we do not see any
specific threat intelligence for, we truly want those sectors to double down and do the work
that's needed.

(MUSIC)

TEMPLE-RASTON: Today’s episode was produced by Will Jarvis and Sean Powers, and it was
edited by Lu Olkowski, with fact-checking from Darren Ankrom. Ben Levingston composed
our theme and original music for the episode. We had additional music from Blue Dot
Sessions.

Click Here is a production of The Record Media.

And we want to hear from you. Please leave us a review and rating wherever you get your
podcasts. And you can connect with us at [Link]

And, just because we love this original composition so much, we’ll go out with Ben
Levingston’s crypto theme.

(MUSIC)

I’m Dina Temple-Raston. We’ll be back on Tuesday.