Posting photos of your luxury cars on social media is probably not the best idea if you are a hacker committing cybercrime. Yet that’s exactly what Karim Baratov did. It is therefore not surprising that the 22-year-old Canadian got caught and pleaded guilty in November to being involved in the Yahoo hack, the biggest data breach ever (to date). That cybercrime is lucrative isn’t news, of course, but the Baratov case stands out because the indictment details his relationship with the FSB, a Russian intelligence service on the other side of the planet.
Former Soviet states boast citizens with highly developed technical skills, thanks to university departments in math, engineering, and computer science that have ranked among the world’s best for decades. It is the result of systematic literacy campaigns after the 1917 revolution, with the campaigns boosting the literacy rate from 22 percent at the beginning of the 20th century to full literacy by the time the Soviet Union collapsed. While states that used to be part of the Soviet Union still rank among the world’s most literate and educated societies, unemployment has risen, and the economy has not been able to absorb this technically skilled workforce. The economic crash in 1998 exacerbated the problem. It’s estimated that only 50 percent of Russian software companies survived the downturn. Around the same time, cybercrime started to become a growing and lucrative business.
The use of cyber proxies in the former Soviet Union today tells us a lot more about the political realities in those countries than just the role that hackers play.
The same challenges persist today. For example, someone in his 20s holding a cybersecurity job in the Ukrainian government today would earn roughly $3,000 a year. And while Samsung has one of its largest R&D centers in Kiev, the private IT industry is neither large nor attractive enough to absorb the available skilled labor. As Alexei Borodin, a hacker, put it, “People think: ‘I’ve got no money, a strong education and law enforcement’s weak. Why not earn a bit on the side?’ ” In sum, there is no labor shortage in the region when it comes to information technology and hacking, but the legitimate industry is not big enough to absorb all of the labor, and government salaries of a few thousand dollars a year pale in comparison to reports of thousands or millions made in the latest cyber heist. At the turn of the 21st century, several hundred Russians had already participated in hacking competitions such as the one organized by Hackzone.ru, and hacker magazines had a monthly circulation in the tens of thousands. By 2014, the Moscow-based cybersecurity company Group-IB estimated the size of the cybercrime market in Russia alone to be $2.3 billion. Since hackers take great care not to target people within the area of the former Soviet Union but focus on victims in the United States and Europe, it is not surprising that few arrests are made by Russian law enforcement agencies. The Russian government often does not respond to requests for assistance from foreign law enforcement agencies and frequently protests when Russian nationals are arrested abroad. For example, when Vladimir Drinkman, a Russian national wanted for committing cybercrime, was arrested while vacationing in Amsterdam in 2012, the Russian government tried to block the U.S. government’s extradition request by filing its own extradition request, thereby at least delaying prosecution.
“Russian law enforcement and the FSB in particular have a very good idea of what is going on and they are monitoring it, but as long as the fraud is restricted to other parts of the world they don’t care,” said cybercrime expert Misha Glenny. Another indication that the Russian government can effectively enforce the law if it so chooses is the fact that malware used by Russian and east European cybercriminals is often designed so that it “purposefully avoids infecting computers if the program detects the potential victim is a native resident.” For example, one site pays people for installing its adware and spyware on machines in dozens of countries but points out on its website that “[w]e do not purchase Russian and CIS [Russian Commonwealth] traffic.” When Russian hackers do target victims in Russia, Moscow’s response is swift and harsh. In 2012, eight men were arrested by Russian police after stealing some $4 million from several dozen banks, including some in Russia. According to security blogger Brian Krebs, “Russian police released a video showing one of the suspects loudly weepingin the moments following a morning raid on his home.”
The state’s tolerance of criminal activities, or rather people abusing state authority for private gain, can become even more convoluted. Take the example of Dmitry Ivanovich Golubov (Dmytro Holubov), a 33-year-old Ukrainian national from Odessa. Wanted by U.S. law enforcement as a top cybercriminal accused of credit-card fraud, Golubov was briefly imprisoned in 2005 “until two influential Ukrainian politicians convinced a judge to toss out the case,” according to a former FBI agent who investigated the case. After founding the Internet Party of Ukraine in 2007, Golubov has been a member of the Ukrainian Parliament since 2014. The reason he pursued a seat in the Ukrainian Parliament? According to Krebs, “[G]ain[ing] a seat in the Ukrainian government … would grant him automatic immunity from prosecution for criminal activities under Ukrainian law.”
A similar example is Roman Valerevich Seleznev, a 33-year-old Russian national and the son of Valery Seleznev, a member of the Russian Parliament and the ultranationalist Liberal Democratic Party. He was convicted by a U.S. federal jury of financial cybercrime that reaped millions in profit. The Secret Service arrested him while he was on vacation in the Maldives rather than trying to work with the Russian government to arrest him—perhaps because of his family connections and certainly because of Russian law enforcement agencies’ general reluctance to cooperate. Seleznev’s arrest caused significant tension between Moscow and Washington. The Russian Ministry of Foreign Affairs accused the U.S. government of having “kidnapped” Seleznev when it arrested him as he was boarding a plane in the Maldives and transferred him to Guam and then to Seattle. (In court in the United States, Seleznev’s defense tried to challenge the circumstances of the arrest but was unsuccessful.)
The Russian Ministry of Foreign Affairs maintains that “the practice of detaining Russian citizens following U.S. requests to third countries all over the world is a legal abuse and violation of internationally recognised proceedings.” When the U.S. government used a fake job interview to trick a suspect, Vasily Gorshkov, into traveling to the United States, and U.S. law enforcement agents accessed Gorshkov’s computer in Russia, the Russian government therefore also protested. Such action, they said, “violated a 1997 agreement that mandates ‘investigation and prosecution of international high-tech crimes must be coordinated among all concerned states, regardless of where harm has occurred.’ ” In the weeks leading up to a December 2015 visit by Secretary of State John Kerry, the ministry demanded that “U.S. law enforcement authorities stop the hunt for Russian citizens in other countries.”
Such sanctioning can turn into more proactive interest from the government. In some cases, entering a proxy relationship allows a nonstate actor to avoid arrest, as described by Oleg Gordievsky, the former head of the KGB office in London, who said in 1998 that “[t]here are organised groups of hackers tied to the FSB and pro-Chechen sites have been hacked into by such groups. … One man I know, who was caught committing a cybercrime, was given the choice of either prison or cooperation with the FSB and he went along.” In such cases, in return for their cooperation, the hackers not only avoid prison but are actively defended by the Russian government. Cybersecurity experts Alexander Klimburg and Heli Tiirmaa-Klaar described one such case in which the Tomsk FSB office described malicious activity against pro-Chechen websites in 2002–2004 as being legal. This system of the FSB turning hackers into proxies for internal and external offensive cyber operations was also reaffirmed by Sergei Pokrovsky, the editor of the hacking magazine Khaker, and Vasilyev, a convicted hacker and the head of the Moscow Civil Hacking School.
That brings us back to the Yahoo hack. In March, the U.S. government unsealed an indictment that offered unprecedented insight into the relationship between FSB officials and cybercriminals. It reinforced previous anecdotal evidence and offered new details as to why and how this proxy relationship was beneficial to all parties involved. The indictment listed three Russian citizens living in Russia, including two FSB officers as well as a Canadian national residing in Canada, accusing them of cybercrime and espionage primarily targeting Yahoo starting in January 2014. The two FSB officers were Igor Anatolyevich Sushchin, 43, and Dmitry Aleksandrovich Dokuchaev, 33. Both belonged to the FSB’s Center for Information Security. (Sushchin was Dokuchaev’s superior.) They were accused of targeting the online accounts of specific individuals, including journalists and government officials in the United States and Russia, as well as private sector officials in the financial, transportation, and other sectors. To achieve their objectives, they worked with two cybercriminals: the Russian citizen Alexsey Alexseyevich Belan, also known as “Magg,” 29, and the Canadian, Karim Baratov, also known as “Kay,” “Karim Taloverov,” and “Karim Akehmet Tokbergenov,” 22. According to the indictment, the two FSB officers “protected, directed, facilitated and paid [the] criminal hackers to collect information through computer intrusions in the U.S. and elsewhere.”
What was the benefit for Belan and Baratov to work with the FSB? For Belan, it was avoiding a U.S. prison. He had been indicted in the United States in 2012 and 2013 for various cybercrimes and was arrested in Europe in June 2013. However, he managed to escape to Russia before being extradited. In spite of Interpol issuing a Red Notice for his arrest in July 2013 and the FBI adding him to its Cyber’s Most Wanted criminals list in November 2013, the Russian government refused to arrest him. The indictment reveals that the Russian government instead “used him to gain unauthorized access to Yahoo’s network.” In addition to avoiding having to face charges in a U.S. court, Belan benefited from information shared by the FSB officers that helped him “avoid detection by U.S. and other law enforcement agencies outside Russia, including information regarding FSB investigations of computer hacking and FSB techniques for identifying criminal hackers.” Finally, Sushchin and Dokuchaev turned a blind eye to Belan’s enriching himself on the side: In addition to providing them with access to Yahoo accounts, “Belan used his access to steal financial information such as gift card and credit card numbers from webmail accounts; to gain access to more than 30 million accounts whose contacts were then stolen to facilitate a spam campaign; and to earn commissions from fraudulently redirecting a subset of Yahoo’s search engine traffic.”
For Baratov, residing in Canada, the incentive was money. Whereas Sushchin and Dokuchaev used Belan to gain access to targets’ Yahoo accounts, they asked Baratov to gain access to a target’s accounts with other providers and paid a bounty in return. According to the indictment, “When Baratov successfully obtained unauthorized access to a victim’s account, he notified Dokuchaev and provided evidence of that access. He then demanded payment—generally approximately U.S. $100—via online payment services. Once Dokuchaev sent Baratov a payment, Baratov provided Dokuchaev with valid, illicitly obtained account credentials.” Baratov was arrested in Canada on March 14.
The use of cyber proxies in the former Soviet Union today tells us a lot more about the political realities in those countries than just the role that hackers play. Even 25 years after the Soviet Union’s collapse, it is clear that the economic situation remains dire enough to provide fertile ground for criminal activity—activity that in the digital age can be far removed from the victim and allow the perpetrator to avoid arrest and often even detection. The amount of money at stake has also made it attractive for corrupt local officials to work with those technically savvy enough to pull off cyber heist after cyber heist. The new possibilities enabled by offensive cyber operations and those able to conduct them have also drawn the attention of intelligence agencies. The combination of economic hardship, relative impunity, and high reward has created an environment in which malicious activity is permitted as long as certain rules are followed, primarily finding victims abroad rather than at home.
The availability of highly skilled and technically well-versed individuals also presents a pool of potential proxies that can be mobilized at a moment’s notice. Often, people will mobilize themselves and take political action in support of the government, as has happened in Estonia in 2007 and in Ukraine since 2014. Governments differ in their ability to catalyze such activity and the extent to which they are in a position to merely endorse, orchestrate, or actively direct their outcomes. In countries where public institutions and the state’s ability to exercise control have deteriorated, it is an uphill battle to break the increasingly entrenched incentive structures reinforcing existing proxy relationships. Meanwhile, the controversy over law enforcement cooperation, including mutual legal assistance and extradition, shows the limits of international cooperation and external influence. The phenomenon described in this chapter is therefore a cautionary tale of the potential pitfalls when a state significantly weakens or collapses and the consequences that will reverberate for decades to come.