Tech Brew Ride Home - Tue. 02/20 – LockBit Ransomware Gang Taken Down

Episode Date: February 20, 2024

Perhaps the biggest law enforcement action against a ransomware gang ever. Once again, you could view other people’s cameras on your Wyze camera. How Anthropic is raising to do battle with OpenAI. Are the VCs flocking back to San Francisco? And comprehensive proof that defense tech is the new VC hotness. Links: FBI Seizes LockBit Hacking Websites in Ransomware Disruption (Bloomberg) Wyze outage led to the cameras of 13,000 customers being shown to other users (9to5Google) Reddit Signs AI Content Licensing Deal Ahead of IPO (Bloomberg) Inside the Funding Frenzy at Anthropic, One of A.I.’s Hottest Start-Ups (NYTimes) Tech Leaders Fled San Francisco During the Pandemic. Now, They’re Coming Back. (WSJ) UK, Allies Look to Arm Ukraine With AI-Enabled Swarm Drones (Bloomberg) How Silicon Valley learned to love America, drones and glory (Washington Post) Pursuing ‘American Dynamism,’ Andreessen Horowitz Ups Its Game in DC (Bloomberg) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Tuesday, February 20th, 2024. I'm Brian McCullough today. Perhaps the biggest law enforcement action ever against a ransomware gang. Once again, you could view other people's cameras on your way's camera.

How Anthropic is raising to do battle with OpenAI are the VCs flocking back to San Francisco and comprehensive proof that defense tech is the new VC hotness. Here's what you miss today in the world of tech. Law enforcement from 11 countries, including the FBI and the UK, National Crime Agency have disrupted the Lockbit Gang and seized 11,000 domains used to facilitate ransomware, quoting Bloomberg. A post on the gang's website Monday said, it's now under the control of the UK agency, the FBI, and other law enforcement agencies. LockBit has caused enormous harm and cost no longer. Graham Bigar, Director General of the National Crime Agency said at a press

conference on Tuesday, we have hacked the hackers. We have taken control of their infrastructure, their source code and obtained keys that will help victims decryp their systems, end quote. LockBit specializes in using malicious software known as ransomware to encrypt files on its victim's computers, then demanding payment to unlock the files. The operation recruits hackers to conduct the cyberattacks using LockBitt's tools and infrastructure. LockBit gets a cut of any ransom extorted in the hacks. The group was responsible for last year's attack on the U.S. arm of Industrial and Commercial Bank of China, which disrupted the $26 billion U.S. Treasury Market. It also took down a website that Boeing uses to sell spare aircraft parts, software, and services. Agents seized control

of LockBitt's equipment, including servers with victim data, file share servers, and communication servers that will help authorities return stolen data to the companies and other organizations hacked by LockBit. We'll be notifying victims here soon, a law enforcement spokesperson said in an interview. Lockbit first came to prominence in 2021, calling itself LockBit 1.0, and in 2022, it became Lockbit 2.0, and its latest iteration is LockBit Green. One of the group's most recent victims was Equiland, the trading platform which processes thousands of dollars of transactions a month, says the incident on January 22nd affected some automated securities lending services. The hacking group has claimed 1,600 victims in the U.S. and 2,000 internationally, according to the FBI. A good majority are

within the private sector and the FBI said it's tracking 144 million ransoms paid in relation to lock-bit attacks. Jean-Philippe Lecoff, Deputy Executive Director of Operations for Europol, said at the press conference that the takedown is, quote, by far the biggest ransomware case coordinated by Europol and involved months of planning and actions, end quote. Wise says around 13,000 customers could briefly see other customers' camera feeds, rhyming with a similar issue Wise had from back in 2023. Wise blames glitches in rebooting systems after an AWS outage, quoting 9 to 5 Google. Last week, Wise users experienced a major outage that took down camera feeds for several hours.

The outage was attributed to a problem with AWS, Wise said, but as the cameras came back online, some users started to notice camera feed thumbnails that weren't from their own cameras. Wise confirmed over the weekend that, yes, camera thumb, were accidentally accessible from other user systems for a brief period. The thumbnails were seen in the Wise app's events tab and showed images, not full clips, from cameras that were not from a user's own cameras. The company at the time mentioned to The Verge that the issue had been reported by just over a dozen users, but the actual impact was far greater. In a round of email sent to Wise customers overnight, Wise explains that this thumbnail issue affected roughly 13,000 customers.

thumbnails from other accounts were sent to that huge number of Wise owners, and the company says that just over 1,500 of those users tapped on the thumbnails from other users. Wise explains on its forums that the emails were sent in three variants. One email was sent to all customers unaffected by the issue, one sent to those affected, and a third to users whose thumbnails were not only visible to others, but were tapped on to be enlarged. That led to some uncomfortable situations, including from one Reddit user, a 23-year-old woman who was, quote, getting ready for work during the outage. In the email, Wise explains that the issue was caused by a third-party caching client library that was recently integrated. The system had trouble handling all of Wise's cameras coming back online at once after the outage was resolved, which led to, quote, mixed-up device ID and user ID mapping. Wise also notes that, quote, to make sure this

doesn't happen again, a new layer of verification has been added before users are connected to event videos, end quote. Over the weekend, Bloomberg was reporting that Reddit signed a deal early in 2024 worth around $60 million on an annualized basis, which will allow a large unnamed AI company to train its models on Reddit's content. Quote, Reddit had more than $800 million in revenue last year about a 20% increase over its 2022 figure. People familiar with the matter have said the ability to profit from the AI wave sweeping the corporate world could help Reddit tap into investors' enthusiasm for the technology and boost its IPO. The company has been advised to consider a valuation of at least $5 billion.

in an IPO which could launch as soon as next month, Bloomberg News has reported, end quote. And quoting the verge. Until recently, most AI companies train their data on the open web without seeking permission. But that's proven to be legally questionable, leading companies to try to get data on firmer footing. It's not known what company Reddit made the deal with, but it's quite a bit more than the $5 million annual deal OpenAI has reportedly been offering news publishers for their data. Apple has also been seeking multi-year deals with major news companies that could be worth at least $50 million, according to the New York Times. The news also follows an October story that Reddit had threatened to cut off Google and Bing's

search crawlers if it couldn't make a training data deal with AI companies. The rumors source told the Washington Post then that the company, quote, can survive without search, end quote. As Paul Kodroski said on threads, quote, everyone sharing content online, including here, is now just an unpaid day laborer on someone else's LLM training farm. The only difference is that some companies make it more obvious than others, end quote. From the file of the new horse race among the big AI startups, the New York Times takes a look at how Anthropic has been trying to keep pace with Open AI by raising $7.3 billion in just the past year, including using unusual deal structures. Sources say Anthropics' valuation

tripled to $15 billion and its monthly revenue recently hit $8 million. quote. Last May, Anthropic, one of the world's hottest artificial intelligence startups, raised $450 million from investors, including Google and Salesforce. It was the beginning of an astonishing funding spree. By August, Anthropic had landed $100 million from two Asian telecoms, then Amazon committed $4 billion to it, followed by $2 billion more from Google. This month, the venture capital firm Menlo Ventures closed the deal to invest $750 million. All told, the AI startup hauled in $7.3 billion in a year. Its five funding deals stood out not just for their speed and size, but for their unusual structures. In one of those deals, Anthropic agreed to use

technologies such as chips and cloud computing services from the companies that invested in it. That meant in effect that some of the money it raised would be pumped back into its investors. And to consolidate smaller investors who were interested in Anthropic, Menlo created a legal entity known as a special purpose vehicle. These deals are so complicated, said Dave Brown and Amazon on Web Services, Vice President who was involved in Amazon's deal with Anthropic. Do you companies better illustrate that than Anthropic, which makes a chatbot called Claude and sells various forms of its AI technology. Over the last year, the start-s valuation has tripled to $15 billion, three people with knowledge of its finances said. It hit roughly

$8 million in monthly revenue last year and expects that to grow by around eight-fold this year, two of the people said. Since founding Anthropic in 2021, Dario Amo Dye, the chief executive and his sister Daniela, M.O. Dye, the president, have positioned it as a startup that would build AI with guardrails. In a podcast interview last year, Dario said there was a 10 to 25% chance that AI technology could destroy humanity. But if that doesn't happen, he said, it'll go not just fine, it'll go really, really great, end quote. Well, and this is, of course, anecdotal. The journal says that all this AI excitement is drawing the VC diaspora back from Miami. Quote, in 2020, venture capitalist Keith Rabeau urged startup founders to join him in ditching San Francisco for Miami,

touting the city's relative safety, lower taxes, and tech-friendly mayor. The self-proclaimed contrarian investor who made a fortune backing company such as Airbnb and DoorDash once tweeted that San Francisco was, quote, miserable on every dimension. The hard pivot to Miami has faltered. Several of the startups that Reboy backed are relocating or opening offices elsewhere to better attract engineering talent. Late last year, he was pushed out of his old venture firm Founders Fund after falling out with some colleagues. Now he plans to spend one week a month in San Francisco for a new employer, Kosovo Ventures, and is busy renovating a house there. During the pandemic scores of Silicon Valley investors and executives such as Reboi decamped to sunnier American cities, criticizing San Francisco's government as dysfunctional and the city's relatively high cost.

of living. Tech firm founders touted their success at raising money outside the Bay Area and encouraged their employees to embrace remote work. Four years later, that bet hasn't really worked out. San Francisco is once again experiencing a tech revival. Entrepreneurs and investors are flocking back to the city, which is undergoing a boom in artificial intelligence. Silicon Valley leaders are getting involved in local politics, flooding city ballot measures and campaigns with tech money to make the city safer for families and businesses. Investors are also pushing startups to return to the Bay Area and bring their employees back. into the office. San Francisco has largely weathered the broader crunch in startup funding. Investment

in Bay Area startups dropped 12% to $63.4 billion last year, but by contrast, funding volumes for Austin, Texas, and Los Angeles to smaller tech hubs dropped 27 and 42% respectively. In Miami, venture investment plunged 70% to just $2 billion last year. An ecosystem such as San Francisco's that has been built over the last 50-plus years doesn't just doubt. because of a pandemic for a few years, said Mo Coithman, founder of venture firm Shine Capital. He pointed to the proximity of universities such as Stanford as reasons why top-tier venture firms need to maintain a presence in the Bay Area, end quote. Finally today, from my file of letting you know that defense tech is the new hotness in Silicon Valley,

a few stories to back up that assertion. First up, there's a ton of conflicts around the world, if you haven't noticed, and military tech is playing a huge role in those conflicts. So, military tech is potentially an endless market at the moment. For example, Bloomberg says that the U.S., UK, and other allies are working to provide Ukraine with thousands of new AI-enabled drones that could swarm Russian targets simultaneously. This has been the longtime dream slash nightmare of drone warfare for a while now. Quote, Western military planners developing the technology believe it could allow Ukraine to overwhelm certain Russian positions with the unmanned vehicles, said the people who asked not to be identified discussing sensitive matters. The drones could be sent to Ukraine within months, they said,

while warning the timeline could slip. Drones have become increasingly important in the Russia-Ukraine war as the conflict approaches the two-year mark and a global race is on to develop new technologies that could shape the future of warfare. Russia is ramping up its own domestic production of battle drones to support the invasion and has received significant supplies from its ally Iran. A coalition of Ukraine's allies has pledged to deliver one million drones to the country, within a year, and the military said it used naval drones to destroy a Russian warship in the Black Sea last week. In January, White House officials met defense companies to discuss innovative battlefield technologies that could aid Ukraine in its bid to combat Russia's invasion, end quote.

One million drones. What did I say about a potentially bottomless market? Here's data point number two, quoting the Washington Post. Hundreds of bright young technologists have landed in California this weekend for a two-day hackathon, a quintessential startup contest, in which teams of coders race to build software. But rather than a posh, snack-laden San Francisco office, they'll work in a cavernous 6,000-square-foot warehouse in El Segundo, a refinery town southwest of Los Angeles. And instead of building mobile apps or AI chatbots,

competitors will hack together surveillance tools, electronic warfare systems, or drone countermeasures for the front lines in Ukraine, battlefield technology driving a funding frenzy among tech investors. Build hard tech for the defense of the West, a hackathon judge wrote on X encouraging applicants, defense, drones, gundo, and organizer wrote using the city's nickname to promote the event. Between 2021 and 2023, investors funneled $108 billion into defense tech companies building a range of cutting-edge tools, including hypersonic missiles, performance-enhancing wearables, and satellite surveillance systems according to the data firm

pitchbook, which predicts the defense tech market will surge to $184.7 billion by 2027. skepticism against defense work has faded for younger generations raised on the tumult of foreign wars, a financial crisis and the rising threat of China, said hackathon organizer Rasmus De Meyer, a 20-year-old junior at Georgetown University School of Foreign Service. In the world's fragile state, Day Meyer said, quote, it's a lot more socially acceptable to be unabashedly patriotic in the national interest, end quote. To some among this new crop of tech workers and startup founders, defense contracting is a higher calling to extend American ideals into the next century. This group of mostly men believes in hard work, real innovation, and family values.

They're eager to accelerate progress for America, and a growing number of investors can't wait to back them, end quote. On that, here's anecdote number three. Bloomberg took a look at A16Z's growing DC lobbying operation, which spent almost $1 million in 2023, easily the most among VCs, and a lot of that was spent to help its defense-focused startups. Quote, A16Z's main priority is now its American dynamism practice, whose strategy is to invest in companies that work in sectors bolstering U.S. national interests. These include the aerospace company SpaceX, billion-dollar startups focused on military contracts such as Anderil and Shield AI, a startup called Radiant that's working on portable nuclear reactors and the supply chain startup flexport.

David Ullovich, one of the A16C partners in charge of the practice, sees these as areas where the firm's commercial interest can line up with the idealism of the people who work there. I am very patriotic. That's why I want to spend my time doing this, he says. But we do see this as a massive opportunity for our investors and to really build companies that have massive impact. Last year, the firm said it would dedicate $500 million to the practice. As of late 2023, it had invested more than three times that, according to Yulevich. Defense and aerospace in particular have become areas of increasing interest to the tech industry. Amazon, Google, and Microsoft have been pursuing government cloud computing

deals. Anderil and SpaceX have become multi-billion-dollar concerns by winning government contracts and venture capitalists are eager to put money into defense and space startups. Investors plowed $32.4 billion into such companies in 2023 more than four times the $7.7 billion they invested in 2017, according to data provider pitchbook. Concerns about conflict with Russia and China have only accelerated this trend. Sentiment has changed with the invasion of Ukraine, says Amelia Pobasco, a senior fellow who studies tech and national security at Georgetown. Center for Security and Emerging Technology. People are eager to show that America does have values and they're worth defending, she says, end quote. Nothing for you today. Talk to you tomorrow.