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As the dust settles on yesterday evening's revelation that the U.S. government has been mining data from most of Silicon Valley's largest companies in a program called "PRISM," one question stands out: How did the NSA get access? Apple, Google, Yahoo! and Microsoft, the largest companies involved in PRISM, the existence of which was revealed last night in a simultaneous Washington Post and Guardian scoop, have categorically denied knowledge of or participation in the program in a series of statements, while acknowledging that they do provide targeted access to the government when required to do so by law, generally according to court orders.

So what gives? Does the government have backdoor access so secret that not even their targets are aware? Are the tech companies lying? Or are they forbidden—as Verizon allegedly is with its NSA arrangement—from acknowledging its existence to an absurd extent?

An excerpt of investigative reporter Glenn Greenwald's new book No Place to Hide published today in The Guardian asserts that the National Security Agency "routinely" bugs computer network equipment made in the United States and sent to customers abroad: A June 2010 report from the head of the NSA's Access and Target Development department is shockingly explicit. The NSA routinely receives – or intercepts – routers, servers, and other computer network devices being exported from the US before they are delivered to the international customers. Advertisement The agency then implants backdoor surveillance tools, repackages the devices with a factory seal, and sends them on. The NSA thus gains access to entire networks and all their users. The document gleefully observes that some "SIGINT tradecraft … is very hands-on (literally!)". The excerpt doesn't say whether the bugging was done to entire shipments of equipment (as opposed to individual items ordered by specific surveillance targets).

The High Court in Ireland has referred a review of a complaint against Facebook to Europe's top court. The complaint alleges the social network shared EU users' data with the US National Security Agency.The European Court of Justice is to assess whether EU law needs to be updated in light of the PRISM revelations, which could have a knock-on effect on tech firms from Facebook to Google. <a href="http://pubads.g.doubleclick.net/gampad/jump?iu=/6978/reg_policy/government&sz=300x250%7C300x600&tile=3&c=33U6KvJawQrMoAAAUTy6EAAAJ5&t=ct%3Dns%26unitnum%3D3%26unitname%3Dwww_top_mpu%26pos%3Dtop%26test%3D0" target="_blank"> <img src="http://pubads.g.doubleclick.net/gampad/ad?iu=/6978/reg_policy/government&sz=300x250%7C300x600&tile=3&c=33U6KvJawQrMoAAAUTy6EAAAJ5&t=ct%3Dns%26unitnum%3D3%26unitname%3Dwww_top_mpu%26pos%3Dtop%26test%3D0" alt=""></a> Austrian law student Maximillian Schrems took Facebook to court in Ireland, where the social network’s European HQ is located, over the revelations from NSA whistleblower Edward Snowden that personal data held by tech firms like Facebook was routinely being slurped by US spooks.

Schrems first asked the Irish Data Commissioner to investigate the legality of Facebook Ireland sending his info over to the States, where it could be seen by the security services, but when the commissioner refused to investigate, he sought a judicial review at the High Court.The Commissioner had ruled that Schrems didn’t have a case because he couldn’t prove that anyone had slurped his data in particular and anyway, the EU has an agreement with the US under the “Safe Harbour” principle decided way back in 2000. This principle governs data flow from Europe to United States and allows US firms to self-certify themselves as respectful of European data protection rules.High Court Justice Gerard Hogan said Schrems did not need to prove that his own data had been spied upon to make a complaint.“Quite obviously, Mr Schrems cannot say whether his own personal data has ever been accessed or whether it would ever be accessed by the US authorities,” he wrote in his ruling.

“But even if this were considered to be unlikely, he is nonetheless certainly entitled to object to a state of affairs where his data are transferred to a jurisdiction which, to all intents and purposes, appears to provide only a limited protection against any interference with that private data by the US security authorities.”However, he said that only the European Court of Justice could decide that individual member states were allowed to look past the Safe Harbour principle or reinterpret its meaning. Hogan said that Schrems, who had filed on behalf of the Europe-v-Facebook group, really had a problem with this principle and acknowledged that there may be an argument for the idea that the rule was outdated.“The Safe Harbour Regime… may reflect a somewhat more innocent age in terms of data protection,” he said. “This Regime came into force prior to the advent of social media and, of course, before the massive terrorist attacks on American soil which took place on September 11th, 2001.”

Companies that provide WiFi on US domestic flights are handing over their data to the NSA, adapting their technology to allow security services new powers to spy on passengers. In doing so, they may be in violation of privacy laws. In a letter leaked to Wired, Gogo, the leading provider of inflight WiFi in the US, admitted to violating the requirements of the Communications Assistance for Law Enforcement Act (CALEA). The act is part of a wiretapping law passed in 1994 that requires telecoms carriers to provide law enforcement with a backdoor in their systems to monitor telephone and broadband communications. Gogo states in the letter to the Federal Communications Commission that it added new capabilities to its service that go beyond CALEA, at the behest of law enforcement agencies.

“In designing its existing network, Gogo worked closely with law enforcement to incorporate functionalities and protections that would serve public safety and national security interests,” Gogo attorney Karis Hastings wrote in the leaked letter, which dates from 2012. He did not elaborate as to the nature of the changes, but said Gogo “worked with federal agencies to reach agreement regarding a set of additional capabilities to accommodate law enforcement interests.” Gogo, which provides WiFi services to the biggest US airlines, are not the only ones to adapt their services to enable spying. Panasonic Avionics also added “additional functionality” to their services as per an agreement with US law enforcement, according to a report published in December. The deals with security services have civil liberties organizations up in arms. They have condemned the WiFi providers’ deals with authorities as scandalous.

A United Arab Emirates (UAE) deal to purchase two intelligence satellites from France worth almost 3.4 billion dirhams (US $930 million) is in jeopardy after the discovery of what was described as “security compromising components.”A high-level UAE source said the two high-resolution Pleiades-type Falcon Eye military observation satellites contained two specific US-supplied components that provide a back door to the highly secure data transmitted to the ground station.

Verizon is the latest big company to enter the post-Snowden market for secure communication, and it's doing so with an encryption standard that comes with a way for law enforcement to access ostensibly secure phone conversations.Verizon Voice Cypher, the product introduced on Thursday with the encryption company Cellcrypt, offers business and government customers end-to-end encryption for voice calls on iOS, Android, or BlackBerry devices equipped with a special app. The encryption software provides secure communications for people speaking on devices with the app, regardless of their wireless carrier, and it can also connect to an organization's secure phone system. Cellcrypt and Verizon both say that law enforcement agencies will be able to access communications that take place over Voice Cypher, so long as they're able to prove that there's a legitimate law enforcement reason for doing so. Seth Polansky, Cellcrypt's vice president for North America, disputes the idea that building technology to allow wiretapping is a security risk. "It's only creating a weakness for government agencies," he says. "Just because a government access option exists, it doesn't mean other companies can access it." 

Phone carriers like Verizon are required by U.S. law to build networks that can be wiretapped. But the legislation known as the Communications Assistance for Law Enforcement Act requires phone carriers to decrypt communications for the government only if they have designed their technology to make it possible to do so. If Verizon and Cellcrypt had structured their encryption so that neither company had the information necessary to decrypt the calls, they would not have been breaking the law.

There has been increased interest in encryption from individual consumers, too, largely thanks to the NSA revelations leaked by Edward Snowden. Yahoo and Google began offering end-to-end encrypted e-mail services this year. Silent Circle, a startup catering to consumer and enterprise clients, has been developing end-to-end voice encryption for phones calls. Verizon's service, with a monthly price of $45 per device, isn't targeting individual buyers and won't be offered to average consumers in the near future.But Verizon's partner, Cellcrypt, looks upon selling to large organizations as the first step toward bringing down the price before eventually offering a consumer-level encryption service. "At the end of the day, we'd love to have this be a line item on your Verizon bill," says Polansky.

It wasn’t ever seriously in doubt, but the FBI yesterday acknowledged that it secretly took control of Freedom Hosting last July, days before the servers of the largest provider of ultra-anonymous hosting were found to be serving custom malware designed to identify visitors. Freedom Hosting’s operator, Eric Eoin Marques, had rented the servers from an unnamed commercial hosting provider in France, and paid for them from a bank account in Las Vegas. It’s not clear how the FBI took over the servers in late July, but the bureau was temporarily thwarted when Marques somehow regained access and changed the passwords, briefly locking out the FBI until it gained back control. The new details emerged in local press reports from a Thursday bail hearing in Dublin, Ireland, where Marques, 28, is fighting extradition to America on charges that Freedom Hosting facilitated child pornography on a massive scale. He was denied bail today for the second time since his arrest in July. Freedom Hosting was a provider of turnkey “Tor hidden service” sites — special sites, with addresses ending in .onion, that hide their geographic location behind layers of routing, and can be reached only over the Tor anonymity network. Tor hidden services are used by sites that need to evade surveillance or protect users’ privacy to an extraordinary degree – including human rights groups and journalists. But they also appeal to serious criminal elements, child-pornography traders among them.

The apparent FBI-malware attack was first noticed on August 4, when all of the hidden service sites hosted by Freedom Hosting began displaying a “Down for Maintenance” message. That included at least some lawful websites, such as the secure email provider TorMail. Some visitors looking at the source code of the maintenance page realized that it included a hidden iframe tag that loaded a mysterious clump of Javascript code from a Verizon Business internet address. By midday, the code was being circulated and dissected all over the net. Mozilla confirmed the code exploited a critical memory management vulnerability in Firefox that was publicly reported on June 25, and is fixed in the latest version of the browser. Though many older revisions of Firefox were vulnerable to that bug, the malware only targeted Firefox 17 ESR, the version of Firefox that forms the basis of the Tor Browser Bundle – the easiest, most user-friendly package for using the Tor anonymity network. That made it clear early on that the attack was focused specifically on de-anonymizing Tor users. Tor Browser Bundle users who installed or manually updated after June 26 were safe from the exploit, according to the Tor Project’s security advisory on the hack.

On August 4, all the sites hosted by Freedom Hosting — some with no connection to child porn — began serving an error message with hidden code embedded in the page. Security researchers dissected the code and found it exploited a security hole in Firefox to identify users of the Tor Browser Bundle, reporting back to a mysterious server in Northern Virginia. The FBI was the obvious suspect, but declined to comment on the incident. The FBI also didn’t respond to inquiries from WIRED today. But FBI Supervisory Special Agent J. Brooke Donahue was more forthcoming when he appeared in the Irish court yesterday to bolster the case for keeping Marques behind bars, according to local press reports. Among the many arguments Donahue and an Irish police inspector offered was that Marques might reestablish contact with co-conspirators, and further complicate the FBI probe. In addition to the wrestling match over Freedom Hosting’s servers, Marques allegedly dove for his laptop when the police raided him, in an effort to shut it down.

China has dismissed all US accusations of industrial cyber-espionage against five of its military officials and published proof that Washington is actually stealing data from China. Beijing also summoned the US ambassador for an explanation. Beijing reacted to Washington’s recent round of industrial espionage accusations by publishing its latest data on US cyber-attacks against China.

China’s National Computer Network Emergency Response Technical Team Coordination Center of China (NCNERTTCC) reported that during just two months, from March 19 to May 18, the US directly controlled 1.18 million host computers in China using 2,077 Trojan horse networks or botnet servers. According to the NCNERTTCC, over the last two months 135 host computers stationed in the US conducted 14,000 phishing operations against Chinese websites using for the attacks 563 phishing pages. The other hacking activities through the same period of time included 57,000 backdoor attacks, performed from 2,016 IP addresses in the US through backdoors implanted on 1,754 Chinese websites. The Chinese Foreign Ministry summoned the American ambassador to China for an explanation, urging him to drop all charges against China’s military officers. The meeting between Chinese Assistant Foreign Minister Zheng Zeguang and US Ambassador Max Baucus took place on Monday night, reported Xinhua.

Depending on further developments, China “will take further action on the so-called charges by the United States,” Zheng told Baucus. “The Chinese government and military and its associated personnel have never conducted or participated in the theft of trade secrets over the internet,” Zheng reportedly told Baucus as quoted by Xinhua.

A new study says that the U.S. tech industry is likely to lose more than $35 billion from foreign customers by 2016 because of concerns over government surveillance.“In short, foreign customers are shunning U.S. companies,” the authors of a new study from the Information Technology and Innovation Foundation write.ADVERTISEMENT“The U.S. government’s failure to reform many of the NSA’s surveillance programs has damaged the competitiveness of the U.S. tech sector and cost it a portion of the global market share,” they said.The think tank’s report found that the cost to the tech sector associated with ongoing concerns over surveillance programs run out of the U.S. was likely to “far exceed” $35 billion by 2016, an earlier estimate set by the group.

The group said that lawmakers must enact additional reforms to surveillance policy if they wish to help the tech sector regain the trust of foreign customers. That includes opposing “backdoors,” which allow law enforcement to access otherwise encrypted data, and signing off on trade agreements, including the controversial Trans-Pacific Partnership, that “ban digital protectionism.”The study’s authors found that the revelations about broad U.S. surveillance programs acted as a justification for foreign policymakers to enact protectionist policies aimed at aiding their own domestic technology sectors.Foreign companies have also used the information about U.S. surveillance programs to their advantage.“Some European companies have begun to highlight where their digital services are hosted as an alternative to U.S. companies,” the authors write.

American companies, they found, have lost contracts to foreign competitors over fears about mass surveillance.Earlier this month, President Obama signed the USA Freedom Act, a bill that reformed the three Patriot Act provisions that authorized the bulk, warrantless collection of Americans’ phone records. The bill was widely supported by technology companies, including giants like Apple and Google.

The head of the FBI has spent the last several months in something of a panic, warning anyone who will listen that terrorists are “going dark”—using encrypted communications to hide from the FBI—and insisting that the bureau needs some kind of electronic back door to get access to those chats.It’s an argument that civil libertarians and technology industry executives have largely rejected. And now, members of the national security establishment—veterans of both the Obama and Bush administrations—are beginning to speak out publicly against FBI Director Jim Comey’s call to give the government a skeleton key to your private talks.

The encryption issue was also one of several small, but telling, ways in which Comey seemed out of sync with some of his fellow members of the national security establishment here at the Aspen Security Forum.

This isn’t the first intra-government fight over encryption, Chertoff noted. The last time an administration insisted on a technological back door—in the 1990s—Congress shot down the idea. And despite cries of “going dark” back then, the government found all kinds of new ways to spy. “We collected more than ever. We found ways to deal with that issue,” Chertoff told the forum.

Until just last week, the U.S. government kept up the charade that its use of a stockpile of security vulnerabilities for hacking was a closely held secret.1 In fact, in response to EFF’s FOIA suit to get access to the official U.S. policy on zero days, the government redacted every single reference to “offensive” use of vulnerabilities. To add insult to injury, the government’s claim was that even admitting to offensive use would cause damage to national security. Now, in the face of EFF’s brief marshaling overwhelming evidence to the contrary, the charade is over. In response to EFF’s motion for summary judgment, the government has disclosed a new version of the Vulnerabilities Equities Process, minus many of the worst redactions. First and foremost, it now admits that the “discovery of vulnerabilities in commercial information technology may present competing ‘equities’ for the [government’s] offensive and defensive mission.” That might seem painfully obvious—a flaw or backdoor in a Juniper router is dangerous for anyone running a network, whether that network is in the U.S. or Iran. But the government’s failure to adequately weigh these “competing equities” was so severe that in 2013 a group of experts appointed by President Obama recommended that the policy favor disclosure “in almost all instances for widely used code.” [.pdf].

The newly disclosed version of the Vulnerabilities Equities Process (VEP) also officially confirms what everyone already knew: the use of zero days isn’t confined to the spies. Rather, the policy states that the “law enforcement community may want to use information pertaining to a vulnerability for similar offensive or defensive purposes but for the ultimate end of law enforcement.” Similarly it explains that “counterintelligence equities can be defensive, offensive, and/or law enforcement-related” and may “also have prosecutorial responsibilities.” Given that the government is currently prosecuting users for committing crimes over Tor hidden services, and that it identified these individuals using vulnerabilities called a “Network Investigative Technique”, this too doesn’t exactly come as a shocker. Just a few weeks ago, the government swore that even acknowledging the mere fact that it uses vulnerabilities offensively “could be expected to cause serious damage to the national security.” That’s a standard move in FOIA cases involving classified information, even though the government unnecessarily classifies documents at an astounding rate. In this case, the government relented only after nearly a year and a half of litigation by EFF. The government would be well advised to stop relying on such weak secrecy claims—it only risks undermining its own credibility.

The new version of the VEP also reveals significantly more information about the general process the government follows when a vulnerability is identified. In a nutshell, an agency that discovers a zero day is responsible for invoking the VEP, which then provides for centralized coordination and weighing of equities among all affected agencies. Along with a declaration from an official at the Office of the Director of National Intelligence, this new information provides more background on the reasons why the government decided to develop an overarching zero day policy in the first place: it “recognized that not all organizations see the entire picture of vulnerabilities, and each organization may have its own equities and concerns regarding the prioritization of patches and fixes, as well as its own distinct mission obligations.” We now know the VEP was finalized in February 2010, but the government apparently failed to implement it in any substantial way, prompting the presidential review group’s recommendation to prioritize disclosure over offensive hacking. We’re glad to have forced a little more transparency on this important issue, but the government is still foolishly holding on to a few last redactions, including refusing to name which agencies participate in the VEP. That’s just not supportable, and we’ll be in court next month to argue that the names of these agencies must be disclosed.