Here’s Some Bitcoin: Oh, and You’ve Been Served!

A California man who lost $100,000 in a 2021 SIM-swapping attack is suing the unknown holder of a cryptocurrency wallet that harbors his stolen funds. The case is thought to be the first in which a federal court has recognized the use of information included in a bitcoin transaction — such as a link to a civil claim filed in federal court — as reasonably likely to provide notice of the lawsuit to the defendant. Experts say the development could make it easier for victims of crypto heists to recover stolen funds through the courts without having to wait years for law enforcement to take notice or help.

Ryan Dellone, a healthcare worker in Fresno, Calif., asserts that thieves stole his bitcoin on Dec. 14, 2021, by executing an unauthorized SIM-swap that involved an employee at his mobile phone provider who switched Dellone’s phone number over to a new device the attackers controlled.

Dellone says the crooks then used his phone number to break into his account at Coinbase and siphon roughly $100,000 worth of cryptocurrencies. Coinbase is also named as a defendant in the lawsuit, which alleges the company ignored multiple red flags, and that it should have detected and stopped the theft. Coinbase did not respond to requests for comment.

Working with experts who track the flow of funds stolen in cryptocurrency heists, Dellone’s lawyer Ethan Mora identified a bitcoin wallet that was the ultimate destination of his client’s stolen crypto. Mora says his client has since been made aware that the bitcoin address in question is embroiled in an ongoing federal investigation into a cryptocurrency theft ring.

Mora said it’s unclear if the bitcoin address that holds his client’s stolen money is being held by the government or by the anonymous hackers. Nevertheless, he is pursuing a novel legal strategy that allows his client to serve notice of the civil suit to that bitcoin address — and potentially win a default judgment to seize his client’s funds within — without knowing the identity of his attackers or anything about the account holder.

In a civil lawsuit seeking monetary damages, a default judgment is usually entered on behalf of the plaintiff if the defendant fails to respond to the complaint within a specified time. Assuming that the cybercriminals who stole the money don’t dispute Dellone’s claim, experts say the money could be seized by cryptocurrency exchanges if the thieves ever tried to move it or spend it.

The U.S. courts have generally held that if you’re going to sue someone, you have to provide some kind of meaningful and timely communication about that lawsuit to the defendant in a way that is reasonably likely to provide them notice.

Not so long ago, you had track down your defendant and hire someone to physically serve them with a copy of the court papers. But legal experts say the courts have evolved their thinking in recent years about what constitutes meaningful service, and now allow notification via email.

On Dec. 14, 2023, a federal judge in the Eastern District of California granted Dellone permission to serve notice of his lawsuit directly to the suspected hackers’ bitcoin address — using a short message that was attached to roughly $100 worth of bitcoin Mora sent to the address.

Bitcoin transactions are public record, and each transaction can be sent along with an optional short message. The message uses what’s known as an “OP RETURN,” or an instruction of the Bitcoin scripting language that allows users to attach metadata to a transaction — and thus save it on the blockchain.

In the $100 bitcoin transaction Mora sent to the disputed bitcoin address, the OP RETURN message read: “OSERVICE – SUMMONS, COMPLAINT U.S. Dist. E.D. Cal. LINK: t.ly/123cv01408_service,” which is a short link to a copy of the lawsuit hosted on Google Drive.

“The courts are adapting to the new style of service of process,” said Mark Rasch, a former federal prosecutor at the U.S. Department of Justice. “And that’s helpful and useful and necessary.”

Rasch said Mora’s strategy could force the government to divulge information about their case, or else explain to a judge why the plaintiff shouldn’t be able to recover their stolen funds without further delay. Rasch said it could be that Dellone’s stolen crypto was seized as part of a government asset forfeiture, but that either way there is no reason Uncle Sam should hold some cybercrime victims’ life savings indefinitely.

“The government doesn’t need the crypto as evidence, but in a forfeiture action the money goes to the government,” Rasch said. “But it was never the government’s money, and that doesn’t help the victim. The government should be providing information to the victims of cryptocurrency theft so that their attorneys can go get the money back themselves.”

Nick Bax is a security researcher who specializes in tracing the labyrinthine activity of criminals trying to use cryptocurrency exchanges and other financial instruments to launder the proceeds of cybercrime. Bax said Mora’s method could allow more victims to stake legitimate legal claims to their stolen funds.

“If you get a default judgment against a bitcoin address, for example, and then down the road that bitcoin gets sent to an exchange that complies with or abides by U.S. court orders, then it’s yours,” Bax said. “I’ve seen funds with a court order on them get frozen by the exchanges that decided it made sense to comply with orders from a U.S. federal court.”

Bax’s research was featured in a Sept. 2023 story here about how experts now believe it’s likely hackers are cracking open some of the password vaults stolen in the 2022 data breach at LastPass.

“I’ve talked to a lot victims who have had life-changing amounts of money being seized and would like that money back,” Bax said. “A big goal here is just making civil cases more efficient. Because then people can help themselves and they don’t need to rely solely on law enforcement with its limited resources. And that’s really the goal: To scale this and make it economically viable.”

While Dellone’s lawsuit may be the first time anyone has obtained approval from a federal judge to use bitcoin to notify another party of a civil action, the technique has been used in several recent unrelated cases involving other cryptocurrencies, including Ethereum and NFTs.

The law firm DLAPiper writes that in November 2022, the U.S. District Court for the Southern District of Florida “authorized service of a lawsuit seeking the recovery of stolen digital assets by way of a non-fungible token or NFT containing the text of the complaint and summons, as well as a hyperlink to a website created by the plaintiffs containing all pleadings and orders in the action.”

In approving Dellone’s request for service via bitcoin transaction, the judge overseeing the case cited a recent New York Superior Court ruling in a John Doe case brought by victims seeking to unmask the crooks behind a $1.3 million cyberheist.

In the New York case, the state trial court found it was acceptable for the plaintiffs to serve notice of the suit via cryptocurrency transactions because the defendants regularly used the Blockchain address to which the tokens were sent, and had recently done so. Also, the New York court found that because the account in question contained a significant sum of money, it was unlikely to be abandoned or forgotten.

“Thus the court inferred the defendants were likely to access the account in the future,” wrote Judge Helena M. March-Kuchta, for the Eastern District of California, summarizing the New York case. “Finally, the plaintiff had no alternative means of contacting these unknown defendants.”

Experts say regardless of the reason for a cryptocurrency theft or loss — whether it’s from a romance scam or a straight-up digital mugging — it’s important for victims to file an official report both with their local police and with the FBI’s Internet Crime Complaint Center (ic3.gov). The IC3 collects reports on cybercrime and sometimes bundles victim reports into cases for DOJ/FBI prosecutors and investigators.

The hard truth is that most victims will never see their stolen funds again. But sometimes federal investigators win minor victories and manage to seize or freeze crypto assets that are known to be associated with specific crimes and criminals. In those cases, the government will eventually make an effort to find, contact and in some cases remunerate known victims.

It might take many years for this process to unfold. But if and when they do make that effort, federal investigators are likely to focus their energies and attention responding to victims who staked a claim and can support it with documentation.

But have no illusions that any of this is likely to happen in a timeframe that is meaningful to victims in the short run. For example, in 2013 the U.S. government seized the assets of the virtual currency Liberty Reserve, massively disrupting a major vehicle for laundering the proceeds of cybercrime and other illegal activities.

When the government offered remuneration to Liberty Reserve account holders who wished to make a financial loss claim and supply supporting documentation, KrebsOnSecurity filed a claim. There wasn’t money much in my Liberty Reserve account; I simply wanted to know how long it would take for federal investigators to follow up on my claim, or indeed if they would at all.

In 2020 KrebsOnSecurity was contacted by an investigator with the U.S. Internal Revenue Service (IRS) who was seeking to discuss my claim. The investigator said they would have called sooner, but that it had taken that long for the IRS to gain legal access to the funds seized in the 2013 Liberty Reserve takedown.

Meet the Brains Behind the Malware-Friendly AI Chat Service ‘WormGPT’

WormGPT, a private new chatbot service advertised as a way to use Artificial Intelligence (AI) to write malicious software without all the pesky prohibitions on such activity enforced by the likes of ChatGPT and Google Bard, has started adding restrictions of its own on how the service can be used. Faced with customers trying to use WormGPT to create ransomware and phishing scams, the 23-year-old Portuguese programmer who created the project now says his service is slowly morphing into “a more controlled environment.”

The large language models (LLMs) made by ChatGPT parent OpenAI or Google or Microsoft all have various safety measures designed to prevent people from abusing them for nefarious purposes — such as creating malware or hate speech. In contrast, WormGPT has promoted itself as a new, uncensored LLM that was created specifically for cybercrime activities.

WormGPT was initially sold exclusively on HackForums, a sprawling, English-language community that has long featured a bustling marketplace for cybercrime tools and services. WormGPT licenses are sold for prices ranging from 500 to 5,000 Euro.

“Introducing my newest creation, ‘WormGPT,’ wrote “Last,” the handle chosen by the HackForums user who is selling the service. “This project aims to provide an alternative to ChatGPT, one that lets you do all sorts of illegal stuff and easily sell it online in the future. Everything blackhat related that you can think of can be done with WormGPT, allowing anyone access to malicious activity without ever leaving the comfort of their home.”

In July, an AI-based security firm called SlashNext analyzed WormGPT and asked it to create a “business email compromise” (BEC) phishing lure that could be used to trick employees into paying a fake invoice.

“The results were unsettling,” SlashNext’s Daniel Kelley wrote. “WormGPT produced an email that was not only remarkably persuasive but also strategically cunning, showcasing its potential for sophisticated phishing and BEC attacks.”

A review of Last’s posts on HackForums over the years shows this individual has extensive experience creating and using malicious software. In August 2022, Last posted a sales thread for “Arctic Stealer,” a data stealing trojan and keystroke logger that he sold there for many months.

“I’m very experienced with malwares,” Last wrote in a message to another HackForums user last year.

Last has also sold a modified version of the information stealer DCRat, as well as an obfuscation service marketed to malicious coders who sell their creations and wish to insulate them from being modified or copied by customers.

Shortly after joining the forum in early 2021, Last told several different Hackforums users his name was Rafael and that he was from Portugal. HackForums has a feature that allows anyone willing to take the time to dig through a user’s postings to learn when and if that user was previously tied to another account.

That account tracing feature reveals that while Last has used many pseudonyms over the years, he originally used the nickname “ruiunashackers.” The first search result in Google for that unique nickname brings up a TikTok account with the same moniker, and that TikTok account says it is associated with an Instagram account for a Rafael Morais from Porto, a coastal city in northwest Portugal.

AN OPEN BOOK

Reached via Instagram and Telegram, Morais said he was happy to chat about WormGPT.

“You can ask me anything,” Morais said. “I’m an open book.”

Morais said he recently graduated from a polytechnic institute in Portugal, where he earned a degree in information technology. He said only about 30 to 35 percent of the work on WormGPT was his, and that other coders are contributing to the project. So far, he says, roughly 200 customers have paid to use the service.

“I don’t do this for money,” Morais explained. “It was basically a project I thought [was] interesting at the beginning and now I’m maintaining it just to help [the] community. We have updated a lot since the release, our model is now 5 or 6 times better in terms of learning and answer accuracy.”

WormGPT isn’t the only rogue ChatGPT clone advertised as friendly to malware writers and cybercriminals. According to SlashNext, one unsettling trend on the cybercrime forums is evident in discussion threads offering “jailbreaks” for interfaces like ChatGPT.

“These ‘jailbreaks’ are specialised prompts that are becoming increasingly common,” Kelley wrote. “They refer to carefully crafted inputs designed to manipulate interfaces like ChatGPT into generating output that might involve disclosing sensitive information, producing inappropriate content, or even executing harmful code. The proliferation of such practices underscores the rising challenges in maintaining AI security in the face of determined cybercriminals.”

Morais said they have been using the GPT-J 6B model since the service was launched, although he declined to discuss the source of the LLMs that power WormGPT. But he said the data set that informs WormGPT is enormous.

“Anyone that tests wormgpt can see that it has no difference from any other uncensored AI or even chatgpt with jailbreaks,” Morais explained. “The game changer is that our dataset [library] is big.”

Morais said he began working on computers at age 13, and soon started exploring security vulnerabilities and the possibility of making a living by finding and reporting them to software vendors.

“My story began in 2013 with some greyhat activies, never anything blackhat tho, mostly bugbounty,” he said. “In 2015, my love for coding started, learning c# and more .net programming languages. In 2017 I’ve started using many hacking forums because I have had some problems home (in terms of money) so I had to help my parents with money… started selling a few products (not blackhat yet) and in 2019 I started turning blackhat. Until a few months ago I was still selling blackhat products but now with wormgpt I see a bright future and have decided to start my transition into whitehat again.”

WormGPT sells licenses via a dedicated channel on Telegram, and the channel recently lamented that media coverage of WormGPT so far has painted the service in an unfairly negative light.

“We are uncensored, not blackhat!” the WormGPT channel announced at the end of July. “From the beginning, the media has portrayed us as a malicious LLM (Language Model), when all we did was use the name ‘blackhatgpt’ for our Telegram channel as a meme. We encourage researchers to test our tool and provide feedback to determine if it is as bad as the media is portraying it to the world.”

It turns out, when you advertise an online service for doing bad things, people tend to show up with the intention of doing bad things with it. WormGPT’s front man Last seems to have acknowledged this at the service’s initial launch, which included the disclaimer, “We are not responsible if you use this tool for doing bad stuff.”

But lately, Morais said, WormGPT has been forced to add certain guardrails of its own.

“We have prohibited some subjects on WormGPT itself,” Morais said. “Anything related to murders, drug traffic, kidnapping, child porn, ransomwares, financial crime. We are working on blocking BEC too, at the moment it is still possible but most of the times it will be incomplete because we already added some limitations. Our plan is to have WormGPT marked as an uncensored AI, not blackhat. In the last weeks we have been blocking some subjects from being discussed on WormGPT.”

Still, Last has continued to state on HackForums — and more recently on the far more serious cybercrime forum Exploit — that WormGPT will quite happily create malware capable of infecting a computer and going “fully undetectable” (FUD) by virtually all of the major antivirus makers (AVs).

“You can easily buy WormGPT and ask it for a Rust malware script and it will 99% sure be FUD against most AVs,” Last told a forum denizen in late July.

Asked to list some of the legitimate or what he called “white hat” uses for WormGPT, Morais said his service offers reliable code, unlimited characters, and accurate, quick answers.

“We used WormGPT to fix some issues on our website related to possible sql problems and exploits,” he explained. “You can use WormGPT to create firewalls, manage iptables, analyze network, code blockers, math, anything.”

Morais said he wants WormGPT to become a positive influence on the security community, not a destructive one, and that he’s actively trying to steer the project in that direction. The original HackForums thread pimping WormGPT as a malware writer’s best friend has since been deleted, and the service is now advertised as “WormGPT – Best GPT Alternative Without Limits — Privacy Focused.”

“We have a few researchers using our wormgpt for whitehat stuff, that’s our main focus now, turning wormgpt into a good thing to [the] community,” he said.

It’s unclear yet whether Last’s customers share that view.