TheChek News Flow

DAX:

MDAX:

SDAX:

Local businessman accused of playing role of trustee for fake bank accounts linked to German payments group

A Singaporean businessman with multiple ties to Wirecard has been charged with falsification of accounts, marking the first set of charges issued by the city-state since it kicked off an investigation into the collapsed German payments company last year.

R Shanmugaratnam is suspected of being a key figure in an alleged multiyear fraud, accused of playing the role of trustee for fake bank accounts, which Wirecard told auditors were filled with cash.

Wirecard collapsed into insolvency in June after it admitted that €1.9bn of cash in so-called trustee accounts probably did “not exist”. The downfall of a company once regarded as a European tech champion was the first failure of a member of Germany’s prestigious Dax index.

Singapore police’s commercial affairs department last month charged Mr Shanmugaratnam with falsifying “wilfully and with intent to defraud” letters to Wirecard saying that his company, Citadelle Corporate Services, was holding hundreds of millions of euros in escrow accounts “when in fact [they] did not hold such balance”, according to charge sheets.

Mr Shanmugaratnam, a Singaporean, was accused of forging three letters in March 2016 and one a year later, claiming Citadelle was holding a total of €321m in three separate escrow accounts.

If convicted, Mr Shanmugaratnam could face up to 10 years in prison and a fine for each of the four charges. He has posted bail of S$150,000 (US$109,000) and his case will be heard on August 20 at Singapore’s state courts.

In early July Singaporean police and the Monetary Authority of Singapore, the country’s de facto central bank, kicked off a joint probe into Citadelle as well as Senjo Group and its subsidiaries for suspected “falsification of accounts” and “carrying on a trust business without a licence”. 

A web of business connections ties Citadelle to Wirecard, as well as two corporate suspects named in a Singapore criminal probe that kicked off in 2019, and to Senjo, where Mr Shanmugaratnam served as director from its incorporation in September 2015 to November 2016. 

Senjo was among three partner businesses that at one point accounted for almost all of the reported profits of Wirecard, which claimed to outsource payments processing to the three companies. After the fake cash balances were revealed, Wirecard said it was examining “whether, in which manner and to what extent such business has actually been conducted for the benefit of the company”.

Citadelle also emerged in the aftermath of Wirecard’s highly controversial 2015 acquisition of an Indian payments group for €326m, just weeks after it changed hands for €36m. According to KPMG’s special audit of Wirecard that began late last year, Mr Shanmugaratnam acted as secretary for a travel business that was carved out of the company, which was acquired by Wirecard.

Mr Shanmugaratnam also incorporated Singapore-based Ruprecht Services, among the partner businesses to which Wirecard extended millions of euros in loans, in a move German prosecutors think pillaged the payments company before its collapse. Ruprecht suspended operations last week.

Wirecard told auditors that €1bn of cash resulting from arrangements with Senjo and two other partners from 2016 to 2018 was held in escrow accounts managed by Citadelle. According to Wirecard, the corporate services firm resigned as a trustee about the time that the KPMG special audit of the payments group began.

According to the appendix of the KPMG report, between 2016 and 2018 Wirecard’s auditor EY relied on documents provided by Citadelle as confirmation that Singapore’s OCBC Bank held up to €1bn on behalf of the payments group — rather than checking directly with the lender.

For instance, in a confirmation dated April 12 2019, Citadelle purportedly confirmed that €1bn of Wirecard cash was held on four accounts at OCBC.

In June this year when EY asked Citadelle to reconfirm the existence of these funds, it was told that the Singapore firm did not provide escrow services to Wirecard after March 2017, according to a document seen by the Financial Times.

Referring to the old confirmations, Citadelle wrote: “Please note that this is NOT my letter and it is not our company’s letterhead. Please note that we do not hold such balances nor have we ever confirmed holding such balances.”

However, in December 2018 Citadelle as a trustee transferred €50m in cash to a Wirecard group account with the reference “Trustee Account Payment According to Advice”, according to EY’s 2019 audit opinion on Wirecard, which was seen by the FT.

Reached by telephone earlier this year, Mr Shanmugaratnam — who has served as a director or secretary at about 400 companies in the city-state — appeared to reject the suggestion that Citadelle was Wirecard’s trustee. “Nothing to do,” he said, before making it clear he did not wish to comment further. 

A person briefed on the details has said Wirecard has no banking relationship with OCBC and that Citadelle does not have an escrow account with the bank. OCBC declined to comment.

Sreenivasan Narayanan, Mr Shanmugaratnam’s lawyer, declined to comment. Senjo and the Singapore police both declined to comment.

Nikkei -0.39% Hang Seng -0.27% CSI +0.57% Shanghai +0.96% Shenzen +0.46%

Eur$1.1798 CNH 6.9636 CNY 6.6942 JPY 105.76 GBP 1.3073 CHF 0.9132 RUB 73.4691 WTI$ 41.81 +1.43%

S&P +0.25% Nasdaq +0.07% EuroStoxx +0.83% FTSE +0.86% Dax +0.87% SMI +0.39%

Macro :

- Buffett Bought Up His Own Stock While Selling Others Amid Rally

- U.K. Set to Remove Tariffs on Japanese Cars in 2026, Nikkei Says

- U.S. Tops 5 Million Cases; Kudlow Sees Progress: Virus Update

- Trump’s Payroll Tax Deferral Raises Red Flags on Social Security

- Europeans Buying Electric Cars Seen Buoying Weak Lithium Market

Keep an eye on :

- AIR FP : Airbus and Boeing Try to Decide How Much to Suffer for Customers

- AF FP : Helikon Investments Boosts Short Position in Air France-KLM

- ATL IM : Atlantia in Exclusive Telepass Talks W/ Partners Group: Radiocor

- AVV LN : Aveva Confirms Talks With Osisoft on Potential Acquisition

- BAMNB NA : BAM Gets Waiver From Providers Revolving Credit Facility

- BARC LN : Barclays Probed by U.K. Watchdog for Monitoring Staff: Telegraph

- BDT GY : Bertrandt 9M Revenue Down 9.1% y/y to EU714m

- CNIC LN : CentralNic Says Performance is in Line With Market Expectations

- CSGN SW : Credit Suisse’s Rohner Says Search for Successor Is Underway: SZ

- ECP FP : Axel Duroux May Be Named CEO of EuropaCorp, Les Echos Reports

- EQNR NO : Equinor Names Anders Opedal CEO, President From November 2 (1)

- IFX GY : Infineon Will Need 5 Years to Absorb Cypress, Sueddeutsche Says

- JUVE IM : Juventus Fires Coach Maurizio Sarri After Just One Season

- KODK US : Kodak’s $765 Million Government Loan on Hold Pending Probe

- MBTN SW : Meyer Burger Sells Muegge to HQ Equita; No Financial Terms

- MSFT US : Blackstone Discussed Being Part of Microsoft’s Tiktok Bid: Fox

- NMC LN : NMC Probe to Focus on Fake Invoices for Millions of Dollars: FT

- NWG LN : NatWest to Oust Three Senior Investment Bankers, Times Reports

- NOKIA FH : Nokia CEO Outlines Neutral Stance in Superpower Tech Wars

- PHARM NA : Pharming: First Patient Enrolled in Multinational Ruconest Trial

- ROG SW : Genentech’s Evrysdi Gets FDA Nod for Spinal Muscular Atrophy (1)

- ROG SW : Roche’s Ulcerative Colitis Study Fails Maintenance Therapy Goal

- RYA ID : Spain Orders Ryanair to Reinstate Suspended Workers: El Pais

- SF3 GY : *STS GROUP AG SELLS ACOUSTICS SEGMENT AT NEGATIVE PURCHASE PRICE

- SEV FP : Suez’s $3.5 Billion Waste Unit Is Said to Attract German Tycoon

- TSLA US : SpaceX Awarded $316 Million U.S. Space Launch Contract

- UCG IM : UniCredit Considering JPMorgan’s Grilli as Chairman, MF Reports

- VOW3 GY : Audi Aims to Sell 40,000 E-Tron SUVs This Year, Frankfurter Says

- WDI GY : Former Wirecard Manager Died of Blood Poisoning in Manila: Bild

Eight deals of more than $10bn have been signed in past six weeks

A series of blockbuster deals has led a resurgence in M&A activity since the start of July, with companies rushing to prepare themselves for the recession and dusting off deals that were shelved because of the pandemic.

Eight deals of more than $10bn have been signed in the past six weeks, according to Refinitiv data, making it the fastest start to the second half for megadeals since 2007 when there was an M&A boom before the financial crisis.

The list of deals includes the $21bn sale of Marathon Petroleum’s Speedway petrol stations business to Seven & i Holdings, the Japanese owner of the 7-Eleven convenience store chain. It also includes Analog Devices’ $20bn deal to buy rival chipmaker Maxim Integrated Products. 

“This is pretty extraordinary with respect to how this bounce back has happened,” said Michael Carr, co-head of global M&A at Goldman Sachs.

The coronavirus pandemic brought a six-year-long dealmaking boom to a halt. Corporate leaders put transactions on hold to concentrate on shoring up operations, while activist investors kept a low profile in fear of a backlash if they pushed for changes in the midst of a health crisis. 

As share prices have recovered, many of those deals contemplated earlier this year are back on track.

Monthly Refinitiv data show that June and July each registered more than $300bn in overall M&A activity, compared with $100bn in April and $130bn in May.

“The backlog is very busy and I would expect things to continue, barring a major event that brings things to a halt,” said Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup. 

“The kind of transactions we expect to see are big strategic takeovers, share-for-share deals among companies in the hardest hit industries and an increasing number of private equity bids,” she said. 

Some companies are looking to strike deals that will help them weather tougher economic climate, said Nestor Paz-Galindo, global co-head of M&A at UBS. 

“People are thinking about how to build scale and resilience, and that is a driver of M&A,” he said. All-stock deals that “you would never have done” when share prices tumbled in April have become easier since stocks have bounced back. 

Most of the largest deals involved US-based companies. The biggest European-led deal was German group Siemens Healthineers’ $16.4bn agreement to buy US-based Varian Medical Systems, which makes devices for cancer treatments. 

Blair Effron, co-founder of Centerview Partners, was more cautious. “The issue right now is that the ability to get comfortable enough to make a big bet in a non face to face environment has shrunk,” said Mr Effron. 

“Transformational deals will pick up as the health crisis recedes.” he added. 

While big deals have recovered, the pandemic derailed several major transactions agreed before the crisis. Others are in trouble, such as the planned €10.7bn takeover of Dutch diagnostics group Qiagen by its larger US-based rival Thermo Fisher.

Thermo Fisher needs support from two-thirds of Qiagen’s investors by Monday evening to seal the deal. But a series of hedge funds are holding out from voting their shares in favour of the deal, arguing that demand for Qiagen’s Covid-19 research test kits means that Thermo Fisher’s offer undervalues the company.

Trump’s assault on absentee voting amid coronavirus is a dark omen

It has long been clear that the only restraints on Donald Trump’s actions are the courts and the American people. Republicans have largely failed to act as a check on the US president, even when he is traducing the principles they claim to hold dear. One of these is the US constitution’s provision for a presidential election every four years.

A few Republican heads made rare appearances above the parapet recently after Mr Trump mused about delaying the November election. That was encouraging. He has no authority to postpone an event that has taken place without fail, including in the throes of the US civil war and two world wars. Yet they are willing accomplices in Mr Trump’s backdoor efforts to make it as hard as possible for Americans to exercise their right to vote. A suppressed turnout could prove as bad as a delayed election.

Of these, the most worrisome is Mr Trump’s assault on mail-in balloting, which he repeatedly describes without evidence as “fraudulent”. Amid a pandemic it is critical that voters be given an alternative to standing in long queues for crowded polling stations. Without a well-functioning US postal service, votes may not be cast, or arrive too late to be counted. Yet Louis DeJoy, the recently appointed postmaster general, who runs the USPS, is taking steps to make postal voting harder.

He has tripled the fee on mail-in ballots, eliminated overtime for USPS deliverers, which has slowed service across the country, and removed from their positions 23 senior executives last Friday. Unlike Mr DeJoy — a generous Trump donor with no experience in the service — the ousted executives are career USPS managers. Moreover, Republicans are blocking a congressional relief bill that would increase funding to the cash-strapped USPS and help to ensure timely ballot deliveries in November.

The risk to the integrity of the US presidential election cannot be overstated. Beneath the radar are a thousand other efforts to make voting, and counting the votes, harder. Among these are state and local measures that would prevent ballots that arrive after polling day from being counted. Legislatures are denying funding for the tens of thousands of officials who need to be trained in how to count absentee ballots. They are also making it easier to reject ballots as fraudulent. Florida’s notorious battle of the “hanging chads” in 2000 could look like child’s play compared to the legal challenges that are being drafted across the US.

The net effect is likely to be widespread confusion. Ballots could take days or weeks to count. Should the election be close, it might take until Thanksgiving or beyond to know the result. And that assumes that efforts to stop the counting would fail in the courts, which is not assured.

Can America avoid an electoral train wreck? In the absence of a landslide for Joe Biden or Mr Trump, the chances are high that the outcome would be murky. That would benefit Mr Trump, who has the vast powers of incumbency. At this late stage it is hard to see how the country’s panoply of state, county and municipal election systems can agree on a roughly common treatment of mail-in ballots, let alone universal postal balloting. Just five states provide for that.

There is no mystery as to why this is happening. Polls show Mr Trump heading for defeat. He is thus casting doubt on the election — deeming it in advance the most “fraudulent” in US history and a “coup” in the making. His efforts to muddy the waters and invalidate absentee ballots are deeply un-American. They should be repugnant to any who call themselves conservative.

Bill Gates on Covid: Most US Tests Are ‘Completely Garbage’

The techie-turned-philanthropist on vaccines, Trump, and why social media is “a poisoned chalice.”

FOR 20 YEARS, Bill Gates has been easing out of the roles that made him rich and famous—CEO, chief software architect, and chair of Microsoft—and devoting his brainpower and passion to the Bill and Melinda Gates Foundation, abandoning earnings calls and antitrust hearings for the metrics of disease eradication and carbon reduction. This year, after he left the Microsoft board, one would have thought he would have relished shedding the spotlight directed at the four CEOs of big tech companies called before Congress.

But as with many of us, 2020 had different plans for Gates. An early Cassandra who warned of our lack of preparedness for a global pandemic, he became one of the most credible figures as his foundation made huge investments in vaccines, treatments, and testing. He also became a target of the plague of misinformation afoot in the land, as logorrheic critics accused him of planning to inject microchips in vaccine recipients. (Fact check: false. In case you were wondering.)

My first interview with Gates was in 1983, and I’ve long lost count of how many times I’ve spoken to him since. He’s yelled at me (more in the earlier years) and made me laugh (more in the latter years). But I’ve never looked forward to speaking to him more than in our year of Covid. We connected on Wednesday, remotely of course. In discussing our country’s failed responses, his issues with his friend Mark Zuckerberg’s social networks, and the innovations that might help us out of this mess, Gates did not disappoint. The interview has been edited for length and clarity.

WIRED: You have been warning us about a global pandemic for years. Now that it has happened just as you predicted, are you disappointed with the performance of the United States?

Bill Gates: Yeah. There’s three time periods, all of which have disappointments. There is 2015 until this particular pandemic hit. If we had built up the diagnostic, therapeutic, and vaccine platforms, and if we’d done the simulations to understand what the key steps were, we’d be dramatically better off. Then there’s the time period of the first few months of the pandemic, when the US actually made it harder for the commercial testing companies to get their tests approved, the CDC had this very low volume test that didn’t work at first, and they weren’t letting people test. The travel ban came too late, and it was too narrow to do anything. Then, after the first few months, eventually we figured out about masks, and that leadership is important.

So you’re disappointed, but are you surprised?

I’m surprised at the US situation because the smartest people on epidemiology in the world, by a lot, are at the CDC. I would have expected them to do better. You would expect the CDC to be the most visible, not the White House or even Anthony Fauci. But they haven’t been the face of the epidemic. They are trained to communicate and not try to panic people but get people to take things seriously. They have basically been muzzled since the beginning. We called the CDC, but they told us we had to talk to the White House a bunch of times. Now they say, “Look, we’re doing a great job on testing, we don’t want to talk to you.” Even the simplest things, which would greatly improve this system, they feel would be admitting there is some imperfection and so they are not interested.

Get WIRED Access

SUBSCRIBE

Most Popular

face mask

GEAR

18 Face Masks We Actually Like to Wear

ADRIENNE SO

virtual classroom and a teacher measuring out student's desks

IDEAS

Hybrid Schooling May Be the Most Dangerous Option of All

DAVID ZWEIG

giant plumes of black smoke from a ship burning with tall buildings in the background

BACKCHANNEL

The Tragic Physics of the Deadly Explosion in Beirut

RACHEL LANCE

iphone camera lens

GEAR

These Are a Few of Our Favorite Things (for Under $20)

ADRIENNE SO

Do you think it’s the agencies that fell down or just the leadership at the top, the White House?

We can do the postmortem at some point. We still have a pandemic going on, and we should focus on that. The White House didn’t allow the CDC to do its job after March. There was a window where they were engaged, but then the White House didn’t let them do that. So the variance between the US and other countries isn’t that first period, it’s the subsequent period where the messages—the opening up, the leadership on masks, those things—are not the CDC’s fault. They said not to open back up; they said that leadership has to be a model of face mask usage. I think they have done a good job since April, but we haven’t had the benefit of it.

At this point, are you optimistic?

Yes. You have to admit there’s been trillions of dollars of economic damage done and a lot of debts, but the innovation pipeline on scaling up diagnostics, on new therapeutics, on vaccines is actually quite impressive. And that makes me feel like, for the rich world, we should largely be able to end this thing by the end of 2021, and for the world at large by the end of 2022. That is only because of the scale of the innovation that’s taking place. Now whenever we get this done, we will have lost many years in malaria and polio and HIV and the indebtedness of countries of all sizes and instability. It’ll take you years beyond that before you’d even get back to where you were at the start of 2020. It’s not World War I or World War II, but it is in that order of magnitude as a negative shock to the system.

In March it was unimaginable that you’d be giving us that timeline and saying it’s great.

Well it’s because of innovation that you don’t have to contemplate an even sadder statement, which is this thing will be raging for five years until natural immunity is our only hope.

Let’s talk vaccines, which your foundation is investing in. Is there anything that’s shaping up relatively quickly that could be safe and effective?

Before the epidemic came, we saw huge potential in the RNA vaccines—Moderna, Pfizer/BioNTech, and CureVac. Right now, because of the way you manufacture them, and the difficulty of scaling up, they are more likely—if they are helpful—to help in the rich countries. They won’t be the low-cost, scalable solution for the world at large. There you’d look more at AstraZeneca or Johnson & Johnson. This disease, from both the animal data and the phase 1 data, seems to be very vaccine preventable. There are questions still. It will take us awhile to figure out the duration [of protection], and the efficacy in elderly, although we think that’s going to be quite good. Are there any side effects, which you really have to get out in those large phase 3 groups and even after that through lots of monitoring to see if there are any autoimmune diseases or conditions that the vaccine could interact with in a deleterious fashion.

Are you concerned that in our rush to get a vaccine we are going to approve something that isn’t safe and effective?

Yeah. In China and Russia they are moving full speed ahead. I bet there’ll be some vaccines that will get out to lots of patients without the full regulatory review somewhere in the world. We probably need three or four months, no matter what, of phase 3 data, just to look for side effects. The FDA, to their credit, at least so far, is sticking to requiring proof of efficacy. So far they have behaved very professionally despite the political pressure. There may be pressure, but people are saying no, make sure that that’s not allowed. The irony is that this is a president who is a vaccine skeptic. Every meeting I have with him he is like, “Hey, I don’t know about vaccines, and you have to meet with this guy Robert Kennedy Jr. who hates vaccines and spreads crazy stuff about them.”

Most Popular

face mask

GEAR

18 Face Masks We Actually Like to Wear

ADRIENNE SO

virtual classroom and a teacher measuring out student's desks

IDEAS

Hybrid Schooling May Be the Most Dangerous Option of All

DAVID ZWEIG

giant plumes of black smoke from a ship burning with tall buildings in the background

BACKCHANNEL

The Tragic Physics of the Deadly Explosion in Beirut

RACHEL LANCE

iphone camera lens

GEAR

These Are a Few of Our Favorite Things (for Under $20)

ADRIENNE SO

Wasn’t Kennedy Jr. talking about you using vaccines to implant chips into people?

Yeah, you’re right. He, Roger Stone, Laura Ingraham. They do it in this kind of way: “I’ve heard lots of people say X, Y, Z.” That’s kind of Trumpish plausible deniability. Anyway, there was a meeting where Francis Collins, Tony Fauci, and I had to [attend], and they had no data about anything. When we would say, “But wait a minute, that’s not real data,” they’d say, “Look, Trump told you you have to sit and listen, so just shut up and listen anyway.” So it’s a bit ironic that the president is now trying to have some benefit from a vaccine.

What goes through your head when you’re in a meeting hearing misinformation, and the President of the United States wants you to keep your mouth shut?

That was a bit strange. I haven’t met directly with the president since March of 2018. I made it clear I’m glad to talk to him about the epidemic anytime. And I have talked to Debbie Birx, I’ve talked to Pence, I’ve talked to Mnuchin, Pompeo, particularly on the issue of, Is the US showing up in terms of providing money to procure the vaccine for the developing countries? There have been lots of meetings, but we haven’t been able to get the US to show up. It’s very important to be able to tell the vaccine companies to build extra factories for the billions of doses, that there is procurement money to buy those for the marginal cost. So in this supplemental bill, I’m calling everyone I can to get 4 billion through GAVI for vaccines and 4 billion through a global fund for therapeutics. That’s less than 1 percent to the bill, but in terms of saving lives and getting us back to normal, that under 1 percent is by far the most important thing if we can get it in there.

Speaking of therapeutics, if you were in the hospital and you have the disease and you’re looking over the doctor’s shoulder, what treatment are you going to ask for?

Remdesivir. Sadly the trials in the US have been so chaotic that the actual proven effect is kind of small. Potentially the effect is much larger than that. It’s insane how confused the trials here in the US have been. The supply of that is going up in the US; it will be quite available for the next few months. Also dexamethasone—it’s actually a fairly cheap drug—that’s for late-stage disease.

I’m assuming you’re not going to have trouble paying for it, Bill, so you could ask for anything.

Well, I don’t want special treatment, so that’s a tricky thing. Other antivirals are two to three months away. Antibodies are two to three months away. We’ve had about a factor-of-two improvement in hospital outcomes already, and that’s with just remdesivir and dexamethasone. These other things will be additive to that.

You helped fund a Covid diagnostic testing program in Seattle that got quicker results, and it wasn’t so intrusive. The FDA put it on pause. What happened?

There’s this thing where the health worker jams the deep turbinate, in the back of your nose, which actually hurts and makes you sneeze on the healthy worker. We showed that the quality of the results can be equivalent if you just put a self-test in the tip of your nose with a cotton swab. The FDA made us jump through some hoops to prove that you didn’t need to refrigerate the result, that it could go back in a dry plastic bag, and so on. So the delay there was just normal double checking, maybe overly careful but not based on some political angle. Because of what we have done at FDA, you can buy these cheaper swabs that are available by the billions. So anybody who’s using the deep turbinate now is just out of date. It’s a mistake, because it slows things down.

Most Popular

face mask

GEAR

18 Face Masks We Actually Like to Wear

ADRIENNE SO

virtual classroom and a teacher measuring out student's desks

IDEAS

Hybrid Schooling May Be the Most Dangerous Option of All

DAVID ZWEIG

giant plumes of black smoke from a ship burning with tall buildings in the background

BACKCHANNEL

The Tragic Physics of the Deadly Explosion in Beirut

RACHEL LANCE

iphone camera lens

GEAR

These Are a Few of Our Favorite Things (for Under $20)

ADRIENNE SO

But people aren’t getting their tests back quickly enough.

Well, that’s just stupidity. The majority of all US tests are completely garbage, wasted. If you don’t care how late the date is and you reimburse at the same level, of course they’re going to take every customer. Because they are making ridiculous money, and it’s mostly rich people that are getting access to that. You have to have the reimbursement system pay a little bit extra for 24 hours, pay the normal fee for 48 hours, and pay nothing [if it isn’t done by then]. And they will fix it overnight.

Why don’t we just do that?

Because the federal government sets that reimbursement system. When we tell them to change it they say, “As far as we can tell, we’re just doing a great job, it’s amazing!” Here we are, this is August. We are the only country in the world where we waste the most money on tests. Fix the reimbursement. Set up the CDC website. But I have been on that kick, and people are tired of listening to me.

As someone who has built your life on science and logic, I’m curious what you think when you see so many people signing onto this anti-science view of the world.

Well, strangely, I’m involved in almost everything that anti-science is fighting. I’m involved with climate change, GMOs, and vaccines. The irony is that it’s digital social media that allows this kind of titillating, oversimplistic explanation of, “OK, there’s just an evil person, and that explains all of this.” And when you have [posts] encrypted, there is no way to know what it is. I personally believe government should not allow those types of lies or fraud or child pornography [to be hidden with encryption like WhatsApp or Facebook Messenger].

Well, you’re friends with Mark Zuckerberg. Have you talked to him about this?

After I said this publicly, he sent me mail. I like Mark, I think he’s got very good values, but he and I do disagree on the trade-offs involved there. The lies are so titillating you have to be able to see them and at least slow them down. Like that video where, what do they call her, the sperm woman? That got over 10 million views! [Note: It was more than 20 million.] Well how good are these guys at blocking things, where once something got the 10 million views and everybody was talking about it, they didn’t delete the link or the searchability? So it was meaningless. They claim, “Oh, now we don’t have it.” What effect did that have? Anybody can go watch that thing! So I am a little bit at odds with the way that these conspiracy theories spread, many of which are anti-vaccine things. We give literally tens of billions for vaccines to save lives, then people turn around saying, “No, we’re trying to make money and we’re trying to end lives.” That’s kind of a wild inversion of what our values are and what our track record is.

As you are the technology adviser to Microsoft, I think you can look forward in a few months to fighting this battle yourself when the company owns TikTok.

Yeah, my critique of dance moves will be fantastically value-added for them.

TikTok is more than just dance moves. There’s political content.

I know, I’m kidding. You’re right. Who knows what’s going to happen with that deal. But yes, it’s a poison chalice. Being big in the social media business is no simple game, like the encryption issue.

Most Popular

face mask

GEAR

18 Face Masks We Actually Like to Wear

ADRIENNE SO

virtual classroom and a teacher measuring out student's desks

IDEAS

Hybrid Schooling May Be the Most Dangerous Option of All

DAVID ZWEIG

giant plumes of black smoke from a ship burning with tall buildings in the background

BACKCHANNEL

The Tragic Physics of the Deadly Explosion in Beirut

RACHEL LANCE

iphone camera lens

GEAR

These Are a Few of Our Favorite Things (for Under $20)

ADRIENNE SO

So are you wary of Microsoft getting into that game?

I mean, this may sound self-serving, but I think that the game being more competitive is probably a good thing. But having Trump kill off the only competitor, it’s pretty bizarre.

Do you understand what rule or regulation the president is invoking to demand that TikTok sell to an American company and then take a cut of the sales price?

I agree that the principle this is proceeding on is singly strange. The cut thing, that’s doubly strange. Anyway, Microsoft will have to deal with all of that.

You have been very cautious in staying away from the political arena. But the issues you care most about—public health and climate change—have had huge setbacks because of who leads the country. Are you reconsidering spending on political change?

The foundation needs to be bipartisan. Whoever gets elected in the US, we are going to want to work with them. We do care a lot about competence, and hopefully voters will take into account how this administration has done at picking competent people and should that weigh into their vote. But there’s going to be plenty of money on both sides of this election, and I don’t like diverting money to political things. Even though the pandemic has made it pretty clear we should expect better, there’s other people who will put their time into the campaigning piece.

Did you have deja vu last week when those tech CEOs testified remotely before Congress?

Yeah. I had a whole committee attacking me, and they had four at a time. I mean, Jesus Christ, what’s the Congress coming to? If you want to give a guy a hard time, give him at least a whole day that he has to sit there on the hot seat by himself! And they didn’t even have to get on a plane!

Do you think the antitrust concerns are the same as when Microsoft was under the gun, or has the landscape changed?

Even without antitrust rules, tech does tend to be quite competitive. And even though in the short run you don’t think it’s going to dislodge people, there will be changes that will keep bringing prices down. But there are a lot of valid issues, and if you’re super-successful, the pleasure of going in front of the Congress comes with the territory.

How has your life changed living under the pandemic?

I used to travel a lot. If I wanted to see President Macron and say, “Hey, give money for the coronavirus vaccine,” to really show I’m serious I’d go there. Now, we had a GAVI replenishment summit where I just sat at home and got up a little early. I am able to get a lot done. My kids are home more than I thought they would be, which at least for me is a nice thing. I’m microwaving more food. I’m getting fairly good at it. The pandemic sadly is less painful for those who were better off before the pandemic.

Do you have a go-to mask you use?

No, I use a pretty ugly normal mask. I change it every day. Maybe I should get a designer mask or something creative, but I just use this surgical-looking mask.

Researchers found troubling bugs in open-source libraries used by financial institutions.

MOST PEOPLE USE either an app, an online platform, or a small hardware device as a wallet to store their cryptocurrency safely. The exchanges through which cryptocurrency changes hands, though, and other high stakes operations need something more like a massive digital bank vault. At the Black Hat security conference on Thursday, researchers detailed potential weaknesses in these specially secured wallet schemes, including some that affected real exchanges that have now been fixed.

The attacks aren't the digital equivalent of jackhammering a weak point on a safe or blowing up a lock. They're more like opening an old-timey bank vault with six keys that all have to turn at the same time. Breaking cryptocurrency private keys into smaller chunks similarly means an attacker has to cobble them together first to steal funds. But unlike distributing physical keys, the cryptographic mechanisms that underly multiparty key management are complex and difficult to implement correctly. Mistakes could be costly.

"These organizations are managing a lot of money, so they have quite high privacy and security requirements," says Jean-Philippe Aumasson, cofounder of the cryptocurrency exchange technology firm Taurus Group and vice president at Kudelski Security. "They need a way to split the cryptocurrency private keys into different components, different shares, so no party ever knows the full key and there isn't a single point of failure. But we found some flaws in how these schemes are set up that are not just theoretical. They could really have been carried out by a malicious party."

For the work, Aumasson, a cryptographer, validated and refined vulnerability discoveries made by Omer Shlomovits, cofounder of the mobile wallet maker ZenGo. The findings break down into three categories of attacks.

The first would require an insider at a cryptocurrency exchange or other financial institution exploiting a vulnerability in an open-source library produced by a prominent cryptocurrency exchange that the researchers declined to name. The attack takes advantage of a flaw in the library's mechanism for refreshing, or rotating, keys. In distributed key schemes, you don't want the secret key or its components to stay the same forever, because over time an attacker could slowly compromise each part and eventually reassemble it. But in the vulnerable library, the refresh mechanism allowed one of the key holders to initiate a refresh and then manipulate the process so some components of the key actually changed and others stayed the same. While you couldn't merge chunks of an old and new key, an attacker could essentially cause a denial of service, permanently locking the exchange out of its own funds.

Most distributed key schemes are set up so only a predetermined majority of the chunks of a key need to be present to authorize transactions. That way the key isn't lost entirely if one portion is accidentally eliminated or destroyed. The researchers point out that an attacker could use this fact to extort money from a target, letting enough portions of the key refresh—including the one they control—that they can contribute their portion and restore access only if the victim pays a price.

The researchers disclosed the flaw to the library developer a week after the code went live, so it's unlikely that any exchanges had time to incorporate the library into their systems. But because it was in an open-source library, it could have found its way into numerous financial institutions.

In the second scenario, an attacker would focus on the relationship between an exchange and its customers. Another flaw in the key rotation process, in which it fails to validate all of the statements the two parties make to each other, could allow an exchange with malicious motivations to slowly extract the private keys of its users over multiple key refreshes. From there a rogue exchange could initiate transactions to steal cryptocurrency from its customers. This could also be carried out quietly by an attacker who first compromises an exchange. The flaw is another open-source library, this time from an unnamed key management firm. The firm does not use the library in its own offerings, but the vulnerability could have been incorporated elsewhere.

Get WIRED Access

SUBSCRIBE

Most Popular

Bill Gates

SCIENCE

Bill Gates on Covid: Most US Tests Are ‘Completely Garbage’

STEVEN LEVY

face mask

GEAR

18 Face Masks We Actually Like to Wear

ADRIENNE SO

virtual classroom and a teacher measuring out student's desks

IDEAS

Hybrid Schooling May Be the Most Dangerous Option of All

DAVID ZWEIG

giant plumes of black smoke from a ship burning with tall buildings in the background

BACKCHANNEL

The Tragic Physics of the Deadly Explosion in Beirut

RACHEL LANCE

The third attack begins when all the trusted parties originally derive their portions of the key. As part of this process, each party must generate a couple of random numbers that will be publicly verified and tested for use later in "zero knowledge proofs," when the different key holders verify that they have the right key information without revealing the content. This time, the researchers found that a protocol in an open-source library developed by the cryptocurrency exchange Binance didn't actually check these random values. As a result, a malicious party in the key generation could send specially constructed messages to everyone else that would essentially choose and assign all of these values, allowing the attacker to later use this unvalidated information to extract everyone's portion of the secret key.

"This is the one that is instantly fatal," says KZen Networks' Shlomovits. "For the attack here you would craft a specific message, send it at the time of key generation, wait until the first signature, and then you're done. You would have enough information to learn all the other keys."

Binance fixed the vulnerability in March and pointed out that it's only present during initial key generation. It does not introduce a lasting vulnerability—unless, of course, your organization's initial key generation included a malicious party from the start.

"We recommend that users upgrade to this new version of 'tss-lib' as soon as possible," the company said in a March security bulletin. "Signing groups should only be re-created if any parties were untrusted or potentially malicious at the time of keygen."

The attacks Shlomovits and Aumasson identified would not be trivial for an attacker to carry out. They all involve a somewhat privileged position within an exchange, whether taking control altogether or controlling one portion of a distributed key. Beyond identifying individual vulnerabilities, though, the two say that the goal of the research was to call attention to how easy it is to make mistakes while implementing multiparty distributed keys for cryptocurrency exchanges. And how impactful those mistakes can be when they're in open-source libraries that can proliferate widely. Using distributed key schemes is an important defense against takeover, but the cryptography is complicated enough that the development process can't be taken lightly.

"It takes a lot of time, a lot of expertise, and everyone makes mistakes," Shlomovits says. "Literally everyone, because it’s really hard to do this translation from paper to an actual production system that holds funds."