FT : US economy in peril as unemployment payments expire

US economy in peril as unemployment payments expire
Talks on stimulus package to resume on Monday with political parties still far apart

US lawmakers are facing increasingly shrill warnings over the dangers to the economy as Congress and the White House struggle to reach a deal on a new fiscal stimulus package, leaving millions of Americans without vital safety net payments and risking not just the US but also the global recovery.

The White House chief of staff Mark Meadows on Sunday said the two sides were still far apart, despite progress over the weekend following the expiry of emergency unemployment benefits.

The impasse on Capitol Hill has echoes of other US budgetary stand-offs in the past — which were also marked by moments of political brinkmanship — but with much higher stakes given the recession triggered by the coronavirus pandemic.

“We still have a long ways to go,” Mr Meadows said on CBS’s Face the Nation. Mr Meadows, who has been leading talks on the Trump administration side with Steven Mnuchin, Treasury secretary, said a session on Saturday had gone well but he was “not optimistic” that there would be an agreement “in the very near term”.

The failure to reach a compromise by July 31 has left more than 25m people in the world’s largest economy grappling with sudden austerity, after the expiration of benefits worth $600 per week.

Democrats have wanted to renew them at the same level until early 2021, but Republicans have resisted, initially arguing that new stimulus was not necessary and then pushing for much smaller payments, making it one of the biggest and most economically consequential sticking points in the talks.

The current stand-off stands in sharp contrast to March and April, when the White House and Congress rapidly converged on $3tn in fiscal support to sustain the economy during the first lockdowns, helping prop up US and global markets.

Now the lack of a deal has caused anxiety at the Federal Reserve, whose chairman, Jay Powell, has repeatedly nudged Congress to offer more support for the economy.

The median forecast of top US central bank officials is for the US economy to shrink by 6.5 per cent this year, but the downturn could be deeper if stimulus is withdrawn. A stunted US recovery would also negatively affect the global economy, which is expected to shrink by 4.9 per cent this year according to the IMF.

“Globally, other economies have benefited from their own regional and domestic fiscal and monetary policies more than from spillovers from the US,” said Douglas Rediker, a former senior Treasury official in the Obama administration but “US aggressive leadership was important as a signal, as much as it was to provide indirect global stimulus.”

US economists have warned that unless a deal is reached on unemployment benefits, there could be additional job losses in the US at businesses hit by a drop in consumer spending, further widening the human suffering.

“People are going to get evicted, they are going to be unable to feed their families,” said Martha Gimbel, the manager of economic research at Schmidt Futures. “Think about the massive amount of money that has been sucked out of this economy, the government should desperately be trying to put it back in,” she added.

On Sunday, Mr Mnuchin said he remained hopeful for a deal, with a new round of negotiations expected on Monday. “The president wants us to get a deal done quickly because this is important to the American people,” he told ABC’s This Week.

“Across both parties, there are different things that are very contentious,” he added, although he said there were also areas of agreement, such as on extending an aid programme for small businesses.

Nancy Pelosi, the Democratic House speaker, said her party was “unified” in their insistence that unemployed Americans should continue to receive $600 a week in emergency benefits, rather than the $200 proposed by the Republican side.

When asked when an agreement might be reached, Ms Pelosi replied: “The fact is, [we] will be close to an agreement when we have an agreement.”

Steven Horsford, a Democratic lawmaker from Nevada, told the Financial Times that the Republican-controlled Senate “wants to pull the rug from underneath the majority of Americans who are still struggling”, adding: “It’s irresponsible, unconscionable, really inhumane and immoral that the Senate has left [for the weekend] without doing its job . . . Something has to get done in the very near future.”

Areas of agreement between Republicans and Democrats include a new round of direct payments to US individuals, of $1200 apiece. As well as on the unemployment benefits, the parties disagree on whether to shield businesses from liability for coronavirus infections — an idea pushed by Republicans — and whether to provide financial help for state and local governments — a priority for Democrats.

Over the past decade, the US has experienced several moments of high-stakes fiscal negotiations, including a brush with a debt default amid Republican resistance to an increase in the debt limit during the Obama administration, testy talks to avoid the lapse of George W Bush’s tax cuts in 2012, and several government shutdowns.

The hope among analysts and economists is that the current US stalemate can be resolved quickly, but the details will matter.

“The size and scope of the package will be important. Any cutback in jobless benefits will have a disproportionate impact on consumer spending, as it will hit the very segment of the population that spends virtually every penny of income,” Oxford Economics wrote in a note.

FT : US to widen action against Chinese tech groups beyond TikTok

US to widen action against Chinese tech groups beyond TikTok
Pompeo vows further clampdown as ByteDance tries to salvage sale talks with Microsoft

The Trump administration has vowed to “take action” in a matter of days against Chinese software companies that it perceives as a risk to security, in a sign that Washington is set to broaden its offensive beyond the video-sharing app TikTok.

ByteDance, the Chinese owner of TikTok, is racing to save the app’s US operations with a plea to the administration to allow it to sell the unit to Microsoft.

Comments from US secretary of state Mike Pompeo on Sunday suggested additional action against a wider range of Chinese technology companies would follow.

“These Chinese software companies doing business in the United States, whether it’s TikTok or WeChat — there are countless more . . . are feeding data directly to the Chinese Communist party, their national security apparatus,” Mr Pompeo told Fox News. 

“President Trump has said 'enough' and we're going to fix it and so he will take action in the coming days with respect to a broad array of national security risks that are presented by software connected to the Chinese Communist party.” 

Mr Pompeo did not expand on the scope of the proposed action, however. The National Security Council declined to offer a clarification.

Speaking about TikTok specifically, Mr Pompeo said that Mr Trump was “closing in on a solution”. 

The US has claimed that TikTok’s ownership by ByteDance means the data of American citizens can be used by the Chinese government. Mr Trump told reporters on Friday that he intended to ban TikTok from the US.

In a deal with Microsoft that was under discussion before Mr Trump’s intervention, 1,500 TikTok staff, intellectual property and technology would move to the US technology giant and ByteDance would retain no interest in the US TikTok business. 

Steven Mnuchin, US Treasury secretary, said on Sunday that TikTok could not continue to be owned by ByteDance and operate in the US. Mr Mnuchin chairs the government’s Committee on Foreign Investment in the US, or Cfius, which is reviewing ByteDance’s acquisition of Music.ly — the precursor to TikTok — on national security grounds.

“The president can either force a sale or the president can block the app . . . and I’m not going to comment on my specific discussions with the president, but everybody agrees it can’t exist as it does,” Mr Mnuchin said.

Asked whether a potential sale of TikTok to a US-based company such as Microsoft would be enough to protect American users’ data, Mr Pompeo said Mr Trump would “make sure that everything we have done drives us as close to zero risk for the American people”.

Top Republican senators have already indicated that a potential sale to a US company would not be enough to assuage their security concerns.

Marco Rubio, the Republican chairman of the Senate intelligence committee, told the Financial Times last week that, even in the event of a sale, TikTok needed to answer questions on where its data was stored and how it would be protected.

FT : EU digital protectionism risks damaging ties with the US

EU digital protectionism risks damaging ties with the US
Both sides should focus on the existential challenge of China

European regulators have taken aggressive action against US technology companies for years, levying or threatening billions of euros in fines on Intel, Microsoft, Facebook, Google, Qualcomm and Amazon. These actions now look to be only the opening salvo. Over recent months, EU leaders have unveiled an ambitious agenda aimed at limiting US technology under the banner of securing European “digital sovereignty”.

This incipient techno-nationalism threatens both US and European interests and must be stopped. In her inaugural speech to the European Parliament, Ursula von der Leyen, the European Commission president, signalled the EU’s protectionist objectives in bold terms. “We must have mastery and ownership of key technologies in Europe,” she said, naming quantum computing, artificial intelligence, blockchain and critical chip technologies as examples.

Emmanuel Macron, France’s president, has been similarly blunt. “The battle we’re fighting is one of sovereignty,” he said. “If we don’t build our own champions in all new areas . . . our choices . . . will be dictated by others.” A report for the European Parliament even argued that the EU Digital Services Act should establish a “European firewall, similar to what has happened in China in the past 20 years”.

Such proposals reflect an emerging European view that greater state control of the digital economy is needed to nurture and protect local technology companies. Specifically, the state must handicap foreign companies and use regulation and funding to promote friendly, compliant local competitors.

One example involves discriminatory digital services taxes. France has enacted a “Gafa tax” (Google, Amazon, Facebook and Apple) aimed at stripping revenue from US digital platforms and advertisers in the hope that French companies will take customers from US rivals. Similar taxes are being prepared by Austria, the Czech Republic, Italy and Spain, and on an EU-wide basis. One goal is to tax US tech companies to fund post-coronavirus economic recovery in Europe. But it would siphon revenues from the US tax base that the country needs to for its own recovery efforts.

A second example is rigged competition laws. The commission and several EU countries are developing proposals to contort competition laws and platform regulations to target US technology companies. The EU’s proposed Digital Services Act seems designed to impose blanket prohibitions on the business models and conduct of US companies. It would “protect interests that go beyond competition or economic considerations” and build on efforts in Germany, France and Austria to redesign the law to sanction technology companies that “transcend” a market — without evidence of competitive harm.

A third example concerns unjustified barriers for foreign AI applications. The commission proposes to subject non-European AI applications to an ex ante conformity assessment process, which may include testing, inspection, certification and potential requirements to use only EU-based data sets. At best, this would impose new delays and costs on US companies. But it could force US companies to choose between providing access to their most sensitive technologies or forgoing access to the EU market.

Finally, massive subsidies for a “European Cloud” are in the offing. The commission proposes to invest €4bn-€6bn in cloud infrastructure to store and process data in Europe and to support European cloud providers. Not coincidentally, leading French and German digital companies reportedly developed this proposal.

Europe should reconsider its digital sovereignty agenda and instead pursue greater regulatory co-operation with the US. Demonising US technology companies hinders efforts to address the foremost challenge for both sides with respect to the digital economy: China. Chinese protectionism — which fuses state and Communist party control, and creates subsidies and intellectual property theft on an unparalleled scale — poses an existential threat to a vibrant digital economy. For example, China is pressing for a new centrally controlled internet, which the US and EU oppose.

If Europe persists in its approach, US policymakers will have no choice but to treat it as a strategic threat. In the near term, it is difficult to imagine that the US will be able to strike a meaningful trade deal with the EU — a priority of both sides for many years — so long as the EU pursues the techno-nationalist moves aimed at the US. The Europeans need to reverse course before the economic and geopolitical damage cannot be undone.

FT : Towers of power: European telcos find value in masts

Towers of power: European telcos find value in masts
Groups such as Vodafone keep control but wave of consolidation predicted among smaller players

Telecoms groups in the US, Africa and India deemed their large tower estates expendable when they sold them off in recent years, but some of their European peers are choosing a different course to selling off the family silver, or more specifically steel.

Mobile towers — the metal structures on which radio antennas sit — were once considered vital to a company’s competitive standing. But as more networks started to share infrastructure to reduce costs and improve coverage, those masts instead became valuable assets that companies have looked to monetise.

French groups Altice and Bouygues, Ireland’s eir and Swiss group Sunrise are among those to have cashed in and sold thousands of towers to specialist companies including Spain’s Cellnex and Blackstone’s Phoenix Towers in recent years.

Yet some of the region’s biggest players — Deutsche Telekom, Vodafone, Telefónica and Orange — are forging their own path, retaining ownership or carving out their towers into separate companies that they still control.

Even the upheaval caused by the pandemic has not distracted them from these plans, with a broader wave of restructuring and consolidation anticipated as European governments demand thousands of new towers to better connect rural areas and roll out 5G networks.

“I think infrastructure is a sexy story in Europe,” Nick Read, chief executive of Vodafone, said in an interview with the Financial Times. The UK group revealed in July plans to list its towers business in Frankfurt at a potential value of more than €20bn.


Spurred by activist investor Elliott Management, Mr Read has been preparing to split off the towers business since he took the helm in 2018 as a way to boost Vodafone’s falling share price. He revealed that the company had turned down a number of approaches to break up and sell off its huge tower estate.

“A lot of tower companies came to the door saying don’t do this, we are the experts,” he said. But Mr Read argued that it was Vodafone that was the genuine tower expert. Vantage Towers, which will still be majority-owned by Vodafone, will be the fifth largest tower business in the world, covering nine markets with 68,000 towers.

Vodafone also operates a joint venture, Inwit, with Telecom Italia after the two merged their Italian mast businesses. Shares in Inwit hit an all-time high in April.

Separating tower assets into a new vehicle but retaining ownership allows telecom groups to unlock their value while moving debt off the parent company’s balance sheet, and creates an avenue for groups to increase their exposure to infrastructure.

In June Telefónica’s towers unit Telxius, which it owns alongside US buyout group KKR, acquired 10,000 towers in Germany from Telefónica Deutschland in a €1.5bn deal. The deal doubled the size of Telxius, making it a sizeable infrastructure player.

But the market remains highly fragmented. About 90 per cent of telecoms towers in the US are owned by specialist companies compared with 60 per cent in Europe, according to an estimate from Barclays.

Mr Read argued that smaller networks will become “hemmed in” over time and a small number of large dedicated players, be they controlled by established telecoms groups or newer players such as Cellnex, will consolidate the market.


The pooling of towers assets is regarded by some bankers as a “back door” route to consolidation within European telecoms which has slowed due to regulatory blocks on domestic mobile mergers. With about 40 network operators active across Europe, compared with three in the US and three in China, some expect that a pooling of infrastructure assets could achieve similar cost and scale benefits without triggering the same antitrust concerns over consumer harm.

The appeal of towers to specialist players, such as Cellnex and American Tower, and infrastructure funds is high. Maurice Patrick, an analyst with Barclays, said the pace of deals was likely to accelerate in 2020 due to the high valuations of tower specialists and the need for networks to raise cash for investment.

“With anemic revenue growth and demands for increased infrastructure investments we expect mobile network operators to continue to utilize the cost-saving benefits of TowerCos,” he said.

Cellnex has been the biggest mover and shaker in the market having acquired tens of thousands of masts in the past five years from companies including the UK’s Arqiva, Portugal’s NOS, Sunrise and Iliad to build a business valued at €21bn.

In July the Barcelona-based company announced plans to raise an additional €4bn to pursue more acquisitions and pointed to a pipeline of €11bn of potential deals. Its share price has surged more than 50 per cent since March, making it one of the best-performing stocks in Europe during the pandemic.

Giles Thorne, an analyst with Jefferies, said the Spanish company would continue to pursue a “domino effect” by forging larger deals in countries where it had gained a toehold, such as the UK.

Investors who have pushed into the market in recent years include Macquarie, which has bought and sold towers in locations including the UK and eastern Europe, and Brookfield, which last year bought 3i’s UK tower vehicle Wireless Infrastructure Group.

Some of them still believe there are opportunities despite competition from the biggest networks and players such as Cellnex.

Mark Crosbie, managing partner at Antin Infrastructure Partners, said there was a lot of activity “behind the scenes” over potential deals this year with infrastructure funds still hungry for telecoms assets such as towers and fibre. Antin has been investing in towers in Europe for more than a decade.

“They won’t have the market all to themselves,” he said of his rivals.

FT : SAP boss warns Europe not to fall behind US and Asia in tech

SAP boss warns Europe not to fall behind US and Asia in tech
Christian Klein says there is not enough talent coming through as America sets pace of innovation

The boss of Europe’s largest software company, SAP, has said the continent “has to do better” if it wants to compete in tech with the US and Asia.

Christian Klein, 40, who took over as sole chief executive of the German group in April, said that while it would be “definitely do-able” for Europe to build another tech company the size of SAP, the continent needs to build a better pipeline of talent.

Earlier this year the European Commission unveiled a plan to boost the bloc’s tech sovereignty and ensure that it can compete with the US and Asia in artificial intelligence and the analysis and use of data.

Europe is also planning to build its own network of cloud computing and data services, named Gaia-X, that will be protected by EU laws and offer an alternative to the US providers Amazon, Microsoft and Google.

Additionally, Brussels has said it will spend €600m to train more than 250,000 people across Europe with advanced tech skills.

Mr Klein, who joined SAP as a student and whose company is helping the EU build its own data infrastructure, said there was “clearly a lack of talent” in the company’s home region.

“When we have position open for a software engineer in Europe, I'm getting round about 20 to 30 people applying for the job,” he said. “When I [offer] the same position in Asia, I have one hundred people, who want to have that job. And of course, also in the US, you see, when you are close to the very good universities, you have great access to talent.”

SAP, which employs more than 100,000 staff worldwide, with roughly 25,000 based in Germany, does most of its business abroad. The US, its single biggest market, accounts for roughly a third of its revenues.

The group, which is in the midst of transforming from an on-site business to a largely cloud-based one, has placed its largest cloud development labs in Asia and America, with bases in Palo Alto, Vancouver, Seattle, Bangalore and Shanghai, among others.

The company also recently opened an innovation centre in Newport Beach, California, due to its proximity to universities with AI skills.

The need to be near SAP’s German headquarters was further weakened during the Covid-19 crisis, when almost all staff worked remotely, without a noticeable decrease in productivity. Other than when German-language skills are required, the Walldorf-based company tends to advertise new software development roles globally.

Founded almost 50 years ago by former IBM employees, SAP has grown into Germany’s most valuable public company, and the country’s sole tech titan.

Wirecard, the payments technology company that looked set to follow in SAP’s footsteps, filed for insolvency last month after revealing a multiyear fraud.

Last year, digital industry association Bitkom warned that Germany has a shortfall of more than 124,000 skilled IT workers, and that tech vacancies tend not to be filled for six months — a situation it said “threatens the competitiveness of our entire economy.”

“Europe has to watch out,” Mr Klein said, “because these digital skills are not only relevant for SAP, but for all other industries as well.”

“This is something the countries in Europe have to double down on,” he added.

SAP has prospered during the Covid-19 pandemic, especially as its major customers have used its software to rearrange their supply chains disrupted by lockdowns.

Its operating profits grew by 7 per cent to almost €2bn in the three months between April and June, as its cloud business revenues shot up by approximately 20 per cent.

But SAP’s customers remain frustrated by the lack of integration between its core software suite, S/4HANA, and a slew of large acquisitions made under Mr Klein’s predecessor, Bill McDermott.

Mr McDermott spent tens of billions of dollars on buying travel expenses specialist Concur, staff management software firm SuccessFactors and Qualtrics, which provides customer feedback data, among several others.

Last week, SAP shocked markets by announcing that it would float Utah-based Qualtrics, which it has bought in 2018 for $8bn, to give it greater autonomy and to allow it to pursue its own acquisitions.

“I think it signals that SAP is potentially more refocused on really the core European market,” said Julian Serafini, an analyst at Jefferies, adding that Qualtrics was probably an exception, and that other products would continue to be folded into SAP’s main suite over the next few months.

“The customers have been asking for this to happen for years at this point.”

Earlier this month, a joint study by the powerful German SAP users’ organisation, DSAG, which represents 3,500 European companies, and its American counterpart, ASUG, found that just 27 per cent of US users felt that S/4HANA worked “extremely well” with other SAP products. A mere 6 per cent of German speaking users felt the same way.

Mr Klein insisted that change was imminent. “I'm hearing our customers very loud and clear,” he said.

“About 10 per cent of our development capacity is assigned now to make the business process integration work,” he added, revealing that 50 per cent of the necessary work was already done.

“By the end of the year, we will hit 90 per cent”. At least until Mr McDermott’s purchases were properly integrated, SAP would focus on “organic growth,” Mr Klein said.

But he did not rule out making further acquisitions. “There will be also for sure in the future scenarios where we say: ‘OK, we can expand our portfolio by some tuck in acquisitions where our customers see the benefit’.”

He added that the company’s US clients, which include many of the country’s largest businesses, such as Exxon and Walmart, are in some respects more advanced than their European counterparts.

“A lot of customers in the US are really at the forefront of the digital transformation,” Mr Klein said.

“The industry cloud for retail will not be developed predominantly in Europe, we will do this in close co-innovation with our US retail customers.”

In contrast, some of the largest businesses in the EU are reluctant to move to cloud-based services, and even pay SAP to ensure that their data is stored on European servers and managed only by employees with EU passports.

“A lot of the core innovation is actually happening out of the US,” he said, adding that SAP would strengthen its management team in the country over the next few months. “It would make no sense to manage these teams out of Germany or Europe.”

>>> Weekend Papers Summary

Weekend Papers Summary
NEW YORK TIMES
Saturday
• Trump’s yearslong assault on the US Postal Service and his increasingly dire warnings about the dangers of voting by mail are sparking concerns that he could seek to influence an election conducted during a pandemic in which more voters than ever will submit their ballots by mail.
• Contact tracing, a cornerstone of the public health arsenal to tamp down the coronavirus across the world, has largely failed in the US—the virus’s pervasiveness and major lags in testing have rendered the system almost pointless.
• Europe’s strong management of the coronavirus enabled many economies to reopen while protecting workers whose livelihoods have been menaced, in contrast to the US, where an uneven and haphazard approach to the grave emergency could create dire economic problems.
• Ignoring international criticism and sanctions, the Chinese government has used the letter and spirit of a new national security law to crush Hong Kong’s pro-democracy opposition with surprising ferocity, with more harsh moves likely to come.
• Law enforcement authorities in Florida arrested Graham Ivan Clark, a 17-year-old recent high school graduate, for his involvement in a scheme that targeted the Twitter accounts of celebrities such as TSLA chief Elon Musk in an effort to have people send him thousands of dollars in Bitcoin.
• Admiral Brett Giroir, the assistant secretary for health and the Trump administration’s testing czar, told Congress on Friday that getting coronavirus test results within two to three days “is not a possible benchmark we can achieve today.”
• The Supreme Court rejected a request from environmental groups to stop construction of Trump’s border wall while the administration seeks review of an appeals court loss—the vote was 5 to 4, with the court’s more conservative members in the majority.
• With foreign markets struggling because of the coronavirus, China is investing heavily in its own infrastructure, employing millions of people not just to build new roads, railway lines and sewage systems but also to make the equipment necessary for those projects.
• Though poverty is soaring in Argentina as the pandemic worsens a punishing economic downturn, BLK is opposing a debt settlement proposed by the government and rallying other creditors to reject it, while holding out for a marginally improved deal.
• Democratic senators Sherrod Brown Elizabeth Warren, members of the committee that oversees banks and regulators, sharply criticized the Fed’s effort to get Congress to help it weaken capital requirements for big banks, saying the move would make the financial system less safe.

Sunday
• “As the US rides what amounts to a second wave of coronavirus cases, with daily new infections leveling off at an alarmingly higher mark, there is a deepening national sense that the progress made in fighting the pandemic is coming undone and no patch of America is safe.”
• Liberal Democrats are increasingly concerned that the military contractors, Wall Street banks, and major corporations where members of Joe Biden’s inner circle have worked while not in government could hold disproportionate power in his administration.
• Most New York City residents are avoiding subways and buses over concerns that sharing enclosed places with strangers is too dangerous, but the situation in major global cities suggests that public transportation may not be as risky as many believe.
• England has had the greatest rate of excess deaths of any country in Europe during the coronavirus pandemic, with a surge that lasted longer and spread to more places than those in hard-hit nations like Italy and Spain, according to a government report.
• Interviews with Republican party officials, strategists, and voters show that Trump’s political strategy is alienating independent and some conservative voters—particularly women and the better-educated—who dislike his partisan appeals and are disappointed in his leadership.
• On Saturday, the United Arab Emirates became the first Arab country to open a nuclear power plant, part of plan to reduce oil dependence, raising concerns about the long-term consequences of introducing more nuclear programs to the Middle East.
• In the Economic View column, Robert Shiller looks at how to navigate the coronavirus real estate market, noting that “It would be easy to assume that the boom times for housing will go on forever, but that would require ignoring the disaster that led to the most recent great financial crisis, a little more than a decade ago.”

WALL STREET JOURNAL
Weekend
• Front page story reports “Big oil companies endured one of their worst second quarters ever and are positioning themselves for prolonged pain as the coronavirus pandemic continues to sap global demand for fossil fuels.”
• The pandemic is accelerating plans in many cities around the world to encourage greater bicycle use by transforming city streets; Paris, to cite one example, will have more than 400 miles of pop-up bike lanes that didn’t exist before the crisis.
• Questionable online sales tactics used by some foreign merchants to boost sales numbers have been brought into focus after the federal government said this week that mysterious seed packages arriving from China may be an e-commerce scam.
• The Department of Homeland Security said it would increase the fee to apply for US citizenship by 81 percent and for the first time impose a charge to apply for asylum, saying current fees don’t fully cover the costs.
• Trump’s re-election campaign has pulled back on TV advertising as he trails in the polls and searches for a consistent message heading into the final months before Election Day.
• Doctors in Europe say their ability to treat Covid-19 patients is helping to reduce fatalities among the sickest patients, a hopeful sign as the region grapples with sporadic flare-ups as it heads through the tourist season and into fall and winter.
• A sudden surge in KODK stock this week turned money-losing stock-option grants into a massive windfall for the company’s executive chairman, Jim Continenza, after the US government announced a $765M loan to help the company shift into drug production.
• + FB: Some advertisers that left the social site to protest the proliferation of hate speech on its platforms say they will return, while the company’s financial outlook suggested the boycott isn’t taking a major financial toll.
• + AMZN, GOOGL, MSFT: Companies are increasingly looking to transform their digital operations during the pandemic by moving more operations into the cloud, a trend that should boost the tech giants’ cloud-computing businesses. • Bank share prices have trailed the market and have been particularly hard hit in recent months, but some investors are betting the pandemic is setting the stage for a rally that many investors have been waiting for.
• H.O.T.S.: The stock market surge may be masking reality for some investors, who are looking past the pandemic for a recovery that may not come as quickly as they think; Household goods makers have been among the biggest winners during the coronavirus crisis, but CL’s quarterly results suggest the gains may be easing; XOM “can manage its dividends, but it comes at a long-term cost that may not seem immediately apparent.”

FINANCIAL TIMES
Weekend
• Front page story on NVDA’s proposed $32B bid for Arm says the deal “would consolidate Nvidia’s position at the center of the semiconductor industry, at just the moment when the group’s technology is finding applications beyond mobile devices, in data centers and personal computers.”
• Washington condemned Hong Kong chief executive Carrie Lam’s move to postpone elections for the city’s legislature because of the pandemic, a decision that came a day after the government disqualified 12 pro-democracy candidates from contesting the election.
• Data published Friday show that the coronavirus pandemic has plunged the Eurozone economy into a historic recessions, with Spain suffering the biggest hit—its economy shrank by 18.5 percent in the three months ending in June.
• Big Read story says “After surging when the pandemic first hit, the dollar has had its worst month in a decade—the move reflects worries about America’s economy and its virus response, stirring debate about the currency’s global role.”
• Lex Column: Governments and central banks lack the resources to shield companies from further blanket lockdowns; After rising to the stratosphere, helium prices appear to be coming back to earth; Washington may be preoccupied with the coronavirus, but the impetus to crack down on Big Tech has also diminished. • Comment: “The crisis has reminded companies that the core purpose of a public listing—access to equity finance from long-term shareholders—comes in very handy when you need cash fast,” says Merryn Somerset Webb.

NEW YORK POST
Saturday
• Trader Joe’s, which for years has sold food under ethnic labels such as Trader Giotto’s and Trader José’s, said it will continue doing so as long as sales remain solid, rebuffing critics calling for the company to ditch the supposedly “racist” labels.

Sunday
• One home was destroyed and nearly 8,000 people were forced to evacuate after a wildfire in Southern California grew dramatically Saturday, and new evacuation orders are being issued for San Bernardino County.
• Swimply, which has been described as Airbnb for swimming pools, has seen a surge in new users during recent months—the app, launched in 2018, has reportedly grown by 2,000 percent since the pandemic started.

NYT : Ivanka Trump and Jared Kushner Report Income of at Least $36 Million in 20

Ivanka Trump and Jared Kushner Report Income of at Least $36 Million in 2019
The couple’s investments, mostly in real estate, were worth at least $204 million and as much as $783 million.
Three years into their new careers as White House officials, Ivanka Trump, the president’s eldest daughter, and her husband, Jared Kushner, reported income of at least $36 million in 2019, according to financial disclosure reports made public on Friday.

The couple’s investments, mostly in real estate, were worth at least $204 million and as much as $783 million, roughly the same as their maximum value of $786 million in 2018.

The documents, like other federal disclosure reports, show ranges of income and asset values. In some cases, they require only a minimum figure, making it impossible to discern a precise maximum figure for income. (President Trump also released his annual financial disclosure report on Friday.)

During 2019, the couple’s income could have been as much as $157 million, and possibly more. That compares with a range in 2018 of $29 million to $135 million.

Mr. Kushner’s continued stake in his family real estate firm, Kushner Companies, has drawn criticism, as the company has sought investments from around the world, despite his government position, including his role as an unofficial diplomat in the Middle East.

Although he has shed some assets, he has retained the vast majority of properties that were in his portfolio when he entered government service. Mr. Kushner stepped down from his position with Kushner Companies before he started working in the government.

Mr. Kushner’s firm remained active in the real estate market in 2019, selling and buying properties in New York, New Jersey, Virginia and Ohio.

Overall, the couple’s income was also down compared with 2017, when they reported at least $82 million.

Mr. Kushner disclosed a new loan of $5 million to $25 million with Bank of America, an obligation he holds jointly with other members of a limited liability company.

Ms. Trump stepped down from her positions at her family’s company as well as her fashion business when her father became president. She said in 2018 that she was shutting down her fashion brand. She did retain stakes in some of the family’s businesses and continues to draw income from them.

She earned $3.95 million from the Trump International Hotel in Washington, the same as she earned in 2017 and 2018. The property has drawn criticism over concerns that guests there are using their hotel stays as a way to influence the administration.

All told, Ms. Trump reported 2019 income of at least $5.5 million compared with a minimum of $6.7 million in 2018.

NYT : Ivanka Trump and Jared Kushner Report Income of at Least $36 Million in 20

Ivanka Trump and Jared Kushner Report Income of at Least $36 Million in 2019
The couple’s investments, mostly in real estate, were worth at least $204 million and as much as $783 million.
Three years into their new careers as White House officials, Ivanka Trump, the president’s eldest daughter, and her husband, Jared Kushner, reported income of at least $36 million in 2019, according to financial disclosure reports made public on Friday.

The couple’s investments, mostly in real estate, were worth at least $204 million and as much as $783 million, roughly the same as their maximum value of $786 million in 2018.

The documents, like other federal disclosure reports, show ranges of income and asset values. In some cases, they require only a minimum figure, making it impossible to discern a precise maximum figure for income. (President Trump also released his annual financial disclosure report on Friday.)

During 2019, the couple’s income could have been as much as $157 million, and possibly more. That compares with a range in 2018 of $29 million to $135 million.

Mr. Kushner’s continued stake in his family real estate firm, Kushner Companies, has drawn criticism, as the company has sought investments from around the world, despite his government position, including his role as an unofficial diplomat in the Middle East.

Although he has shed some assets, he has retained the vast majority of properties that were in his portfolio when he entered government service. Mr. Kushner stepped down from his position with Kushner Companies before he started working in the government.

Mr. Kushner’s firm remained active in the real estate market in 2019, selling and buying properties in New York, New Jersey, Virginia and Ohio.

Overall, the couple’s income was also down compared with 2017, when they reported at least $82 million.

Mr. Kushner disclosed a new loan of $5 million to $25 million with Bank of America, an obligation he holds jointly with other members of a limited liability company.

Ms. Trump stepped down from her positions at her family’s company as well as her fashion business when her father became president. She said in 2018 that she was shutting down her fashion brand. She did retain stakes in some of the family’s businesses and continues to draw income from them.

She earned $3.95 million from the Trump International Hotel in Washington, the same as she earned in 2017 and 2018. The property has drawn criticism over concerns that guests there are using their hotel stays as a way to influence the administration.

All told, Ms. Trump reported 2019 income of at least $5.5 million compared with a minimum of $6.7 million in 2018.

The New Yorker : The Cold War Bunker That Became Home to a Dark-Web Empire

The Cold War Bunker That Became Home to a Dark-Web Empire
An eccentric Dutchman began living in a giant underground facility built by the German military—and ran a server farm beloved by cybercriminals.
In the mid-nineteen-seventies, the West German Army, the Bundeswehr, built a vast underground bunker near the town of Traben-Trarbach. It was five stories deep, had nearly sixty thousand square feet of floor space, and was designed to withstand a nuclear attack. Eighty days’ worth of survival provisions were stored inside, including an emergency power supply and more than a million litres of drinking water. You entered the facility through an air lock; the interior temperature was set to seventy degrees. The walls were concrete, thirty-one inches thick, and some were lined with copper. The rooms were soundproof and transmission-proof. Between 1978 and 2012, the bunker was the headquarters of the Bundeswehr’s meteorological division, and at any one time about three hundred and fifty civilian contractors worked there; most of them focussed on predicting and plotting weather patterns wherever the German military was deployed. New employees often got lost. On each level, the walls were painted a different color, to help people orient themselves—but the bunker was symmetrical, so one side looked much like another. There was no natural light. In winter, workers on day shifts arrived in the dark and left in the dark.

In 2012, the Bundeswehr moved its meteorological division to another site. Germany’s federal real-estate agency, known as BImA, listed the bunker for three hundred and fifty thousand euros. The low price reflected the unusual nature of the property and the expense of maintaining it. The bunker sat beneath a plot of some thirty acres, in a forested area on a hill outside Traben-Trarbach, which is an hour east of the Belgian border. The perimeter of the property was marked by ramparts and a fence, and aboveground the site contained several large structures, including a gatehouse, an office building, a tall aerial with satellite dishes, a helipad, and barracks constructed by the Nazis in 1933. The Bundeswehr had employed twelve men, who worked in shifts around the clock, solely to insure that the bunker was properly ventilated and did not flood. The German government hoped that a technology business, or perhaps a hotel, might want the premises, but there were few prospective buyers.

The relocation of the Bundeswehr division was a blow to the local economy. Traben-Trarbach is a fairy-tale town that straddles a bend in the wide, teal-blue Mosel River. Traben is on the north bank, Trarbach on the south. The town, which is overlooked by a ruined fourteenth-century castle, is full of aesthetic quirks and highly caloric delicacies. Only about six thousand people live there, but thousands of tourists arrive every summer to hike, drink the local Riesling, and take river cruises. At the turn of the twentieth century, Traben-Trarbach was a wine-trading hub second only to Bordeaux, and also a center of the Jugendstil movement, the German iteration of Art Nouveau; many of its buildings reflect the wealth and the brio of that period. Near the hotel where I stayed in December, a Jugendstil relief of Rapunzel adorned the side of an apartment building. Her gilded hair fell in wavy lines from the fourth floor to the second.
The mayor of Traben-Trarbach, Patrice-Christian-Roger Langer, a garrulous man with a fine gray beard, worked at the bunker complex for nearly thirty years, and for eleven of them he operated its mainframe computer. He enjoyed his time working underground. But, he told me, “not everybody could deal with working in a bunker,” adding, “It’s a mental thing . . . if you don’t have a window.”
In 2012, a foundation controlled by a fifty-three-year-old Dutchman named Herman-Johan Xennt proposed to buy the bunker complex. Xennt travelled to Traben-Trarbach to explain his plans to a closed session of the town council. He was a striking man, with a cascade of shoulder-length gray-blond hair, and wore a dark suit, which highlighted the pallor of his face. Xennt told the council that he intended to set up a Web-hosting business at the bunker complex, and promised to create as many as a hundred jobs for local people, but he was vague when pressed for details.

Several council members were concerned about Xennt’s credentials. Although he said that he had been in the Web-hosting business for years, he did not name any blue-chip clients. But there were no other viable buyers, and so, in June, 2013, the property was sold to Xennt’s foundation. One of the council members, Heide Pönnighaus, later told a newspaper, “I didn’t have the best feeling about it.”
Xennt was born Herman-Johan Verwoert-Derksen, in 1959. He grew up in Arnhem, a small city in the eastern Netherlands which had been the site of intense fighting during the Second World War. As a teen-ager, he became interested in historical buildings, and several times he visited an old Nazi bunker on the edge of town. He also fell in love with science fiction, and began calling himself Xennt (pronounced “Zent”). When “Star Wars” was released, in 1977, he was enraptured by it. He decorated his bedroom to look like a spaceship, with blacked-out windows, jury-rigged electric doors, and speakers playing moody synthesizer music. In one corner of the room was an Apple II personal computer.
By his early twenties, he had officially changed his surname. Nothing irritated him more than being called by his given name, and he preferred to be called by his new surname alone. Even his parents knew him simply as Xennt. After graduating from college, in the early eighties, he started several personal-computer businesses in the Netherlands. A poster for a store that he owned, PC International, shows him with long brown hair, bushy eyebrows, and an unconvincing mustache. He is wearing a T-shirt with “Xennt” printed on it, and is standing behind a bulky monitor emblazoned with the store’s logo. During this period, he and a partner, a woman of Dutch Antillean heritage named Angelique, had two sons. They named them Xyonn and Yennoah: X and Y. Xennt and Angelique soon separated, and she retained primary custody of the boys. (Xennt also has a son who was born in 2019, to a different mother.)
In 1995, when Xennt was thirty-five, he bought a twenty-thousand-square-foot former nato bunker in the Dutch town of Goes, near the North Sea coast. The bunker, built forty-one years earlier, had ceased being used for military purposes in 1994. Xennt settled in with some old friends, including Paul Scheepers, a computer technician with a bald pate, long curly hair, and a sweet laugh. Scheepers is now fifty-eight years old, and works in I.T. support for a Dutch badminton foundation, but he still introduces himself by the online sobriquet that he adopted in the eighties: Cytrax. “We were looking for some space to make a kind of futuristic environment,” Scheepers told me recently. “And what do you do when you have a bunker and you have a computer company? You put computers in the bunker.”
At the Goes property, Xennt started a new business, called CyberBunker, which offered “bulletproof hosting” to Web sites. All Web sites must be physically hosted somewhere, whether on a personal computer or a server; hosting is now a multibillion-dollar industry dominated by such companies as Amazon Web Services and GoDaddy. CyberBunker offered, for a steep price, a highly secure hosting environment for sites containing sensitive, or illicit, material. In the late nineties, most of CyberBunker’s customers ran pornographic sites. Xennt had a liberal outlook, but there were lines he would not cross. According to CyberBunker’s Web site, its servers would host all content except “child pornography and anything related to terrorism.”
“The pear-shaped object approaching the house isn’t your father?”
Cartoon by Frank Cotham
I spoke to a former pornography distributor who used Xennt’s servers during this period. (He did not want me to publish his name, as he now works in finance.) He told me that his business brought in about a million euros a year, but that Xennt himself had relatively little money, because he had imprudently bought hundreds of servers—an investment in infrastructure that took several years to pay off.
A curious mixture of adolescent-male fantasia and techno-anarchist utopia, CyberBunker anticipated the current trend for apocalypse-ready hideaways owned by the rich and paranoid. The pornographer visited the Goes facility several times. Xennt’s taste in interior design had changed little since he had decorated his teen-age bedroom: the bunker was furnished with computer terminals, black leather sofas, neon-red lamps, and artificial plants. Ethereal music was often playing. The pornographer found the bunker’s atmosphere strange but “impressive”; its denizens were “alternative” people. Xennt had an odd diet. For breakfast, he ate frikandel—a skinless, deep-fried pork sausage, which is a popular snack in the Netherlands—along with an assortment of vitamins. “Xennt was a mysterious guy,” the pornographer told me, laughing. Two other former colleagues remember that the Goes bunker had a “porno room” where there were sometimes live sex shows involving Xennt’s girlfriends.
In 1999, a young programmer named Sven Kamphuis, who went by the online handle CB3ROB, joined the CyberBunker collective. Kamphuis worked a day job at the Dutch Internet firm XS4ALL. He had unruly black eyebrows and a crazy mop of black hair, and his colleagues at XS4ALL thought that he looked like Bert, from “Sesame Street.” They also remember him as rude, childish, and prone to conspiracy theories. But Kamphuis’s talent for programming was undeniable. He soon became one of Xennt’s lieutenants.

At around the same time, Xennt rented part of the bunker to another group. On July 27, 2002, there was an explosion in that section, and in the fire that ensued Xennt suffered burns on his hands and his face. The police showed up, and in the charred ruins of the bunker they found the remnants of a laboratory for making Ecstasy. Xennt’s business license was taken away, but he was not charged with any crime. He maintained that he had known nothing about the drug factory, and that the subletting group had assured him it was a painting company. CyberBunker’s servers were moved to aboveground facilities, in Amsterdam and elsewhere.
Xennt encouraged the notion that CyberBunker was more than a business. Less than a week after the fire, on August 1, 2002, he and Kamphuis published a declaration of independence for a new state, which they called the Republic of CyberBunker. Citing a U.N. Security Council resolution from 1960, which said that “all people have the right to self-determination,” the Republic of CyberBunker—population six—seceded from the Netherlands. CyberBunker declared as its sovereign territory the five hundred acres containing the ruined bunker. The country’s official currencies would be gold, dollars, and euros, and each resident would pay a flat tax of fifteen thousand dollars a year. Unusually for a republic, it had a royal family. Its President was His Majesty King Xennt von CyberBunker, and its minister of foreign affairs and telecommunications was His Royal Highness Prince Sven Olaf von CyberBunker-Kamphuis.
Kamphuis often acted as CyberBunker’s spokesperson, and he promoted anti-authoritarian, libertarian ideas. Among his tenets: free speech is supreme; everyone has a right to be online; the Internet erases the power of the state; copyright is twentieth-century bullshit. Such notions were in fashion during the nineties, when big technology firms had yet to dominate the Internet. In 1996, John Perry Barlow, the anarchist writer and a founder of the Electronic Frontier Foundation, a group committed to digital freedom and privacy, wrote an influential manifesto that began, “Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of the Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.”
Several people told me that Xennt was not entirely sincere about his self-proclaimed regal status. (He recently called CyberBunker’s declaration of independence “a joke.”) But Kamphuis was serious about it—and remains so. Since 2002, he has more than once claimed to “enjoy personal and functional immunity” when faced with arrest, on charges ranging from driving offenses to cybercrime. Paul Scheepers, Xennt’s longtime friend, told me that Xennt’s world view was more pragmatic than Kamphuis’s: he simply wanted the freedom to pursue his own projects without interference. Xennt declined to be interviewed for this article, but agreed to give written answers to a dozen questions. He explained, “I am not interested in politics at all. I value privacy and I am against the ‘big brother’ policy of large corporations and governments.”
In the nineties and two-thousands, however, Xennt took part in some activism, helping to instigate what became known as the Public Root movement. He and an international group of investors and programmers tried to create their own roster of top-level domains—the suffixes that follow an Internet address, such as “.org,” “.com,” and “.edu.” They came up with various new domains—including “.schiphol,” the name of Amsterdam’s airport, and “.sex”—with the aim of selling them. Top-level domains are controlled by an American nonprofit organization called icann. At a time when the structure of the Internet still seemed to be in flux, Xennt and others in the Public Root movement chafed at icann’s authority. In 2005, Xennt filed a patent application related to top-level domains, writing, “We state that each Internet user has the right to see all of the Internet.”
The Public Root movement eventually fell apart, because of internal arguments over control, funding, and transparency. Martijn Burger, one of Xennt’s former partners in the project, successfully sued Xennt for breach of contract. Burger told me that Public Root was “ideological,” but added, “We also wanted to make some money.”
Burger, who now works in private health care in the Netherlands, told me that Xennt has “brilliant ideas, but he’s not a businessman.” Peter Olsthoorn, a Dutch investigative journalist who has covered Xennt and CyberBunker ever since the Public Root contretemps, said that Xennt was an “old-fashioned anarchist” with a specific gift: he understood “the Internet in its root, in the core.” Scheepers told me that Xennt was an inspired designer who might have worked for Apple had he chosen a different path.
Another former colleague of Xennt’s, a Dutch programmer named Frank Van der Loos, occasionally performed legal work for CyberBunker, despite having only paralegal qualifications. When we met in The Hague in March, Van der Loos wore a Bluetooth earpiece the entire time and spoke so quickly that I frequently misunderstood him. (He often finished his sentences with “Do you understand?”) Van der Loos said that he and Xennt had argued about money, adding that Xennt’s great weakness was that he was a “cheapskate.” But Van der Loos also compared him to Steve Jobs. Although Xennt could code only in the rudimentary language BASIC, he was prescient about the kinds of change that a connected world would bring. Before PayPal became popular, for instance, Xennt had attempted to start his own online encrypted banking-transfer service, named Bank66. It had failed because of Xennt’s greed and lack of business acumen, Van der Loos said. Nevertheless, he called Xennt “a visionary.”

Jörg Angerer, a senior German prosecutor, first heard that Xennt’s foundation had bought the Traben-Trarbach bunker in the summer of 2013, after a council member conveyed his concerns to the local police. Angerer, who is based in Koblenz, an hour northeast of Traben-Trarbach, is a lean and affable man with a shaved head and an unshaven face. For the past few years, his office has specialized in prosecuting cybercrime. Soon after he began researching Xennt and his company, he told me, he concluded that some of CyberBunker’s clients were manifestly illegal. But CyberBunker itself appeared to exist in a gray area between activism, business, and criminality.
In the two-thousands and twenty-tens, CyberBunker and Kamphuis’s associated Internet-service provider, which was also called CB3ROB, had become notorious for hosting the spam e-mail operations of phishing sites—fraudulent criminal enterprises that lure people into disclosing their credit-card details—and of rogue pharmaceutical peddlers. At the same time, CyberBunker hosted WikiLeaks, the renegade operation devoted to exposing secret documents. (Xennt told me that this was not a political gesture on his part: “CyberBunker hosted WikiLeaks indeed. Why? Because WikiLeaks hired its services.”) The Pirate Bay, a site for sharing movies and other copyrighted content, was a CyberBunker client until 2010, when the Motion Picture Association of America won a court ruling, in Hamburg, that forced Xennt and Kamphuis to remove the site from its servers. Kamphuis was indignant about the decision, telling a reporter, “Help us put these dinosaurs out of their misery!”
As Angerer continued to research CyberBunker, he learned that it could be very aggressive. Around 2010, the Spamhaus Project, a European volunteer-driven organization whose goal is to impede spammers, had begun listing I.P. and real addresses associated with CyberBunker and CB3ROB, and had lobbied Internet-service providers to block the company. In early 2013, this pressure led to CB3ROB’s services being briefly taken off-line. In retaliation, Kamphuis and a loose group of hackers in different countries, who called themselves the Stophaus Collective, hit Spamhaus with a distributed denial-of-service attack, which incapacitates a site by overloading it with traffic. Kamphuis was arrested shortly after the attack, but Xennt was not; he proceeded with moving into the Traben-Trarbach bunker.
Angerer told me that he didn’t fully understand Xennt’s acquisition of the property, except to say that he evidently had “a weak spot for bunkers.” CyberBunker gained some mystique by operating out of a fortified underground facility, but there is little benefit for customers in physically protecting servers to such an extreme degree. Moreover, the ostentatiously secure location was bound to attract the suspicion of law enforcement. Xennt’s promise of bulletproof hosting, Angerer suggested, could have been more effectively fulfilled by using regular servers in a more permissive jurisdiction, such as Russia.
Xennt’s desire to live and work underground was not entirely rational. Van der Loos, the former associate, told me that Xennt was bunkergeil—a Dutch portmanteau that means “horny for bunkers.” After the underground facility in the Netherlands was destroyed by fire, in 2002, Xennt concluded that the most likely country where he might find a replacement was Germany, which had many military hideouts from the Cold War era. In 2007, Van der Loos and Xennt visited a former nato bunker in Börfink, a facility that had been used as a center for West German intelligence in the seventies and eighties. In some areas of the Börfink bunker, there were no lights, and so the two men toured the cavernous space in darkness, following fluorescent green arrows on the walls, like Egyptologists inspecting hieroglyphs. The biggest underground room, which had formerly housed nato maps, was three stories high. Xennt was captivated. “I want to be buried here,” he said. Van der Loos spent the night in a nearby hotel, but Xennt made a bed in the abandoned map room and slept there.
CyberBunker, a business based near the German resort town of Traben-Trarbach, offered “bulletproof hosting” for Web sites. The air-locked facility, five stories deep, was designed to withstand a nuclear attack.Photo illustration by Max Guther
Xennt moved into the Traben-Trarbach bunker in June, 2013. Angerer kept an eye on Xennt’s activities but did not authorize a full investigation of CyberBunker for more than a year. The inquiry presented many legal difficulties. According to German legislation, it’s lawful to host a Web site containing illicit material, as long as the hoster is unaware of the content and does not actively assist the site’s owner in illegal behavior. Online privacy is an important principle in German law, and establishing that a hoster knows of or assists in the publishing of illicit content normally requires a communication tap, which a judge is unlikely to permit without prima-facie evidence of criminality. Before Xennt moved to Traben-Trarbach, no Web hoster in Germany had ever been successfully prosecuted.
Michel van Eeten, a Dutch professor of cybercrime at Delft University of Technology, recently helped the Dutch police in an investigation of another “bulletproof hoster,” called MaxiDed. The Netherlands has laws similar to Germany’s on such matters, and van Eeten told me that investigators were left in “a Catch-22”: “We don’t have the power to show that the hosters are actively facilitating crime, and so we don’t have the power to actually collect the data.” Van Eeten told me that the MaxiDed case, which was tried last year, turned on a piece of luck. A separate Dutch investigation of a child-abuse site revealed that it was owned by the same people who owned MaxiDed. The judge in the MaxiDed case then allowed some digital intercepts. In one e-mail exchange, which I have seen, a customer complained that his server had been shut down for “abuse” even though he had paid a premium for permission to host “adult, erotic, movies, doorways, dating, vpn, blogs, xrumer, and zennoposter.” (A “doorway” page is a means of manipulating search engines; XRumer and ZennoPoster are tools for spreading spam.) The MaxiDed representative asked the customer what he had been running on his server. The customer responded, “xrumer.” The MaxiDed representative said, “OK. Proceed.” The customer then acknowledged that he had also used the server as a command-and-control center for denial-of-service attacks. The hoster replied, “Done . . . should be up in a few minutes.”
Despite this damning evidence, the MaxiDed case was not easy to prosecute. The company was shut down and two of its administrators were arrested. One was tried in the Netherlands but was convicted only on a single count of money laundering. On all other counts, the prosecutors failed to show that MaxiDed had been a knowing accessory to crime. “The case sort of fell apart,” van Eeten told me.
“Do you have any more eggs I could borrow?”
Cartoon by Justin Sheen
Angerer, the German prosecutor, knew that if he was going to bring down CyberBunker he needed both analog and digital evidence of wrongdoing. After Xennt set up shop in Germany, local police officers started monitoring the property, though they could not see much, because Xennt had added taller fencing to the ramparts, and dogs to guard the perimeter. The officers also enlisted someone connected to CyberBunker as an informant. At the start of 2015, a German cybercrime unit based in the city of Mainz began investigating Xennt’s activities.

In December, I travelled to Mainz, which is about an hour east of Traben-Trarbach, and met with the cybercrime team. Three police officers and two civilian contractors worked out of a crowded room in a quiet area of the city. The unit’s headquarters had the ambience of a nerdy frat house. Decorating one wall was a “Breaking Bad” poster featuring the show’s antihero, Walter White—a disgruntled chemistry teacher who begins cooking enormous quantities of meth in a high-tech bunker. The officers asked that I not use their names, but they were happy to discuss their five-year investigation of CyberBunker. None of the men looked old enough to have been doing anything professional for half a decade.
The police officers told me that, later in 2015, German authorities granted them permission to intercept the bunker’s Web traffic. The officers tapped a cable going into the facility; the inflow and outflow were “mirrored,” or copied, but not stopped. A small portion of the information they captured—around ten or fifteen per cent—was unencrypted. On that “clear” portion, the police could see links to illegal Web pages that sold drugs, facilitated credit-card fraud, and conducted other scams. Although the police could not decode any of the encrypted data, the size of the flow suggested that CyberBunker was offering bulletproof protection for a huge number of so-called dark-Web sites. Xennt, in other words, was hosting illicit marketplaces.
Most people use only a fraction of the Internet. A small percentage of Web content is accessed through search engines like Google, or discussion sites like Reddit, or news sites like cnn.com. Beneath the “clear” Web that most people use is a vast amount of non-searchable and password-protected content, including government reports, scientific material, and medical records. This section of the Internet is known as the deep Web. Beneath this level is the dark Web, which exists largely on Tor—software that allows users to communicate with one another without betraying their identities or their I.P. addresses.
Tor is based on technology developed in the mid-nineties by employees of the U.S. Naval Research Laboratory, with the intention of protecting online communications. (Tor is still partly funded by the U.S. government.) The first working version of the software was launched in 2002. Tor’s premise is simple and elegant. The Internet works by sending packets of information from one computer to another. The Tor browser routes all traffic through a network of relay nodes, in such a way that the starting point cannot be detected by the destination. As data pass through each of the relays, encryption is stripped away like the layers of an onion. Tor is an abbreviation of “the onion router.”
In repressive states, the dark Web has become a haven for political activists. Many journalists use Tor to send and receive information securely, or to communicate with sources. Some users like the fact that dark-Web pages are not subject to the same censorship as the regular Web, where there are limits on what you can say. Other users appreciate Tor because they can avoid offering up their private data to such giant corporations as Google and Facebook. Some legitimate news outlets, including the Times and ProPublica, maintain onion-router pages.
Yet a 2016 study by researchers at King’s College London found that sixty per cent of Tor sites contain illicit material. Between 2011 and 2013, the first truly successful dark-Web bazaar, the Silk Road, processed hundreds of millions of dollars’ worth of illegal drug transactions. The site, modelled on Amazon or eBay, used the U.S. Postal Service to deliver packages. The F.B.I. eventually closed the Silk Road, and its founder, Ross Ulbricht—an American who went by the online moniker Dread Pirate Roberts—is now serving a life sentence in an Arizona prison, without the possibility of parole. Before his arrest, Ulbricht had espoused a libertarian outlook, and had argued that the Silk Road was forging a path toward a world unfettered by repressive governments. Every transaction on his site, Ulbricht wrote to Silk Road users, weakened “the thieving, murderous” state.
It’s easy enough to access Tor. You can download a Tor browser onto a regular computer; or you can run an operating system, funnelled through Tor, from a USB stick plugged into your device. Dark-Web sites look much like the rest of the Internet, but they are generally much more difficult to navigate: you often find yourself scrabbling around like a hiker lost on a trail at night, trying to read a hand-drawn map with a flashlight. If you use a search engine to find a popular dark-Web site, you will see lists of recent links to that site, but some of the links will lead to error messages. Such addresses are characterized by a mess of numbers and letters, which makes memorizing them virtually impossible. (On Tor, the e-mail and chat provider Riseup appears as http://vww6ybal4bd7szmgncyruucpgfkqahzddi37ktceo3ah7ngmcopnpyyd.onion/.)
I recently spent some time on Dread, a forum accessed through Tor which is a kind of Reddit for the dark Web. In one thread, commenters used assumed names to discuss the selling of illegal drugs in the United Kingdom. They were talking about how the coronavirus outbreak would affect the importation of narcotics. “Would you see any of this moving to more attempts at UK based production?” someone using the handle Darknetpeach asked. “Surely MDMA and pills can be produced on home soil?” CoronaKid, apparently an importer, said, “We’ll be fine, shipments will still get thru . . . places like Holland will always be the main players for bulk production. . . . Just stock up now if you’re worried.” CoronaKid suggested visiting a dark-Web drug exchange, Empire Market, which he said was well provisioned. Darknetpeach was less sanguine, arguing, “100% there will be coke and heroin shortages.”

Xennt lived a peculiar existence in Traben-Trarbach. The bunker was not designed with domesticity in mind. The entrance to the complex was through a barrier gate, next to a Bundeswehr-era sign that said “halt,” in giant letters. Inside, Xennt was joined by an ever-changing group of perhaps two dozen people, including programmers and technicians from various European countries, several girlfriends, a gardener, a cook, and, for a period in 2015, Sven Kamphuis. Employees and guests were generally given rooms in the old Nazi barracks, where the cook prepared meals. Xennt liked to tell visitors that the barracks had once housed part of Hitler’s eugenics program, but there is no evidence for that claim. There was only one shower in the 1933 structure, and the facilities were rudimentary. Xennt slept in the bunker, on the first underground floor. His bedroom was furnished with black satin sheets, an elaborate sound system, and a life-size figure of the Marvel character War Machine, which stood by his bed.
When Xennt bought the Traben-Trarbach property, he invited his sons, who were now young adults, to work there. Their mother, Angelique, came along, too, though she didn’t work at CyberBunker. According to a childhood friend of the sons, who visited the complex, the family didn’t fully reunite: Angelique and her sons stayed in the aboveground barracks with the other workers.
People from Traben-Trarbach remember Xennt driving into town in a white BMW X6. When Ajax, Amsterdam’s best soccer team, played in the Champions League tournament, Xennt liked to eat pizza at the Costa Smeralda restaurant, then watch the game at a sports bar next door. Sometimes Xennt and his crew visited a strip club in the nearby town of Trier. The staff at the pizzeria and at other local restaurants recall Xennt and his colleagues tipping well. Traben-Trarbach is not a diverse place. Xennt, with his trenchcoat and long yellow hair, stood out, as did his multilingual and multiracial companions. The locals found the group strange but glamorous—like a pirate crew that had unexpectedly docked in town.
A rumor started that Xennt was cultivating cannabis in the bunker, and local people were alarmed by the guard dogs roaming the property. To reassure members of the city council, Xennt occasionally gave tours of the facility. Langer, the mayor who had worked at the complex for the Bundeswehr, visited twice, at Xennt’s invitation. He remembers feeling aggrieved that the jobs Xennt had promised for local people had not materialized, but he saw no marijuana cultivation or any other obvious signs of illegal activity.
The bunker had not changed much since Langer had stopped working there, except that the grounds were a lot messier. There was the same color-coded scheme for differentiating floors. Old maps of Afghanistan hung on the walls. On the fifth level down were the water tanks. On the fourth level down were the generators. On the third level down, an old supercomputer used by the Bundeswehr was still hooked up to a giant screen. On the same floor, a room was filled with racks of Dell computer servers. The heat from these servers warmed the whole bunker, through the air-conditioning vents.
“There was always this funny feeling—what was on those servers?” Langer told me. “And Xennt would say, ‘That’s my customers’ secret.’ ”
When Frank Van der Loos, the Dutch programmer, first visited the bunker complex, in the fall of 2015, he was bowled over by how enormous the property was. He was on the site for two days, and saw “maybe a third of it.” Xennt told Van der Loos that he kept finding new rooms.
Van der Loos also wondered what was on those servers. In 2014, Dutch authorities investigating the dark-Web marketplace Cannabis Road had seized a CyberBunker server housed in Amsterdam, at a facility owned by the company Leaseweb. A Dutch prosecutor explained that the server had been impounded because Xennt was suspected in the trafficking of drugs. Xennt reassured his colleagues at CyberBunker that he had merely leased the impounded server, and hadn’t known what it was used for—a legitimate position, under both Dutch and German law. Xennt told Van der Loos that the Traben-Trarbach servers were, in a similar way, closed books to him. Nevertheless, he felt that he was being spied on by the German police. “I don’t do anything wrong,” Xennt told Van der Loos. “Still, they are watching me.”

Van der Loos was surprised to see that Xennt’s office was littered with phones—there were around thirty modified BlackBerrys on his desk alone. Xennt explained to Van der Loos that the phones were why he had been invited to Traben-Trarbach. He was expanding into an exciting new business.
Bulletproof Web hosting had originally been lucrative, but by 2015 most legitimate sites had migrated to conventional hosters, and competition had driven rental prices down, making the business model less viable. Xennt’s server business generated annual profits of between two and three hundred thousand euros—enough to cover the maintenance costs of the bunker, but not much more. (According to usenix, a nonprofit that studies computing systems, MaxiDed, the Dutch bulletproof-hosting service that was shut down, accrued profits of no more than six hundred and eighty thousand euros in seven years, whereas a child-pornography site that it hosted made more than four million in five years.) Xennt told Van der Loos that he was turning over the day-to-day supervision of CyberBunker’s servers to his eldest son. Xennt’s new project was building an encrypted-phone network, which he called “a money-maker.” He asked Van der Loos to help him.
“I didn’t want to embarrass them by telling them I don’t work here, so I told them it was a three-hour wait for a table instead.”
Cartoon by Carolita Johnson
Around the time of Van der Loos’s visit to the bunker, Nicola Tallant, an Irish crime reporter from the Sunday World, also arrived in Traben-Trarbach. She has a reputation for writing juicy, exclusive stories about Irish criminals. In 2015, she received a tip from a source that a major Irish drug dealer, George Mitchell, had moved from southern Spain to Traben-Trarbach, in order to work on an encrypted-phone business with Xennt. She had never heard of Xennt, but a tourist town in the Mosel Valley is a curious headquarters for a crime boss, and so Tallant decided to investigate.
Mitchell has a portly frame and a distinctive waddle, and is sometimes known as the Penguin. Whenever he visited CyberBunker, he went by Mr. Green. By the mid-nineties, he had become one of Ireland’s most successful importers of illegal drugs. But he abruptly left for Amsterdam after he was linked to the attempted murder of a London gangster and to the creation of Ireland’s first Ecstasy factory. In 1998, Mitchell was arrested in the Netherlands after he was caught unloading a shipment of stolen computer parts, and he spent a year in jail. According to a senior Irish police detective, Mitchell’s drug-importation business thrived even after his Dutch jail term; in 2012, he facilitated the attempted shipment to Ireland of some four hundred kilograms of cocaine—an operation thwarted by the police. The detective told me that Mitchell remained a major figure in the European drug trade until about six years ago. “From ’14 or ’15 onward, we didn’t see much from Mitchell in terms of the importing of drugs,” he said. “It may be that he branched out into other areas.” (In fact, European police intelligence suggests that Mitchell continued to organize large shipments of drugs after 2014. Mitchell has denied any involvement in criminal activities.)
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Tallant had her own theory about the Penguin: he was approaching retirement age, and, as the father of several children, he was looking for a way to protect his dependents and his assets. In 2000, his son-in-law, a drug supplier named Derek (Maradona) Dunne, was murdered in Amsterdam. And around the time Mitchell arrived in Traben-Trarbach a dispute among Irish gangs had turned bloody. In September, 2015, Gary Hutch, an Irishman who had previously worked with Mitchell, was killed by a rival group on the south coast of Spain. Mitchell, Tallant surmised, wanted to leave Spain and the gang feud behind, and to reinvest some of his money in a more legitimate-seeming enterprise.
Mitchell had known Xennt for many years, at least from the time of Mitchell’s arrest for handling stolen computer parts, in 1998. (A person familiar with Xennt’s computer business told me that Xennt had bought stolen parts from Mitchell; Xennt declined to comment on this accusation.) Martijn Burger, the businessman once involved in the Public Root movement, remembers Xennt and Mitchell spending time together around the turn of the millennium. Back then, Burger did not know of Mitchell’s status in the criminal world, and teasingly called him Charlie Chaplin, because of his gait. Burger recalled that Mitchell was often accompanied by glamorous young women, and carried a small bag containing “ten to twelve” Nokia phones, each with its phone number written on the back.
When Tallant received her tip, Mitchell had not been photographed in more than two decades. She travelled to Traben-Trarbach twice in the fall of 2015, along with a Sunday World photographer. They watched his movements for several days. He rarely left the apartment complex where he was staying, on the Traben side of town. But on some mornings Xennt picked up Mitchell and took him to breakfast. The pair once ate lunch at a popular local restaurant, the Historische Stadt-Mühle—the Historic Mill. They remained there all afternoon as Mitchell ordered gin-and-tonics and Xennt drank hot chocolate. Tallant was fascinated by Xennt’s appearance: he often wore a floor-length coat, and resembled a Bond villain. “He is sensational-looking,” she told me. “I’ve never seen anyone as weird in all my life.”
Tallant and the photographer eventually found their opportunity one morning, as Mitchell was leaving a restaurant after having breakfast with Xennt and Xyonn. The Penguin wore a navy suit and a black T-shirt; Xennt had on a long black puffer jacket; Xyonn had his hair in dreadlocks.

Tallant walked up to Mitchell and said, “George, quick word—how are you?”
“Very good,” Mitchell replied instinctively, in his broad Dublin accent. Then, surprised at hearing another Irish voice, he peered under the baseball cap that Tallant was wearing, and evidently recognized her. “Fnck off!” he said.
The photographer got his shot. Tallant’s exclusive was published the next Sunday, under the headline “The Lost Godfather.
The encrypted-phone business is indeed a money-maker. Many people now use end-to-end encrypted-communication apps like Signal and WhatsApp on their smartphones. But, for a small subset of privacy-minded people, such apps are insufficient: they want a specialized, fully encrypted phone that operates on a private network. A “crypto phone” normally costs a user between fifteen hundred and two thousand euros for the handset, and biannual payments of up to a thousand euros for access to a private data network. The handsets—often reëngineered Android or BlackBerry devices—tend to be sold with the camera, the microphone, and location services disabled. The phone typically uses only one end-to-end encrypted-messaging app, which runs on servers that the providers own. Many phones include a panic button that wipes all data from the handset when activated.
Providing or using an encrypted phone is not illegal in Europe or in America, but the devices appear to be used predominantly for illegal activities, and prosecutors have begun finding ways to break up some encrypted networks. In March, 2019, the U.S. Attorney for the Southern District of California brought racketeering-conspiracy charges against Vincent Ramos, the C.E.O. of a Canadian company called Phantom Secure. Six months later, he pleaded guilty to “leading a criminal enterprise that facilitated the transnational importation and distribution of narcotics through the sale of encrypted communication devices and services,” and was sentenced to nine years in prison. Many of Phantom Secure’s customers were members of the Sinaloa drug cartel, in Mexico. It was the first case in the United States in which an encryption-service provider was jailed.
One of the best-known private phone networks is one that collapsed. In April, 2016, Danny Manupassa, the owner of a Dutch company called Ennetcom, was arrested, on suspicion of money laundering and possession of illegal weapons. The servers used by his network, which were housed in Toronto, were seized by Canadian authorities and passed on to the Dutch. Officials in the Netherlands were able to decrypt many communications by Ennetcom users, likely because the company had housed decryption keys on the same server where it stored messages—a catastrophic error. By 2017, the Dutch police had decrypted 3.6 million messages. Several people have since been arrested because of this trove of criminal evidence, including Naoufal Fassih, a Moroccan-Dutch gangster, who was sentenced to eighteen years in prison for attempted murder. (In early July, Dutch, British, and French police announced that they had infiltrated another popular network, EncroChat. This had led to more than eight hundred arrests, across Europe, and to the seizure of huge quantities of guns and drugs—and of some sixty-seven million dollars in “suspect cash.”)
In Traben-Trarbach, Xennt built his own encrypted-phone network and applications with the help of Sven Kamphuis and some programmers in Poland. Xennt explained to me that his apps are “sold and distributed under various brands all over the world, by third parties.” One of the first encrypted-phone apps that Xennt developed, called Underground, was sold on a modified BlackBerry handset. More recently, he developed a messaging app called Exclu, which uses a novel encryption scheme and is sold on a Wileyfox Android device.
Many of Xennt’s initial encrypted-phone customers were in Ireland; his market subsequently spread throughout Europe. Xennt told me that his phone business was more lucrative than his hosting business, although the extent of its profitability is hard to assess without seeing a balance sheet. The F.B.I. reported that Phantom Secure, the company that had facilitated the Sinaloa cartel, had earned annual revenues of eighty million dollars, but that network had between ten and twenty thousand devices—at least twice as many as Xennt’s—and server infrastructure on four continents; it also charged a much higher biannual renewal fee. The yearly profits of Xennt’s phone business likely never went much beyond a million dollars.

During Frank Van der Loos’s 2015 visit to the bunker, Xennt asked him to help develop software for his phones that would include the ability to send money to other users of the private network. According to a former colleague, Xennt also wanted to include a “back door,” so that if a phone was seized, or the network was disabled, Xennt could drain all the funds stored in the application’s escrow account. Van der Loos refused, on ethical grounds. (Xennt told me that he never would have asked for a back-door feature, because it clashes with his “views on privacy.”)
According to two people close to CyberBunker, George Mitchell was not the only investor interested in Xennt’s encrypted-phone business. Danny Manupassa, the former boss of Ennetcom, also travelled to Traben-Trarbach to see Xennt. According to the sources, Manupassa wanted to invest a million euros in Xennt’s network. It seems unlikely that Manupassa did so: after he was arrested, in April, 2016, Ennetcom was shuttered and turned inside out by the Dutch police in a search for information.
The German police’s interest in CyberBunker intensified after the sighting of Mitchell in 2015. They suspected that he might be the guiding figure behind a large criminal enterprise, based in the bunker. A judge allowed the police to tap sixteen of Mitchell’s non-encrypted phones. But, despite glimpses into his criminal dealings, including mentions of shipments of “oranges”—which the police assumed was a coded reference to drugs—there was never enough evidence to charge Mitchell with a crime. In 2016 or 2017, perhaps sensing that he was being watched, he left Traben-Trarbach. Mitchell’s most obvious role before then was as a salesman for Xennt’s encrypted-phone business, which he marketed to members of Colombian drug cartels and to biker gangs in Majorca. “It’s the only way, all my friends use it, everybody,” he told a prospective client on a recorded call.
The police unit in Mainz decided to focus on CyberBunker activities that were provably criminal. Running an encrypted-phone network is not illegal, even though it very often brings providers into contact with known criminals. Similarly, hosting dark-Web sites is not against the law. But if police officers could demonstrate that Xennt and his team were actively assisting the administrators of dark-Web sites that traded in illicit substances or services, they could build a strong case against CyberBunker. Conveniently, Xennt’s operational security was often poor. In the early days at Traben-Trarbach, he and his team occasionally used unencrypted e-mail, which the police were able to monitor. But the authorities needed a better way to establish the relationship between Xennt and his dark-Web clients.
The cybercrime unit developed a bold scheme. With the permission of high-level German authorities, it created its own dark-Web site on Tor: a scam, involving lottery numbers, that accepted payment in bitcoin. The unit’s members made sure that nobody who used the site could lose money—otherwise the officers themselves would be committing a crime—but the site was designed to look as realistic, and as shady, as possible. Designing it was “kind of fun,” an officer admitted to me.
“And isn’t it true, Mr. Robertson, that you habitually leave ridiculously small amounts of cereal in the box and then return it to the cabinet?”
Cartoon by Teresa Burns Parkhurst
The Mainz team members received permission from their superiors to buy thousands of dollars’ worth of bitcoin, then e-mailed CyberBunker, asking to rent a server. A representative from the company readily agreed, and the undercover officers engaged in a long dialogue with a CyberBunker salesperson. The officers would not share details of that discussion with me, because it would reveal “police tactics,” but they ascertained that Xennt’s company actively assisted clients it knew to be engaged in illicit transactions. CyberBunker even offered some clients tips for hiding their real identities.
The police, meanwhile, began ensnaring Xennt in a more direct fashion. When Frank Van der Loos visited the bunker in 2015, he chastised Xennt for using cheap technology that compromised his operational security. Xennt’s servers were not connected by a virtual-lan cable, which allows the digital traffic from individual servers to remain separated, even if the servers are using the same physical cable. Van der Loos told me that if someone wanted to “listen” to the activity on CyberBunker’s servers, all it took was secretly adding another server to the group. Separately, I learned that in 2018 a young intern at CyberBunker discovered a server on the third floor which looked nothing like the others. Hidden underneath the floorboards, it was connected to the rest of the server bank. When I asked the leader of the Mainz team whether he had asked an informant working in the bunker to install the extra server, as a spying device, he stifled a laugh, then said, “I cannot answer it, and I cannot deny it.” (Xennt told me it was “impossible” that the police had surveilled him in this way.)
By various methods, the police came to believe that CyberBunker was the biggest hoster of illegal Web sites in Germany, and perhaps anywhere in the world. In 2014, it hosted Cannabis Road, the dark-Web marketplace. Between March, 2016, and February, 2018, it hosted the forum Fraudsters, through which counterfeit money, fake I.D.s, and prescription and illicit drugs were traded. Between 2015 and 2018, CyberBunker hosted Flugsvamp, a dark-Web market that accounted for roughly ninety per cent of the online illicit drug trade in Sweden. Xennt’s most significant dark-Web client was a site called Wall Street Market. Between 2016 and 2019, it sold more than thirty-six million euros’ worth of drugs. The site’s administrators took a commission of three per cent on each transaction.

While the Mainz cybercrime unit was building its case against Xennt, a separate international investigation—led by federal police in the United States, Germany, and the Netherlands—targeted Wall Street Market. Jörg Angerer, the Koblenz prosecutor, told me it was vital that the prosecution of Wall Street Market proceed before the German police moved against CyberBunker. “There is a chain,” Angerer said. “The hosters are facilitating the real criminals. . . . But first you have to process the real criminals.”
In April, 2019, the police arrested three German men accused of being Wall Street Market’s administrators. On the dark Web, the defendants were known by pseudonyms: Tibo Lousee was coder420; Jonathan Kalla was Kronos; Klaus-Martin Frost was TheOne. Led by officers from Germany’s federal cybercrime unit, which is based in Frankfurt, the police in the three countries worked together to decipher the identities of the administrators, through undercover chats and through clues left by the men online. In a complaint filed in the Central District of California, the three principals were charged not only with running the site but also with planning an “exit scam,” in which they intended to abscond with some eleven million dollars being held in users’ accounts. All three men are awaiting trial.
A week after Wall Street Market was broken up and its leaders arrested, several officers from the B.K.A., Germany’s federal police force, arrived at the Traben-Trarbach bunker to seize evidence relating to the case. A manager at the bunker expressed surprise and readily complied, escorting the officers to the server bank on the third floor. The officers took away the servers used by Wall Street Market, and left the rest.
After Wall Street Market was taken down, Angerer fixed CyberBunker itself in his sights.
On September 26, 2019, everybody at the bunker complex—nine people, including Xennt, his sons, and his girlfriend, Jacqueline—went out for an early dinner at the Historic Mill, leaving the bunker unguarded. It was unusual for all the residents to be gone at the same time, but Xennt’s gardener, Harry, had unexpectedly come into an inheritance, and wanted to celebrate. The leader of the Mainz cybercrime team told me his unit had gathered intelligence that made them “pretty, pretty sure” nobody would be in the bunker during the meal.
At the Historic Mill, antiquated cooking utensils and old guitars hang on the walls. Through a glass panel on the floor, diners can look at the stream that once powered the old mill. Xennt’s group had booked a private area on the mezzanine. It was a Thursday evening at the end of the summer season, and the main dining room, on the ground floor, was nearly full. At around 6 p.m., as the members of Xennt’s party were starting to eat, several patrons on the ground floor revealed themselves to be armed undercover police officers. The officers went upstairs to arrest Xennt and the others. Several armed units of police massed outside the front door. A helicopter buzzed nearby. A Belgian tourist was almost caught up in the arrest when he tried to visit the bathroom on the mezzanine just before Xennt was placed in handcuffs.
A few minutes later, about a hundred police officers—including a contingent from Germany’s federal paramilitary police unit—raided the bunker. They seized four hundred and twelve hard drives, four hundred and three servers, sixty-five USB sticks, sixty-one laptops and computers, fifty-seven phones, piles of paper documents, and about a hundred thousand euros in cash. Some six hundred and fifty officers were involved in the arrests and the raid.
At a press conference the next day, German authorities were jubilant. Jürgen Brauer, the chief prosecutor, declared that it was the first time in German history that arrests were “not directed against the operators of marketplaces but against those who make the crime possible.” CyberBunker was a haven for the world’s worst dark-Web sites, established to help its clients “exclusively for illegal purposes.” Moreover, its operators were connected to people involved in organized crime. (Brauer didn’t name the Penguin—whose current location remains unknown—but he was clearly in his thoughts.) Xennt had been arrested, alongside his two sons, Jacqueline, two Germans, and a Bulgarian. Six other suspects remained at large.

The prosecutors reported that, in November, 2016, the bunker had also provided the command-and-control servers for an attack against Deutsche Telekom, one of Germany’s largest communications companies. The attack had deployed a new weapon called a Mirai-botnet, which harnesses smart appliances and other wireless devices. An attempt to capture the company’s routers failed but caused the network to crash. More than a million Deutsche Telekom customers lost their Internet connection in the attack, costing the company at least two million euros. The incident occurred only a few weeks after an even larger Mirai-botnet attack in Europe and the United States, which disabled Amazon, Netflix, and Twitter, among other sites. Brauer, the prosecutor, said that the people from CyberBunker who had been arrested were accused of “hundreds of thousands of offenses,” ranging from “drugs, counterfeit money, and forged documents” to being “accessories to the distribution of child pornography.”
Sven Kamphuis, the Prince of CyberBunker, was not arrested in the raids of September 26th; nor is he one of the six suspects still at large. After the raid, he claimed that the German police had engaged in “an act of war”—yet he had survived with barely a scratch. The police arrested almost everybody with a connection to the bunker. Given the comprehensiveness of the investigation, the prosecutors’ lack of interest in Kamphuis seemed strange.
Xennt insisted to me that Kamphuis “was not involved in the data center in Germany.” But Kamphuis told me that he had engineered much of the Traben-Trarbach bunker’s infrastructure, and, according to several people, he had also been important in developing the encrypted-phone business for Xennt. Even if Kamphuis’s work was not technically illegal, he was deeply knowledgeable about an organization that the German state believed to be criminal. When details of an indictment were published, in April, the mystery of Kamphuis’s treatment deepened. In the document, prosecutors noted that a search engine had been hosted on the Traben-Trarbach servers: cb3rob.net/darknet. It listed more than sixty-five hundred dark-Web sites, including “marketplaces for narcotics, weapons, counterfeit money, murder orders, and child pornography.” I recalled that CB3ROB is Kamphuis’s online handle.
When I asked Patrick Fata, a senior police officer who oversaw the CyberBunker investigation, why Kamphuis was not accused in the case, he said that Kamphuis’s role in the organization had diminished since 2014, and that the police did not have enough evidence to link him to the administration of Wall Street Market or other illegal sites. I asked Fata if the police had spoken to Kamphuis during the exhaustive six-year investigation. “No,” Fata said, adding, “We don’t know where he is.”
It was surprising that the German police, who had proved so competent in this investigation, had lost track of Kamphuis. After his arrest for the denial-of-service attack on Spamhaus, in 2013, he had spent fifty-five days in a Spanish jail while awaiting extradition to the Netherlands. Ultimately, a judge had placed him on probation for two years. The German and Dutch police coöperated extensively in the early days of the investigation into CyberBunker, and during Kamphuis’s probationary period it would have been easy enough to place legal pressure on him to talk to the German police.
I found Kamphuis without too much difficulty. He agreed to meet me in March, in a train-station café in Middelburg, a pretty Dutch city near the first CyberBunker site. Kamphuis, who was wearing a blue Adidas tracksuit, had piercing blue eyes and a scraggly beard. Some of his teeth were blackened, and a few were missing. Using a tissue, he frequently dabbed at pus weeping from a sore on his eyelid. He drank three strong coffees in about ninety minutes, and his hands kept shaking.
Kamphuis posts on the social-media site Gab, and his stream is a litany of conspiracy theories and anti-Semitic assertions. He told me that he was part of the “libertarian extremist right,” and suggested that a “disproportionate number of Jews” held powerful positions in Europe and America. He often laughed at his own jokes.
I asked him if he had created the dark-Web search engine that had been hosted on Xennt’s servers. He said yes. Later, by text message, he explained that he bore no responsibility for the results of the search engine, because it “finds things indiscriminately,” adding, “That is what search engines do.”
“Hey! You’re in the bike lane!”
Cartoon by David Sipress
Kamphuis insisted that he had not been an informant against Xennt. He accused a manager at CyberBunker, Tom Funken, of planning the dinner trap at the Historic Mill—even though I had been assured by Xennt’s family that the meal was a setup arranged by the gardener. Xennt told me that he also blamed the gardener, and maintains that there were “no informants” inside the bunker. (Funken was arrested and awaits trial. A recently leaked legal file suggests that, between 2018 and the raid, the gardener was an undercover policeman.)

Although Kamphuis said that he hadn’t been involved regularly with CyberBunker since 2014, he still considered himself “the prince, and currently the head of state,” of the organization. He felt under no legal pressure, he said, because both Spain and the Netherlands “respected his diplomatic immunity.” Kamphuis inveighed against the German police, but he appeared to have profited from their prosecution of Xennt: he said that he was now helping to run Xennt’s encrypted-phone business, which had not been shut down.
After our interview, I texted Kamphuis, and asked him again if he’d ever spoken to the German police. “We don’t negotiate with terrorists,” he said.
Xennt has been imprisoned in Koblenz since his arrest. Although his lawyer would not discuss a legal strategy, Xennt’s defense appears to be that he didn’t know what was on his servers. He told me, “I do not believe that a hoster should accept all kind[s] of content. . . . As soon as a hoster [has] a clear indication that illegal content is hosted then the hoster should cancel the service.” CyberBunker’s willingness to hand over the Wall Street Market servers might buttress that defense. However, a report by Der Spiegel claims that, a day after his arrest, Xennt became emotional and apologetic in a police interview, saying that he was “troubled” by how much illegal activity had flowed through the bunker.
Xennt won’t stand trial until this fall at the earliest, because of delays caused by the coronavirus crisis. Even then, prosecutors will have an incomplete picture of what went on in the bunker. Since the raid, analysts have attempted to sift through the data stored at the facility, which may amount to two thousand terabytes—a herculean task. It would take a large team many years to read a fraction of what was recovered in Traben-Trarbach. In April, however, the prosecutors said that they had identified dozens of CyberBunker clients—and not one of their enterprises was legal.
I wondered what good would come of all the data. A spokesman for the German federal cybercrime unit that led the international investigation into Wall Street Market told me frankly that the war against dark-Web bazaars was unwinnable. Just as Wall Street Market had flourished after the Silk Road’s demise, new markets would grow in the place of Wall Street Market. People would continue to have illicit desires, and the Internet would find ways to satisfy them. Nevertheless, the penetration of the Traben-Trarbach bunker had offered valuable insight into how nefarious elements operated online. “I do not recall any case where this huge amount of criminal-infrastructure data was gathered,” one of the officers in Mainz told me. “We want to learn how the other side is behaving.”
Xennt was formally indicted on April 6th. German authorities stated that he had “made all the business decisions” for CyberBunker, and described him as the head of a “criminal organization.” This depiction was a bit difficult to square with the stranger, more complex reality of Xennt. A patina of idealism, however misguided, seemed to be essential to him. A police officer who monitored him for several years said that Xennt’s seedier qualities were accompanied by a utopian outlook—“free Internet, freedom of speech, nobody controls what’s out there, stuff like that.” The officer conceded, “This is no bank heist. It’s not like he’s a billionaire.”
In March, I visited Xennt’s sister and brother-in-law, Anna and René Van Wolferen, in a village near Arnhem. The Van Wolferens have a tidy, well-appointed home, with a wood-burning stove in the sitting room. René works for a pharmaceutical company and is an auxiliary firefighter. He wore a beeper on his belt, and a T-shirt with the slogan “We Face What You Fear.” Anna is a tall woman with auburn hair and a friendly, anxious manner. They showed me an Exclu phone that Xennt had sent them from the bunker. Neither of them had ever unwrapped it; to show me how it worked, they had to charge it for twenty minutes.
The Van Wolferens explained that Xennt had always lived “on the edge,” but was hardly a cackling mastermind. (The Sunday World, the Irish tabloid, recently called Xennt the “lord of the darknet.”) Rather, he was a brilliant, dreamy, somewhat naïve person, who had swum out of his depth. They worried about his state of mind in prison, where he played chess against himself all day, and had almost no contact with the outside world. Xennt and Anna’s father died in January, and Xennt’s lawyer had asked permission for her client to attend the funeral. The request was denied. Xennt then asked for a laptop to watch a live stream of the service, and this was also refused.

The Van Wolferens spoke again and again about Xennt’s childhood bedroom in Arnhem, and how he had always been fascinated by a futuristic aesthetic. René said that, in late middle age, Xennt had begun dabbling in cannabinoid treatments, because he was interested in remaining “forever young.” He described his brother-in-law as someone with arrested development. “His whole world was science fiction,” René said.
This was an astute observation. People connected to CyberBunker spoke about the world purely in terms of what was online. They didn’t talk about the Netherlands, a country of seventeen million people. They called it by its domain name: “.nl.” Similarly, they spoke of “kinderporno,” an Internet term for child pornography. In many jurisdictions, there is no such thing as child pornography; any image of a child having sex is considered evidence of abuse. It was in Xennt’s commercial interest to ignore the link between the three-dimensional world and what appeared on computer screens. But his many years in windowless rooms may have blinded him to the link altogether. When I asked Xennt if CyberBunker knew that it was hosting the Pirate Bay, the content-sharing site, he responded with the kind of dodge that could be applied to even the darkest material: “If a customer does not reveal its name to CyberBunker, then the CyberBunker crew does not know who the customer is.”
When Anna was out of the room, René admitted that Xennt had apparently sometimes gone “over the edge.” For reasons that were unclear to René, Xennt often hid his business interests behind charitable foundations. The Van Wolferens’ home was listed as an address of one of those foundations. As a result, the couple had been visited more than once by the Dutch police, who asked René about illegal content hosted on CyberBunker’s servers. And an Irish criminal connected to Xennt’s phone business had once arrived at the Van Wolferen home. René recognized him as a gangster of some kind, and ejected him. René was fond of his brother-in-law, but he told him that his businesses led him to mix with “people who are not legal.”
In April, I wrote a letter to Xennt in prison, which was delivered by his lawyer. The sole condition of our correspondence was that we could not discuss matters that might directly affect the trial. Xennt replied to me in May. He wrote in English, in blue pen, on grid paper. His writing was capitalized, except when he used the word “I.” He told me he believed that the authorities had targeted his hosting business as a means to “stop the development of the secure communication app.” He added, with a few misspellings, “The next version would have a wallet that would have enabled its users to make unlimited instand anonymous payments. That—of corse—would not make authorities very happy.” Xennt was passing the time by writing a book about “privacy and what happened to me.” He said that he had already “sold the exclusive rights to a movie studio.” (I could find no evidence of this.)
In my letter, I asked Xennt about the infatuation that had dominated his unusual life: bunkers. He told me about his childhood visits to the Second World War complex in Arnhem, and about how that space had bewitched him. “I instantly fell in love with it,” he recalled. He said that the first CyberBunker, in Goes, was the realization of “a dream” to own “one of these facilities and to renovate it to make it a modern hi-tech stronghold.” But he could go no deeper. Xennt wrote, “I am unable to explain why I like bunkers. Why does someone like a hamburger? Why do they like motor sport? I cannot answer that. I just like bunkers. That is all.” ♦

WSJ : Russia Aims to Begin Mass Vaccinations Against Covid-19 in October

Russia Aims to Begin Mass Vaccinations Against Covid-19 in October
Russia has shortened trial approval times and sped up clinical evaluations in its pursuit of a vaccine

MOSCOW—Russia plans to roll out a Covid-19 vaccine to the general population starting in October, hoping to be the first country to start mass vaccinations against a virus that has killed more than 679,000 people world-wide.

Russia, which has seen the effects of coronavirus pandemic strain its health-care system and lockdown measures hit its economy, has shortened trial approval times and sped up clinical evaluations in an attempt to assert itself in the race for vaccine.

“We’re planning a broader vaccination in October,” Health Minister Mikhail Murashko told Russian news agencies Saturday. He said the effort would follow the vaccination of health-care workers and teachers, who will get administered the vaccine first.

Earlier this week a Russian official said a vaccine made by the state-owned Gamaleya Institute for Epidemiology and Microbiology should be registered by mid-August, the most important step before the vaccine can be administered for medical use. Those efforts have put Russia ahead of its Western peers in developing and preparing a vaccination for widespread administration.

While some Western vaccine candidates are going through a third test phase right now, Russia’s decision to skip a third test before the vaccine is registered has led some to worry that the country may be trading public safety for national prestige.

Dr. Anthony Fauci, the U.S.’s top infectious-disease expert, said during a House Covid-19 subcommittee hearing on Friday that the U.S. would likely not use vaccines developed in China or Russia.

“I do hope that the Chinese and the Russians are actually testing the vaccine before they are administering the vaccine to anyone,” he said. “Claims of having a vaccine ready to distribute before you do testing, I think, is problematic, at best.”

Dr. Fauci said he hoped the U.S. would have a vaccine by the end of the year.

The vaccine developed by the Gamaleya Institute is one of two undergoing late-stage trials in Russia. The World Health Organization declined to answer earlier this week when asked if it had seen any data pointing to the efficacy of the Russian vaccines.

Earlier this year, the U.S., U.K. and Canada accused Russia of hacking into international institutions to steal Covid-19 vaccine information. Russia denied the accusations.

Russia, which earlier this year registered the second-highest number of coronavirus cases in the world, has recorded more than 845,000 cases since the pandemic began. Only the U.S., Brazil and India have seen more. The official death toll stands at more than 14,000.

Kirill Dmitriev, head of the Russian Direct Investment Fund, or RDIF, this week said Russian officials are taking all the necessary measures to ensure the safety of the vaccine, and said he had taken it to show his confidence in it. The vaccine will be conditionally registered with the Health Ministry, he said, a measure that allows for a third test while it is being used medically and for its withdrawal from use if needed.

RDIF is developing and producing the vaccine with the Gamaleya Institute and Russian conglomerate Sistema.

Mr. Dmitriev said Russia was in advanced talks with a handful of countries in South America, Africa, the Middle East and Asia to transfer the technology of the vaccine so it can be replicated elsewhere. He said clinical data would be made available to the public in early August.

Speaking to Moscow’s official Russian Gazeta earlier this month, the director of the Gamaleya Institute, Alexander Gintsburg, said that no side effects of the drug had been observed in the first round of testing apart from cold symptoms and redness at the site of injection.

The military has been involved in trial runs of vaccines, and in early June, the Russian military isolated 45 servicemen and five servicewomen after giving them the vaccine. Dr. Gintsburg publicly thanked the Russian armed forces in June for helping in testing.