Jurisdiction

Australian police arrest alleged crime app mastermind

Australian authorities have charged a Sydney man with creating and managing an encrypted messaging app, Ghost, allegedly used by global crime networks. The man, 32, was arrested in western Sydney and appeared in court on Wednesday, facing multiple charges related to the platform’s role in organised crime. Ghost is said to have been used by syndicates from Australia, the Middle East, and South Korea for drug trafficking and contract killings.

Police, in collaboration with international forces, carried out extensive raids across Australia and beyond, with searches also conducted in Italy, Ireland, Sweden, and Canada. Up to 50 Australians allegedly involved with Ghost are now facing charges, with significant prison terms expected. More arrests are anticipated in both Australia and abroad.

Authorities have made a breakthrough by cracking Ghost’s encryption, preventing the deaths or serious injuries of 50 individuals in Australia. This marks the first time an Australian has been accused of running a global criminal messaging platform, a major milestone in the country’s fight against organised crime.

The Australian Federal Police Deputy Commissioner highlighted the complex nature of dismantling encrypted communication platforms. The success in accessing evidence from Ghost represents a major achievement in efforts to disrupt global criminal activity.

Former FTX auditor pays $1.95 million in SEC settlement

Prager Metis, the former auditor for collapsed cryptocurrency exchange FTX, has agreed to pay $1.95 million to settle two cases brought by the US Securities and Exchange Commission (SEC). The settlement resolves allegations of negligence in auditing the exchange under the leadership of Sam Bankman-Fried, who has since been convicted of fraud. The SEC accused the New York-based firm of providing inaccurate audit reports for FTX in 2021 and 2022, failing to meet accepted auditing standards.

The audit firm was found to have misunderstood FTX’s operations, particularly its relationship with Alameda Research, a hedge fund tied to Bankman-Fried. Alameda suffered significant financial losses, prompting Bankman-Fried to misappropriate $8 billion from FTX customers to cover them. FTX’s sudden collapse in November 2022 led to its bankruptcy filing, leaving many investors defrauded and billions in losses.

As part of the settlement, Prager Metis will pay $1.75 million in civil fines alongside disgorged profits and interest, though the firm did not admit any wrongdoing. Additionally, the SEC settlement included charges related to auditor independence violations between 2017 and 2020. Prager Metis’ legal representative stated that the firm was also a victim of FTX’s internal fraud.

Meanwhile, Bankman-Fried is appealing his conviction and 25-year prison sentence. Caroline Ellison, former chief executive of Alameda and Bankman-Fried’s former girlfriend, pleaded guilty and testified against him. Her sentencing is set for later this month, and she is requesting leniency from the court.

EU publishers reject Google’s deal offer to settle antitrust case

Google’s advertising business has faced renewed scrutiny in the EU, with a recent proposal to sell its advertising marketplace, AdX, being rejected by European publishers. The tech giant offered the sale to resolve an antitrust investigation by the EU, which accuses Google of favouring its services. The investigation followed complaints from the European Publishers Council, and the European Commission has since charged Google with anti-competitive practices.

Publishers dismissed Google’s offer as insufficient, arguing that the sale of AdX alone would not address the broader conflicts of interest due to Google’s dominance across the entire adtech supply chain. These industry insiders suggest that more drastic measures may be needed to curb Google’s influence, but the EU has not yet demanded such extensive divestments.

Google, meanwhile, maintains that the Commission’s claims are based on a misinterpretation of the competitive nature of the advertising sector. Despite facing similar antitrust trials in the US over its advertising technology, the company continues to defend its business practices, where authorities have called for selling its Ad Manager product.

AdX, which allows publishers to auction unsold ad space to advertisers in real time, has become a key component in the ongoing investigation. The EU antitrust chief Margrethe Vestager previously suggested Google divest additional tools to resolve the issue. However, experts believe the Commission may first issue a simpler ruling to halt Google’s current practices before escalating to demands for asset sales.

With advertising contributing to 77% of Google’s $237.85 billion revenue in 2023, the company’s dominant position in digital advertising remains a central point of contention in the EU and globally.

Meta wins lawsuit over Apple’s privacy changes

Meta Platforms has secured a legal victory after a US court dismissed a lawsuit accusing the tech giant of misleading shareholders about the impact of Apple’s privacy changes on its advertising business. The suit, brought by Israeli insurers and pension funds, claimed Meta concealed how Apple’s iOS privacy updates would diminish the effectiveness of ads on Facebook and Instagram, harming the company’s ad revenue.

The plaintiffs argued that Meta’s stock value dropped 53% within a year, wiping out over $500 billion in market value as the truth about Apple’s changes came to light. However, US District Judge Yvonne Gonzalez Rogers ruled that Meta’s eventual admission of a $10 billion financial hit in 2022 due to Apple’s policy didn’t prove that earlier disclosures were misleading or fraudulent.

In addition to the privacy claims, the lawsuit also alleged Meta had concealed former COO Sheryl Sandberg’s use of company resources for personal projects, including her wedding and book. The judge rejected these accusations, noting they were based on unverified media reports. Claims that Meta’s transition to Reels, a short-form video format inspired by TikTok, negatively impacted the company’s financial performance were also dismissed for lack of evidence.

Judge Rogers’ ruling effectively closes the case, dismissing it with prejudice, meaning it cannot be refiled. Meta and its top executives, including CEO Mark Zuckerberg and CFO Susan Li, have denied the allegations throughout the legal battle. Meta and the plaintiffs’ lawyers have not commented on the court’s decision.

Google battles £7 billion lawsuit over search dominance in UK

Google is facing a billionaire lawsuit in London as Alphabet, its parent company, asked a tribunal to dismiss claims accusing the tech giant of abusing its dominance in the online search market. The lawsuit, which could amount to £7 billion ($9.3 billion), focuses on businesses’ costs when using Google’s search advertising services, which plaintiffs argue are ultimately passed on to consumers. The legal challenge is one of several targeting Google’s practices in recent years, including a similar case in Britain concerning its advertising market dominance and an ongoing antitrust trial in the United States.

Consumer rights advocate Nikki Stopford, representing the class of claimants, argues that Google’s overwhelming market presence allows it to increase costs unfairly. Her lawsuit also points to a €4.5 billion fine imposed by the European Commission in 2018 over Google’s restrictions on Android manufacturers, a decision currently being appealed. Furthermore, the lawsuit accuses Google of striking a deal with Apple to make its search engine the default on Apple’s Safari browser in exchange for a portion of mobile search ad revenues.

Google has dismissed these claims as unfounded. Its lawyer, Meredith Pickford, stated that the case is flawed, rejecting the notion that Google’s practices harmed consumers. Pickford also emphasised that Google’s agreement with Apple was legally sound and argued that the European Commission’s ruling was based on technicalities rather than substantive issues. The tribunal’s decision on whether the case will proceed to trial remains pending.

Binance founder CZ to be released this month

Binance founder Changpeng Zhao, better known as CZ, is due to be released from a US prison on 29th September. Zhao, 47, has been serving a four-month sentence for breaching US anti-money laundering and sanctions laws, particularly for allowing transactions with sanctioned countries such as Iran and Cuba. His legal troubles started in November 2023 when Binance and Zhao admitted to multiple charges, resulting in a substantial $4.3 billion fine for the company and a personal penalty of $50 million for Zhao.

Initially facing a potential three-year term, Zhao’s sentence was significantly reduced after US District Judge Richard Jones determined there was insufficient evidence to prove his direct involvement. The judge also considered Zhao’s personal history and character as mitigating factors. As part of the settlement, Zhao agreed to step down as Binance’s CEO.

Although Zhao’s legal woes have rattled Binance, the exchange continues to operate. Following his release, there is speculation about his future role in the crypto world. Earlier in 2024, Zhao hinted at launching a new venture, Giggle Academy, a free educational platform for underprivileged children, signalling his intent to leave a legacy beyond cryptocurrency.

Qualcomm fined €238.7 million in EU antitrust case

Qualcomm faced another legal setback in the EU as the continent’s second-highest court largely upheld an EU antitrust fine, reducing it slightly to €238.7 million ($265.5 million) from the original €242 million. The fine, imposed by the European Commission in 2019, stemmed from Qualcomm’s practice of selling chipsets below cost between 2009 and 2011—a tactic known as predatory pricing—aimed at driving British competitor Icera, now part of Nvidia, out of the market.

Qualcomm argued that the chipsets in question only accounted for a small fraction (0.7%) of the market, making it unlikely they could have effectively blocked competitors. However, the General Court in Luxembourg dismissed most of the company’s claims, apart from a minor point regarding the fine’s calculation, which led to a slight reduction.

The ruling marks another chapter in Qualcomm’s legal battles with the EU. While the company can appeal on legal grounds to the EU Court of Justice, it has already experienced mixed results in the European courts. In 2021, Qualcomm overturned a separate €997 million fine, which had been levied for paying Apple billions to exclusively use its chips in iPhones and iPads from 2011 to 2016.

For now, the EU’s watchdog continues to pursue antitrust enforcement in the tech sector, with Qualcomm remaining a key target in its efforts to curb anti-competitive behaviour.

Drone technology smuggling: Russian man charged in US

A Russian national has been arrested in Florida on charges of illegally exporting drone-related technology to Russia. Authorities allege that 44-year-old Denis Postovoy, residing in Sarasota, smuggled microelectronic components with military applications to Russia following the 2022 invasion of Ukraine.

Postovoy is accused of violating US law by shipping technology that could enhance Russia’s military capabilities in the conflict. The Department of Justice stated that the exported components are used in drones and have dual-use potential for military purposes.

To conceal his activities, Postovoy allegedly worked through a network of companies in Russia and Hong Kong. He is said to have purchased the components from US distributors and sent them to intermediary locations before reaching Russia.

While the Russian embassy has acknowledged Postovoy’s detention, it noted no official communication from US law enforcement regarding the arrest has been received.

EU to fine Meta over anti-competitive practices

Facebook’s owner company, Meta, is bracing for a substantial fine from the European Union, according to sources familiar with the matter. The penalty stems from allegations that Meta is leveraging its dominance in social networking to stifle competition in the classified advertising sector. The company’s practice of linking its free Marketplace service with Facebook has raised concerns among the EU regulators, who view this strategy as an attempt to edge out rivals.

The decision is expected as soon as next month, and it could be one of the final significant moves overseen by the EU’s current competition chief, Margrethe Vestager, before her departure. The investigation into Meta’s business practices marks a continuation of the EU’s broader efforts to crack down on the monopolistic behaviour of tech giants.

Currently, neither Meta nor the EU regulators have commented on the looming decision. However, this case could signal a more stringent approach to maintaining a level playing field in the digital marketplace, where tech companies have long held considerable power. The ruling could have substantial financial and operational consequences for Meta, potentially setting the tone for future regulatory actions in the tech industry.

Telegram’s Pavel Durov faces criminal probe in France under LOPMI law

France has taken a bold legal step with its new law, targeting tech executives whose platforms enable illegal activities. The pioneering legislation, enacted in January 2023, puts France at the forefront of efforts to curb cybercrime. The law allows for criminal charges against tech leaders, like Telegram CEO Pavel Durov, for complicity in crimes committed through their platforms. Durov is under formal investigation in France, facing potential charges that could carry a 10-year prison sentence and a €500,000 fine. He denies Telegram’s role in facilitating illegal transactions, stating the platform complies with the EU regulations.

The so-called LOPMI (Loi d’Orientation et de Programmation du Ministère de l’Intérieur) 2023-22 law, unique in its scope, is yet to be tested in court, making France the first country to target tech executives in this way directly. Legal experts point out that no similar laws exist in the US or elsewhere in the Western world.

What is LOPMI?

The LOPMI law for the Ministry of the Interior outlines a €15 billion plan over five years to address future security challenges by enhancing human, legal, and budgetary resources. It aims to modernise operations through digital transformation, with nearly half the budget dedicated to digitising services, modernising investigative tools, and improving cybercrime response. The law plans to create 8,500 new jobs, improve recruitment diversity, and double police and gendarme presence by 2030. It emphasises crisis management, especially for civil security and climate events, and strengthens public order for major international events like the 2024 Olympics. Additionally, it aims to improve border security through advanced technology and cooperation.

While the US has prosecuted individuals like Ross Ulbricht, founder of the Silk Road marketplace, those cases required proof of active involvement in criminal activity. However, French law seeks to hold platform operators accountable for illegal actions facilitated through their sites, even if they were not directly involved.

Prosecutors in Paris, led by Laure Beccuau, have praised the law as a powerful tool in their fight against organised cybercrime, including child exploitation, credit card trafficking, and denial-of-service attacks. The recent high-profile arrest of Durov and the shutdown of other criminal platforms like Coco highlight France’s aggressive stance in combating online crime. The J3 cybercrime unit overseeing Durov’s case has been involved in other relevant investigations, including the notorious case of Dominique Pelicot, who used the anonymous chat forum Coco to orchestrate heinous crimes.

While the law gives French authorities unprecedented power, legal and academic experts caution that its untested nature could lead to challenges in court. Nonetheless, France’s new cybercrime law seriously escalates the global battle against online criminal activity.