Binance Concealed Ties To China For Years, Even After 2017 Crypto Crackdown, Report Finds

Binance CEO Changpeng “CZ” Zhao and other senior executives have been for years concealing the crypto exchange ties with China, according to documents obtained by the Financial Times. CoinTelegraph reports: In a report on March 29, FT claims that Binance had substantial ties to China for several years, contrary to the company’s claims that it left the country after a 2017 ban on crypto, including an office still in use by the end of 2019 and a Chinese bank used to pay employees. “We no longer publish our office addresses … people in China can directly say that our office is not in China,” Zhao reportedly said in a company message group in November 2017. Employees were told in 2018 that wages would be paid through a Shanghai-based bank. A year later, personnel on payroll in China were required to attend tax sessions in an office based in the country, according to FT. Based on the messages, Binance employees discussed a media report that claimed the company would open an office in Beijing in 2019. “Reminder: publicly, we have offices in Malta, Singapore, and Uganda. […] Please do not confirm any offices anywhere else, including China.”

The report backs up accusations made in a lawsuit filed on March 27 by the United States Commodity Futures Trading Commission (CFTC) against the exchange, claiming that Binance obscured the location of its executive offices, as well as the “identities and locations of the entities operating the trading platform.” According to the lawsuit, Zhao stated in an internal Binance memo that the policy was intended to “keep countries clean [of violations of law]” by “not landing .com anywhere. This is the main reason .com does not land anywhere.”

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Huawei Claims To Have Built Its Own 14nm Chip Design Suite

Huawei has reportedly completed work on electronic design automation (EDA) tools for laying out and making chips down to 14nm process nodes. The Register reports: Chinese media said the platform is one of 78 being developed by the telecoms equipment giant to replace American and European chip design toolkits that have become subject to export controls by the US and others. Huawei’s EDA platform was reportedly revealed by rotating Chairman Xu Zhijun during a meeting in February, and later confirmed by media in China. […] Huawei’s focus on EDA software for 14nm and larger chips reflects the current state of China’s semiconductor industry. State-backed foundry operator SMIC currently possesses the ability to produce 14nm chips at scale, although there have been some reports the company has had success developing a 7nm process node.

Today, the EDA market is largely controlled by three companies: California-based Synopsys and Cadence, as well as Germany’s Siemens. According to the industry watchers at TrendForce, these three companies account for roughly 75 percent of the EDA market. And this poses a problem for Chinese chipmakers and foundries, which have steadily found themselves cut off from these tools. Synopsys and Cadence’s EDA tech is already subject to several of these export controls, which were stiffened by the US Commerce Department last summer to include state-of-the-art gate-all-around (GAA) transistors. This January, the White House also reportedly stopped issuing export licenses to companies supplying the likes of Huawei.

This is particularly troublesome for Huawei, foundry operator SMIC, and memory vendor YMTC to name a few on the US Entity List, a roster of companies Uncle Sam would prefer you not to do business with. It leaves them unable to access recent and latest technologies, at the very least. So the development of a homegrown EDA platform for 14nm chips serves as insurance in case broader access to Western production platforms is cut off entirely.

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The Daring Ruse That Exposed China’s Campaign To Steal American Secrets

The New York Times magazine tells the story of an innocuous-seeming message on LinkedIn in 2017 from Qu Hui, the deputy director of the China-based Provincial Association for International Science and Technology Development.

Federal agents eventually obtained search warrants for two Gmail addresses the official was using, and “In what would prove to be a lucky break, the investigators found that each email address was the Apple ID used for an iPhone, linked to an iCloud account where data from the phones was periodically backed up. The agents were later able to obtain search warrants for the two iCloud accounts [that] opened a treasure trove.”

This included confirmation of what they had suspected all along: that Qu worked for Chinese intelligence. His real name was Xu Yanjun. He had worked at the Ministry of State Security since 2003, earning six promotions to become a deputy division director of the Sixth Bureau in the Jiangsu Province M.S.S. Like so many of us, he had taken pictures of important documents using his iPhone — his national ID card, pay stubs, his health insurance card, an application for vacation — which is how they ended up in his iCloud account. There, investigators also found an audio recording of a 2016 conversation with a professor at N.U.A.A. in which Xu had talked about his job in intelligence and the risks associated with traveling. “The leadership asks you to get the materials of the U.S. F-22 fighter aircraft,” he told the professor. “You can’t get it by sitting at home.” The discovery of evidence of Xu’s identity in an iCloud account makes for a kind of delicious reversal. The ubiquitous use of iPhones around the world — a result of America’s technological prowess — was helping to fight back against a rival nation’s efforts to steal technology.
Qu scheduled a meeting in Brussels with one American target — where he was arrested and extradited to America, becoming the first-ever Chinese intelligence official convicted on U.S. soil on charges of economic espionage.

The prosecution contended that Xu had been systematically going after intellectual property at aerospace companies in the United States and Europe through cyberespionage and the use of human sources. It’s not often that prosecutors find a one-stop shop for much of their evidence, but that’s what Xu’s iCloud account was — a repository of the spy’s personal and professional life. That’s because often Xu used his iPhone calendar as a diary, documenting not just the day’s events but also his thoughts and feelings…. The messages in Xu’s iCloud account enabled investigators to make another damning discovery. Xu had helped coordinate a cyberespionage campaign that targeted several aviation technology companies….

At the end of the trial, Xu was convicted of conspiring and attempting to commit economic espionage and theft of trade secrets…. According to Timothy Mangan, who led the prosecution, the evidence laid out during Xu’s trial goes far beyond merely proving his guilt — it uncovers the systematic nature of China’s vast economic espionage. The revelation of Xu’s activities lifts the veil on how pervasive China’s economic espionage is, according to the F.B.I. agent. If just one provincial officer can do what he did, the agent suggests, you can imagine how big the country’s overall operations must be.
The article notes that the Chinese government “also offers financial incentives to help Chinese expats start their own businesses in China using trade secrets stolen from their American employers.” It also cites a 2019 report from a congressional committee’s security review that found “myriad ways in which Chinese companies, often backed by their government, help transfer strategic know-how from the United States to China.”
The maneuvers range from seemingly benign (acquiring American firms with access to key intellectual property) to notoriously coercive (compelling American companies to form joint ventures with Chinese firms and share trade secrets with them in return for access to the Chinese market) to outright theft. Cyberattacks have become an increasingly common tactic because they can’t always be linked directly to the Chinese government. Over the past few years, however, federal agents and cybersecurity experts in the U.S. have identified the digital footprints left along the trails of these attacks — malware and I.P. addresses among them — and traced this evidence back to specific groups of hackers with proven ties to the Chinese government.
One 2020 indictment blamed five “computer hackers” in China for breaching more than 100 organizations.

Thanks to Slashdot reader schwit1 for sharing the article.

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Top Chinese Scientists Sketch Out Plans To Thwart US Chip Curbs

Key members of China’s most influential scientific body have outlined the country’s plan to circumvent US chip sanctions for the first time, codifying Beijing’s view of how it could win a crucial technological conflict with Washington. From a report: Two of the country’s senior academics wrote that Beijing should amass a portfolio of patents that govern the next generation of chipmaking, from novel materials to new techniques. That should propel its semiconductor ambitions while giving China the clout to push back against US sanctions designed to hamstring its semiconductor sector, Luo Junwei and Li Shushen wrote in the bulletin of the Chinese Academy of Sciences.

The article, published to a social media account affiliated with the academy, offers a rare glimpse into how Beijing thinks about and might react to the Biden administration’s escalating hostilities over semiconductors. The academy advises China’s top decision makers and the article echoes remarks by President Xi Jinping calling for victory in developing core technologies. It comes as the country’s new technology overseer outlined his vision for moving past American sanctions, stressing the need to modernize and rectify weak links in its supply chain. China has a plan to develop next-generation chip materials that it put in place in 2020 as a reaction to Trump-era restrictions. Yet that national strategy has yet to yield a technological edge on the world’s leading chipmakers. Washington has implemented a series of measures limiting exports of technology such as chipmaking gear and artificial intelligence processors to China, part of a broader set of technology sanctions.

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TikTok Spied On Forbes Journalists

ByteDance confirmed it used TikTok to monitor three journalists’ physical location using their IP addresses, reports Forbes, “to unearth the source of leaks inside the company following a drumbeat of stories exposing the company’s ongoing links to China.”

As a result of the investigation into the surveillance tactics, ByteDance fired Chris Lepitak, its chief internal auditor who led the team responsible for them. The China-based executive Song Ye, who Lepitak reported to and who reports directly to ByteDance CEO Rubo Liang, resigned…. “It is standard practice for companies to have an internal audit group authorized to investigate code of conduct violations,” TikTok General Counsel Erich Andersen wrote in a second internal email shared with Forbes. “However, in this case individuals misused their authority to obtain access to TikTok user data….”

“This new development reinforces serious concerns that the social media platform has permitted TikTok engineers and executives in the People’s Republic of China to repeatedly access private data of U.S. users despite repeated claims to lawmakers and users that this data was protected,” Senator Mark Warner told Forbes….

ByteDance is not the first tech giant to use an app to monitor specific users. In 2017, the New York Times reported that Uber had identified various local politicians and regulators and served them a separate, misleading version of the Uber app to avoid regulatory penalties…. Both Uber and Facebook also reportedly tracked the location of journalists reporting on their apps.

Ironically, TikTok’s journalist-tracking project involved the company’s Chief Security and Privacy Office, according to Forbes, and targeted three Forbes journalists who had formerly worked at BuzzFeed News.

It was back in October that Forbes first reported ByteDance had discussed tracking journallists. ByteDance had immediately denied the charges on Twitter, saying “TikTok has never been used to ‘target’ any members of the U.S. government, activists, public figures or journalists,” and that “TikTok could not monitor U.S. users in the way the article suggested.”

Forbes also notes that in 2021, TikTok became the most visited website in the world. Thanks to long-time Slashdot reader newbie_fantod for submitting the story!

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China Bans Deepfakes Created Without Permission Or For Evil

China’s Cyberspace Administration has issued guidelines on how to do deepfakes the right way. The Register reports: [T]he Cyberspace Administration (CAC) has issued regulations that prohibit their creation without the subject’s permission, or to depict or utter anything that could be considered as counter to the national interest. Anything counter to socialist values falls under that description, as does any form of “Illegal and harmful information” or using AI-generated humans in an attempt to deceive or slander. But the rules also suggest China expects synthetic humans will be widely used. For instance, they allow use of deepfakes in applications such as chatbots. In such scenarios, deepfakes must be flagged as digital creations.

The document also envisages that deepfakes will be used by online publishers, which must take into account China’s myriad other rules about acceptable online content. Including the one that censpored images of Winnie the Pooh online, as the beloved bear – as depicted by illustrator E. H. Shepard – was felt to resemble, and mock, China’s president-for-probably-life Xi Jinping. The Register therefore suggests it will be a very, very, brave Chinese developer that creates a photorealistic ursine chatbot or avatar.

The regulations also spell out how the creators of deepfakes — who are termed “deep synthesis service providers” — must take care that their AI/ML models and algorithms are accurate and regularly revised, and ensure the security of data they collect. The rules also include a requirement for registration of users — including their real names. Because allowing an unknown person to mess with deepfakes would not do. The rules are pitched as ensuring that synthesis tech avoids the downsides and delivers benefits to China. Or, as Beijing puts it (albeit in translation), deepfakes must “Promote the healthy development of internet information services and maintain a good ecology of cyberspace.” The regulations come into force on January 10, 2023.

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Chinese Takeover of UK’s Largest Chip Plant Blocked on National Security Grounds

Slashdot has been covering plans for the UK’s largest chip plant to be acquired by Chinese-owned firm Nexperia.

But this week the U.K. government “has blocked the takeover of the country’s largest microchip factory by a Chinese-owned firm,” CNBC reported this week, “over concerns it may undermine national security.”

Grant Shapps, minister for business, energy and industrial strategy, on Wednesday ordered Dutch chipmaker Nexperia to sell its majority stake in Newport Wafer Fab, the Welsh semiconductor firm it acquired for £63 million ($75 million).

Nexperia is based in the Netherlands but owned by Wingtech, a partially Chinese state-backed company listed in Shanghai. Nexperia completed its acquisition of Newport Wafer Fab in 2021, and the firm subsequently changed its name to Nexperia Newport Limited, or NN.

“The order has the effect of requiring Nexperia BV to sell at least 86% of NNL within a specified period and by following a specified process,” the United Kingdom’s Department for Business, Energy and Industrial Strategy said in a statement. Nexperia had initially owned 14% of Newport Wafer Fab, but in July 2021 it upped its stake to 100%.

“We welcome foreign trade & investment that supports growth and jobs,” Shapps tweeted Wednesday. “But where we identify a risk to national security we will act decisively.”

Nexperia plans to appeal the decision.

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China Dumps Dud Chips On Russia, Moscow Media Moans

The failure rate of semiconductors shipped from China to Russia has increased by 1,900 percent in recent months, according to Russian national business daily Kommersant. The Register reports: Quoting an anonymous source, Kommersant states that before Russia’s illegal invasion of Ukraine the defect rate in imported silicon was two percent. Since that war commenced, Russian manufacturers have apparently faced 40 percent failure rates. Even a two percent defect rate is sub-optimal, because products made of many components can therefore experience considerable quality problems. Forty percent failure rates mean supplies are perilously close to being unfit for purpose.

According to Kommersant, Russian electronics manufacturers are not enjoying life at all because, on top of high failure rates, gray market gear doesn’t flow with the same speed as legit kit and supply chains are currently very kinked indeed inside Russia. The newspaper lays the blame on economic sanctions that have seen many major businesses quit Russia. Gray market distributors and other opportunistic operators have been left as the only entities willing to deal with Russian businesses. Gray market folks are not renowned for their sterling customer service nor their commitment to quality. They get away with it because buyers of products with — ahem — unconventional origins self-incriminate if they complain to authorities. Perhaps they’re even dumping dud product on Russian buyers, knowing that they can’t easily access alternatives.

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