Drugs and dosh: The new untraceable money

Craig MacGregor has developed what he claims to be the first truly anonymous crypto-currency.

Chris Skelton / Fairfax NZ

Craig MacGregor has developed what he claims to be the first truly anonymous crypto-currency.

In 2008 Craig MacGregor stepped into jail in style. Wearing a pair of $300 white Nikes – leather, low top and embossed – he was in remand for drug possession and supply (ecstasy and acid). Another deal: half a pouch of tobacco for those sweet shoes.

The 30-year-old is now raking in enough money to revive his shoe habit. He’s wearing similar low-top navy Puma sneakers when the Sunday Star-Times visits his North Shore flat. He’s soft spoken, drinking green tea and petting his rabbit, Rupert, with affection.

MacGregor claims he’s on the cusp of something big. In March his year-old company, Navajocoin, released the first truly anonymous feature of cryptocurrency – a new method, he reckons, that makes it more secure than stalwart Bitcoin. It’s a big claim.

DIGITAL GOLD

There’s no alluring way to describe Bitcoin, or crypto (cryptic is more apt) currency. Essentially, it’s digital gold – encrypted digital money that can’t be traced and has no government or bank behind it. The currency is regulated by a network of computers and represented by a long string of numbers.

Are you still using paper money anyway? That flimsy stuff that tears, stains, crumples and flies away in Wellington streets? Ever since the elusive Satoshi Nakamoto launched Bitcoin in 2008, a new nirvana has been buzzing online for anarchists, hackers, drug dealers and savvy investors alike.

“He’s like the guy who invented electricity,” says MacGregor. “He made this thing and didn’t realise the implications of it. Just like Thomas Edison didn’t realise there was going to be computers and flatscreen TVs.”

The currency inspired a bunch of alt-coins such as Digitalcoin and Darkcoin. But Wall Street bankers are investing in Bitcoin and fringe pioneers are being muscled out by Silicon Valley Types. Internet hero Bill Gates has praised it.

It’s yet to truly kick off here, but most of the essentials accept it: a wine store, an entertainment venue in Auckland. A lolly shop. You can pay your Slingshot internet bills with Bitcoin too. For a brief period last year, Auckland had a Bitcoin ATM but it disappeared after the banks refused to cooperate.

Silk Road is Bitcoin’s shady uncle. It was the internet’s Wild West. A thriving online black-market which was shut down by the FBI in October 2013. With reviews and star-ratings of each transaction it was like Trade Me – if you swap the knitted jerseys and stained cutlery for LSD and murder-for-hire. You never paid with traceable credit cards and Paypal – the only acceptable currency was Bitcoin.

Navajocoin was the brainchild of MacGregor’s co-creator, a mysterious man who goes by the handle Soopy452000; MacGregor was the one who put months into developing the server technology.

Where it claims to be different is the extra level of security and anonymity it offers. Does that mean Navajo runs the risk of becoming the next clog in the dark net machine? No, says MacGregor. “When the US wanted to shut them down they went to Silk Road, not the guys who created Bitcoin. As with any anonymous tool there’s always going to be something dodgy with it somewhere. Let’s equate it to cash dollars. You can’t track those. Do we think cash is evil because people buy drugs with it? Nah.

“Why do you have curtains? Most of the time we sit here with curtains open but sometimes I want to close them because I don’t want people peeking in. It should be my right to have curtains when I want them.”

But why else would someone go to such lengths to cover their tracks in an online purchase if it wasn’t for something sketchy? “Let’s say like personal preference – I don’t want anyone to ever find out I like Justin Bieber so I buy the CD using anonymous technology.”

Who are these inane people tracking IPs to see if you’re buying Justin Bieber? “Okay, that wasn’t a good example. Let’s say I was a journalist in North Korea for an independent paper and needed to get paid anonymously otherwise the government would hunt me down.

“They know that money is coming from a newspaper to someone in the country and can see it coming across the network. That person could live or die by receiving that money anonymously or openly.”

The new technology has wider implications – in the future he thinks it could be used as a secure method of uncensorable communication.

William Mook, a Christchurch-based polymath and entrepreneur has invested in supercomputers to mine bitcoins and is watching Navajocoin with interest, and scepticism. Mook compares Bitcoin to Coca-Cola and every other contender to the Pepsis and other also-rans: it’s hard to see what will dislodge them from their dominant position. He notes that Navajocoin is a rebranding of SummercoinV2 after it was robbed of 1 million Summercoins last year by criminals using the same tricks that lead to the well-publicised collapse of Mt. Gox the year before. “Summercoin also suffered a similar fate, after they claimed to have made a bulletproof Bitcoin. That led to SummercoinV2 and that failure lead to the Navajocoin of today,” he says. “Have they succeeded after two tries? Maybe, maybe not.”

But he says if Navajocoin offers the security that MacGregor promises, it could be revolutionary. “The developers are after the right solution,” he says. “They are attempting to increase security and ease of use of the cryptocurrencies. Once they are successful, their coin will attract a huge attention.”

DRUGS AND PRISON

McGregor says he has come a long way from the drug dealing drum and bass DJ he was in 2008, and has a rehabilitation clinic in West Auckland’s Te Atatu to thank.

“It was a pretty rough period of time for me. One of my best friends had just committed suicide … in our flat. That was really rugged for me, pretty raw obviously. I was in a real bad place and I ended up getting in some trouble with the police and got arrested for dealing drugs.”

He spent a week in prison in remand and only told one person what he was there for.

“You don’t want to tell people what you’re in for because a lot of them are gang members. If they find out you’re a drug dealer they might either beat you up until you get people to smuggle in drugs or look you up when you’re out so they can come knocking on your door and get protection money or steal your drugs.”

The one person he told gave him the best advice of his life: go to the Higher Ground rehab clinic, or be a career criminal.

As a result he was given home detention for 12 months (four of those were spent in the live-in rehab) and avoided a five to eight year sentence. He convinced the technology institute he’d applied to that he could study with a monitoring unit on his ankle and every week day would get a bus from his house to school.

“I did my diploma of web development where I really kick-started my programming career. Dealing drugs wasn’t the best move in hindsight but it was a blessing in disguise getting arrested for it.”

It was a wake up call and MacGregor thinks that if he’d continued his habits for another couple of months he’d be dead.

“I don’t regret what I’ve done in the past because it put me on the path to where I am today and I’m really proud of who I am, what I’ve done and what I stand to achieve in the future.”

He knows some people will connect the dots and find the drug dealing past and the design of a currency that drug dealers can use a suspicious pill to swallow.

“It was a long time ago and I think I’ve proved my penance. I went to rehab, changed and turned my life around. If you look at my life over the last seven years since that incident I’d challenge you to find any blemish at all. I don’t connect the two things.”

Nevertheless, he admits, it sounds shifty at first glance. His dad thought so. The servers are in Sweden, Switzerland and the Netherlands – nothing in New Zealand except MacGregor and his computer – so “good luck” to any officials who try to shut it down.

“We haven’t done anything wrong. They don’t even recognise Bitcoin as a currency. For all intents and purposes I’ve made an anonymous way to send Monopoly money to someone.”

The keys – a bundle of numbers and letters – used to encrypt are only kept for a couple of days. Once deleted, they are gone.

“You’d have to have a server farm working for a hundred years to decrypt them.

“Yes, some of that purchasing will probably be used for drugs one day but you can’t stop it. Just like you can’t stop someone using a 20 dollar bill to go to a tinny house…It should be in the power of the person to decide what they do with their money and who has the right to look at their financial history.”

Instead, he says, it’s about personal freedom.

He has strong views on Five Eyes and the GCSB. He doesn’t think people will be terribly interested in this article – “it’s hard enough getting people to care about their rights to privacy, let alone explain what bitcoin is.”

He’s upset about what’s going on in the world – atheists in Saudi Arabia being stoned to death and the constant increase of surveillance states of the western world. While New Zealand has it better, he admits, this is a global currency and the anonymity probably appeals more overseas.

“It comes down to freedom of speech,” he concludes, “and people’s jobs that may rely on discretion.”

 – Sunday Star Times

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