DBS Hacker Update as of 11/28/95

DBS Hacker Update as of 11/28/95

This article is Copyright 1995 by David Lawson and

Scrambling News. Both parts may be reprinted and

distributed freely as long as they are not modified in any way.

The Canadian group has released their fix for the DSS

system. Their chief engineer is said to be Dectec's

former head engineer. The fix will be marketed from

Canada and Mexico, and underground in the U.S.

The fix is a paddleboard which fits into the cardslot.

It uses two microprocessors including a Dallas 5002

and an Atmel with Fastram. There is also a 256k ram

chip with a lithium battery backup. In order to receive

Pay-Per-View programming the EEPROM in the

receiver must be reprogrammed with a new ID.

According to informed sources, the first-run

paddleboards suffer from a 30% failure rate. In addition,

they are extremely sensitive to static electricity. If

zapped, they cannot be reprogrammed.

The developers are grabbing every penny they can on

this fix. The wholesale cost to dealers purchasing in

quantities is $400 each so retail will likely be $600-$700.

This is the cost of one year's programming and it is longer

than the fix will last. Opening the DSS receiver will also

void any warranty.

There is another, more elegant smartcard fix which is

not yet on the market. Someone placed an anonymized

ad in rec.video.satellite.dbs recently that they have

hundreds of pirate smartcards for sale. It is possible

that someone obtained a supply of blank cards and

programmed them but it is unlikely they would be

sold openly through the internet.Thousands could

very easily be sold quietly through the satellite

underground, without fanfare.

Subscribers to our newsletter ($29.95 for 12 issues)

will receive more information by mail next week.

(12/4/95). It will include important information on

the Cyber 1 fix for the VCII PLUS. One of the

individuals now distributing the paddleboard fix is

one of the individuals who was charged and convicted

in the U.S. Customs sting of 1993. That sting involved

a fix for the Videocipher II PLUS satellite system.

We have included the article we did on that sting.

It may be of interest to some of you, and it will provide

you with an inside account of how the satellite piracy

business works.Our article was prepared from court

documents and interviews with the participants. All

those charged were convicted.

The sting started in the spring of 1993 and culminated

at the SBCA trade show for satellite dealers on Septem

ber 7, 1993. Here is what happened.

With impeccable timing, the U.S.Customs Service

executed a sting on several of the largest suppliers of

satellite television modifications in the country. Most

dealers got their first news of it through a message by Ron

Mac Donald, on his Canadian BBS. The message quickly

spread across North America, with many individuals

changing the name on the header to their own. Here is

the text:

Msg#:19752 *News*

09-08-93 22:30:23 (Read 40 Times)

From: RON MACDONALD

To: ALL

Subj: FBI & GI STING

Well it seems that the FBI and the U.S. Customs

department in conjunction with GI have pulled

off a MAJOR sting operation in New Orleans

yesterday. By now everybody has heard of the

so-called VCII Plus clone fix that has been shown

around in the states.

The story starts 6 months ago and I will try to set

out the players in order of appearance.Everybody

has asked for a VCII plus fix - when will it be released?

A new member on this BBS using the name Gerald

?XXXX kept bugging me about a rumour he was

hearing and trying to chase down. I kept saying it

is too hard and too expensive to develop. But lo and

behold, 2 weeks ago, he called me and said he found

the guys with the VCII PLUS clone fix and he was now

representing them and was marketing it for the

developers. The developers wanted to keep their

names out of the picture completely.

We were told that Gerald's associate "Richard

Collins" would be in touch with us to do a demostration

of the product. Arrangements were made for "Richard"

to meet us in Canada just across from the border of

Buffalo. But at the last minute Richard called and said

he wouldn't cross the border with the VCII units and we

have to go to the states for the demo. We complied and went to

see the device. Sure enough, he had a MASTER unit and three

clones of that ID number.

All three were tested seemed to be identical. The three

cloned units had a soft epoxy on them and we were told

that the parts under the epoxy could be bought at Radio

Shack for the simple mods.

One of the cloned units was picked at random, put on line

and called in for a subscription to be added to the unit.

The hit came down within minutes and on came the new

subscribed channel. This verified the existence of a cloned

unit.

Richard informed us that the price of the technolgy was

$50,000.00. They wanted 20 people to put up $50,000.00

each to pay off the developers a total of $1,000,000.00. This

fix was to be guaranteed for a year.

A meeting was going to be held in New Orleans on Sept 7

1993 for a demo of the so-called keypuller/reader/writer device.

At this meeting we would be taught the full operation of the

process and then pay for it and leave with the product. We

stalled off on answering their questions about when we

would arrive in New Orleans.

Something was fishy! Richard was using the same sales

pitch on too many people in the inustry! Feedback was

coming in from all over the country! Even from people that

I knew, who could not afford the $50,000.00 price tag -

why were they attending this so-called hush-hush

meeting. Were they playing around with the price tag?

Better off to sit back and let it shake itself out.

Did you ever see that Eyewitness Video episode on

how a police department setup a phoney front that

bought any hot stuff from crooks. After 3 or 4 months

in operation they had a party for all of these "customers"

of theirs and then the FBI raided them and hauled them

off to jail.

Well I couldn't get that episode out of my mind! I keep

thinking - what a major catch for the FBI and GI.A perfect

STING operation - 20 or more of the top chippers in the

industry, all in one spot at one time! And that is exactly

what GI and the FBI and U.S. Customs did!

Now the others players who were involed in setting

up the sting:Richard Collins - possible alias: Ted La

Fever - U.S Customs agent Gerald XXXXX - New

Orleans - hosted the demo ! Dana XXXXXXX -

Corning N.Y. - was he busted or was he also selling

the fix. aka: Jason Bates

Busted:

Tony- Magna Systems

Jeff C.- Tennennese

Jeff P. - Tennennese

Scottie- S&S Satellite

Kenneth- New York

Theo- Nassau

Robert- Kentucky

According to official sources here is what really happened.

This information was obtained exclusively by Scrambling

News. Two individuals were arrested in New Orleans

on September 7, 1993. They were Jeffery Carr of TN,

referred to in Criminal Complaint number 93-223 MAG

in the U.S. District Court in the Eastern District of

Louisiana, and Douglas Stewart, a Canadian, with a

residence in Santa Clara, CA, and referred to in

Criminal Complaint 93-221 MAG. Both cases resulted

from the work done by an undercover officer employed

as a Special Agent of the U.S. Customs Service.

In the case of Douglas Stewart: On August 3, 1992 a

counterfeit Videocipher II descrambler module, a

device used primarily for the unlawful interception of

encrypted satellite cable programming was ordered

from Troy Stewart. The module arrived but had to

be returned due to defects. On August 28 a

replacement module arrived. The module is commonly

known as a Sunboard (a counterfeit Videocipher II module).

The module successfully descrambled encrypted

programming on satellite G5, without paying for the

services. General Instrument Corporation analyzed the

module and found that it successfully descrambled services

without paying for them.

On or about October 7, 1992 Troy Stewart telephonically

introduced the undercover officer to his father Douglas

Stewart. Then on October 29 the agent contacted Douglas

Stewart and told him that he was interested in purchasing

Sun board descramblers. During that undercover contact

the officer told Stewart that they must be careful about the

authorities and he asked Stewart how he gets descramblers

into the United States. Stewart told the officer that although

it was risky he just drove them past U.S. Customs Inspectors.

On December 1, 1992 the officer telephoned Douglas Stewart

at his home in California. During that conversation Stewart

agreed to sell to the officer, two modified Videocipher II

descrambler modules for $400 each. Stewart instructed the

officer to send the money to a California residence.

The officer phoned Douglas Stewart on December 15

concerning the purchase made on December 1. He told

Stewart that $800 had been sent via the U.S. Mail. Stewart

said that he did not accept U.S. Mail because it was mail

fraud. He instructed the officer to have the package containing

the funds returned by the U.S. Post Office and requested that

the money be sent to an address in Canada.

On or about January 8 the two modified Videocipher II

descrambler modules ordered from Douglas Stewart were

received. The package had been sent directly from Canada to

the officer's undercover address and contained an insufficient or

false description of the contents of the package for proper

declaration to U.S. Customs.

Between January 8, and February 17, 1993 the officer negotiated

from New Orleans with Douglas Stewart for the purchase of 40

additional modified Videocipher modules for a total price of $14,000.

Stewart agreed to meet the officer in Blaine WA for the transaction.

On or about February 17, the officer called Douglas Stewart in

Canada. Stewart said he was still working on the modules but

would meet the officer on February 18, in Blaine. At the February

18 meeting the officer and Stewart discussed how necessary it

was to be leery of the F.B.I. Stewart said he had just come from

the airport and that he was on the lookout for someone who fit his

profile of an F.B.I. agent. He also said that when agents recently

raided his son's home in California that they had seized 1500

GP-28 adapters, just like the ones that had been installed on the

boards which had been ordered on December 1. Stewart said

that the descramblers were at a private mailbox and that he

shipped Sun Boards from there on a regular basis.

The officer, accompanied by a female U.S. Customs officer

followed Stewart and his business partner Alan Reimer to the

private mail box company, located in Blaine WA where

Stewart and Reimer loaded the 40 modified descrambler

modules into the agents' rental car. They commented that the

trunk of the agents' car was larger than that of the rental car

they had used to transport the modules.When the officer

presented Douglas Stewart with the $14,000 cheque, he

expressed concern that the bank would generate an IRS

form because the transaction was over $10,000.

In a subsequent phone call the officer adked Alan Reimer

about the method of importation of the modules purchased

on February 18. He asked how the Customs Inspector did

not notice the boxes in the rear of the mini van that he and

Stewart were driving that day. Reimer said that they had

used another vehicle with a trunk and had been able to

drive past U.S. Customs. In later conversations between

the officer and Douglas Stewart, Stewart repeatedly

expressed concern over being caught by U.S. authorities

for being involved in the purchase/sale of modified

Videociphers or equipment designed to aid in the

modification of Videociphers and that the purchase or

sale of this type of merchandise could result in a jail

sentence.

On September 7, 1993 the officer again met with

Douglas Stewart in New Orleans and during that

conversation Stewart admitted that he committed

the act of smuggling satellite descrambling devices

on or about February 18 and numerous other acts as

well. At that time he was arrested by assisting U.S.

Customs agents and the undercover officer revealed

his true identity. Douglas Stewart was charged under

Title 47 United States Code, 605 (e) (4) for unlawfully

distributing devices designed primarily for use in the

unauthorized interception of satellite cable programming.

In the case of Jeffrey Carr: The undercover officer had

made contact with Dana LaFever of Corning, NY. LaFever

had told him that he could sell or install VMS devices

which enable satellite customers to download cable

security codes via a computer modem and telephone

line so that they can receive encrypted satrellite cable

programming without authorization. LaFever quoted a

price of $115 each.

On or about June 2, the officer again contacted LaFever.

LaFever said that either he or Bill Hunter, a Canadian who

is in the satellite piracy business would sell a host

program for $750 which would allow the officer to

automatically provide his customers with the codes

for the encrypted channels.

In a phone conversation on or about June 9, LaFever

said that his tec support program, which will enable

customers to receive the code updates would go on

line that night. LaFever told the officer that there was a

legitimate use for the VMS device but then added that it

was necessary to have a gimmick. It was necessary to

be able to claim that the device has some legitimate

purpose. At that time the officer ordered a host program,

one remote program for $900 and ten VC 018 modules

with ten VMS devices installed by LaFever for $1950.

On June 17, the officer placed another order for another

host program, remote program and a security device.

LaFever stated at that time that he tries to conduct his

business without paper work.

On July 15, during the S.B.C.A. show the officer met

Dana LaFever at the Fiddler Inn in Nashville. for the

purpose of purchasing more VMS devices. He was

introduced to Jeffrey Carr who works for Video Marketing

Services which manufactures the devices. After Carr left,

LaFever told the officer that Carr does all the programming

and that he had just paid Carr's partner over $30,000 in cash.

LaFever had a sealed box in the room which he said contained

100 VMS devices. The officer purchased 15 of them with

modems for $95 each.

The officer next met with Dana LaFever on August 30, at his

residence in Corning NY in order to purchase more illegal

satellite cable programming descrambling devices and to

demonstrate the latest illegal device, modified Videocipher

II PLUS modules. The officer told LAFever that the devices

were clearly illegal and LaFever acknowledged that he knew

they were. LaFever tested the modules and and had at least

three telephone conversations with Jeffrey Carr. LaFever

initiated the first phone call and Carr returned at least one call

to LaFever. After one of the conversations the officer was

requested to connect two of the descramblers to the same

satellite cable receiving system in order to determine if the

descramblers would receive authorization simultaneously if

only one of the unit addresses was was provided to a legitimate

programmer. LaFever said that if both descramblers allowed

the viewing of scrambled services simultaneously based on a

single unit address then it truly was a clone fix. The officer told

LaFever that an illegal seed key pulling device was in existence

in New Orleans. the officer also said that if LaFever wished to

purchase the device he would have to travel to New Orleans for

a complete demonstration and that the device was for sale for

$50,000.

On or about August 31, Jeffrey Carr phoned the officer and

said that he had been talking with Dana LaFever and that he

was interested in seeing the demonstration of the modified

VCII PLUS modules and possibly purchasing a device being

offered for sale. Carr asked if the agent and his associates

would be interested in mass production of the devices being

offered. The officer responded that he would have to

confer with his associates and said that his associates

expected payment at the demonstration/sale in New Orleans

on September 7. He added that 20 of the devices would be

sold for $50,000 each. and that only 20 were being offered to

avoid being busted. Carr acknowledged that the price was

$50,000 and that the test would be to see if the two clones

could be authorized simultaneously.

On September 7, 1993 at approximately 10 AM, the officer went

to Jeffrey Carr's room at the Oliver Hotel in New

Orleans. and was met by Jeffrey Mayes. Mayes introduced

himself as Carr's partner and he said that Carr was too ill

to see the VCII PLUS module demonstration. The agent

transported Mayes to a location in Kenner, LA and

demonstrated the VCII PLUS cloned boards. He discussed

with Mayes the illegality of the boards and Mayes

acknowledged that he was aware of it. Mayes also admitted

that he was aware that many users of the VMS device used

it primarily for the illegal descrambling of encrypted

satellite transmissions. Shortly after that, Mayes was advised

of the officer's true identity. and that he was in violation of federal

law.

At approximately 2 PM the officer returned to Jeffrey Carr's

room at the Oliver Hotel and offered to demonstrate the VCII

PLUS fix to him. On the way to Kenner, Carr described how he

pulled the seedkeys from several legal descrambling devices.

Carr said that they had recently obtained the seed keys for

Request Pay Per View services.

At the Kenner location the officer demonstrated the VCII

PLUS cloned boards and engaged him in conversation

about the VMS devices. Carr was asked specifically

about the method by which the VMS was being distributed,

whereby distributors sign a disclaimer to absolve Video

Marketing Services of criminal liability. Carr described the

legal use of the VMS and did not acknowledge that he was

aware that his distributors were utilizing the VMS for illegal

purposes. The officer then advised Carr that he

is a U.S. Customs Special Agent investigating the

distribution of devices primarily used for illegal

descrambling purposes.Shortly thereafter, another agent

spoke to Mayes and asked him if Jeffrey Carr was also

aware, as Mayes had just told the undercover agent that

many of the VMS distributors were using the VMS device

for illegal purposes. Mayes said yes.

Later that day the officer interviewed Mayes who said that

he and Carr had been in the business of manufacturing

VMS devices for approximately one year. Mayes was the

hardware designer and Carr was the software designer.

Mayes said that upon startup they had conferred with their

lawyers who had advised them to have their distributors

sign a disclaimer to protect themselves against illegal

utilization. Mayes said that he and Carr had met with all

their distributors to make sure that each one had a

computer capable of running the text data feature of the

VMS device. Mayes said each one was instructed to use

the device for legal purposes only. and to sign a disclaimer

to that effect.

Mayes also said that he and Carr recently came to realize

that Bill Hunter and LeFever were using the VMS devices

for the purpose of illegally descrambling satellite

transmissions. Mayes said that he and Carr continued to

supply them because they were such a large part of the

distribution system. Mayes also said that Carr came to him

recently after having been told by LaFever that the PLUS fix

existed. They wanted Carr to determine if it was real. Mayes

said that Carr got excited about the VCII fix and the possibility

of making a quick million dollars. He said that Hunter and

LeFever would be the actual buyers and that he and Carr

would only receive a kick-back from the sale.

Jeffrey Carr was charged under U.S. Code Title 47, Section 605

(e) (4) and under Title 18, section 371.

The Business

The following is entirely based on guesstimates and is only

intended to provide some order of magnitude.There

are several different modem systems in use, with 10-15,000

users each being typical. The VMS system is the largest,

with an estimated 100,000 users. At a wholesale price of $75

the VMS manufacturing business would have generated

approximately $7.5 million in a little less than a year of

business. [Ed. when S&S was raided in February, authorities

released information that they had done $700,00 in business

the month before they were raided]. Consumers paid an average

$200 for an installed unit for a total of $20 million at retail. In

addition they directly or indirectly have been paying for a BBS

service to download the cable security codes, at roughly $10

per month for a total of $1 million/month. Establishment

sources always calculate the cost of piracy as if each pirate

would pay for services if they weren't being received free but

that is not true. Assuming that each individual would on

average spend $100/yr. on legal programming, then

programmers have lost $10 million in revenue over the

past year.

What was allegedly being offered was a package consisting

of a 3M,3M clone and a 4M with auto- shut-off. That would

provide for three consumer upgrade levels. The qualitative

tests which were allowed to be conducted on the modules

precluded an independent test to determine whether the

three modules had in fact, all been loaded with the same

keys in the first place. According to informed sources, that

is what happened, and GI did not actually demonstrate a

compromise of its PLUS system.

The Charges

We discussed 47 U.S.C. Section 605 with attorney Barry

Teague in the September 1992 issue of Snews. Section

(e)(4) reads as follows:Any person who manufactures,

assembles, modifies, imports,

exports, sells, or distributes any electronic, mechanical

or other device or equipment, knowing or having reason

o know that the device or equipment is primarily of

assistance in the unauthorized decryption of satellite

cable programming or is intended for any other activity

prohibited by subsection (a) shall be fined not more than

$500,000 or imprisioned for more than 5 years for each

violation, or both. For purposes of all penalties and remedies

established for violations of this paragraph, the prohibited

activity established herein as it applies to each such device

shall be deemed a separate violation. (d) for purposes of this

section (1) the term satellite cable programming means video

pro - gramming which is transmitted via satellite and which

is primarily intended for the direct receipt by cable operators

for their retransmission to cable subscribers.The officer in

the affadavit describes the TVRO system used to give the

clone demonstration as a satellite cable receiving system.

Title 18 Section 371 relates to a conspiracy to commit an

offense or to defraud the United States. It reads: If two or

more persons conspire either to commit any offense against

the United States or to defraud the United States, or any

agency thereof in any manner or for any purpose and one or

more of such persons do any act to effect the object of the

conspiracy, each shall be fined not more than $10,000 or

imprisoned not more than five years, or both.

If however, the, the offense, the commission of which is the

object of the conspiracy,is a misdemeanor only, the

punishment of such conspiracy shall not exceed the

maximum punishment provided for such misdemeanor.

In the historical and revision notes for this law it says that

the statute is broad enough in its terms to include any

conspiracy for the purpose of impairing, obstructing or de-

feating any lawful functions of any department of government.

Others Involved

We have not been able to contact all those involved. Others

we spoke to were under instructions by their attorneys not to

comment. Tony at Magna Systems said that he was raided on

the morning of September 7 by approximately twelve U.S.

Customs agents, executing a search warrant. He said they

were looking for any VCII related objects, but found none.

They answered the phone for the 5 or 6 hours they were

there but it was a slow day and there were only about ten

calls. They left with some computer magazines and his

mother's bank records. He was not charged and is still

open for business.

According to sources, the offices of Video Marketing

Services were raided by U.S. Customs agents who were

towing U Haul trailers behind their vehicles. Nothing illegal

was found, though records and samples were taken. The

agent in charge reportedly told them they could continue

with their business. Video Marketing Services is still open

for business.

The Fallout

This action has visibly shaken satellite dealers across the

country, as well as those who assumed they would soon be

selling VCII PLUS products and that their flagging businesses

would return to normal. The ECM's, the upgrades, the on-going

monthly BBS charges, not to mention the danger in repeatedly

calling a phone number which only downloads cable security

codes has more and more dishowners going legal. Earlier this

year authorizations were running at about 35,000/month.

Today they are up to 75,000/month. To make matters worse

the HBO/Cinemax western commercial feeds were shut off

on September 20, the Eastern feeds are scheduled for shutdown

October 20, and Showtime/Movie Channel have announced that

they will discontinue their commercial feeds by the end of October.

First Choice in Canada has also announced that it will discontinue

its use of the VCII commercial data stream by the end of October.

We have not heard of any other services announcing their

abandonment of the VCII commercial data stream so there will

still be many services abvailable, but the loss of virtually all the

most popular services and the lack of a pirate alternative leaves

consumers no option but to go legal. Those now turning legal will

probably not readily return to piracy, considering what it has cost

them over the past eighteen months.

If a PLUS fix is released, it may well be done quietly, without publicity

or fanfare. It is inconceivable that anyone would advertise it in a

magazine any time in the near future. The normal distribution channels

which were targeted in the sting are going to be extra leery even if a

valid product appears.According to official sources this is an on-

going investigation.

The Videocipher II information is only of historical interest, but the

"biz" is the same. In the newsletter we will discuss the desirable

features of a DSS fix. Scrambling News. Voice/FAX 716.874.2088