Power

The FBI’s warning to Silicon Valley: China and Russia are trying to turn your employees into spies

A top special agent in San Francisco has a stark message: "Raise your shields."

A suspicious login screen

The FBI is warning tech companies of an insider threat that's not like anything they've seen in a James Bond movie.

Image: Christopher T. Fong / Protocol

When FBI special agent Nick Shenkin starts talking about spies in Silicon Valley, he's not describing a James Bond movie or even what people have seen on "The Americans." Instead, what he's there to warn the tech sector about is less dramatic but perhaps more insidious: the insider threat of economic espionage and intellectual property theft.

It's not the Hollywood image of espionage. But the risk to tech companies is real, the FBI says: Employees are being persuaded, or more typically, coerced by foreign autocracies into stealing information or handing over login credentials. In one case Shenkin worked on, Chinese government agents threatened to deny an employee's mother dialysis back in China if he didn't steal proprietary information from a large hardware/software company.

"This is a quotidian activity," Shenkin told Protocol in an interview. "This is a massive fundamental activity that bolsters and is one of the mainstays of many autocratic countries and their governments."

For the last few years, San Francisco-based Shenkin has been quietly briefing venture firms, startups, academics and tech industry groups that might be of interest to foreign actors. It's not the glamorous spy stings that form movie plots, but a subtle way of fighting espionage through education. After Protocol heard about the briefings from multiple sources, the FBI agreed to an interview about the content of the briefings and shared its framework, called the "Delta Protocol" (no relation to COVID-19 or this publication), which the agency developed to distribute to startups so they can learn to protect themselves.

"The reason why we're being so much more assertive about these briefings and trying to be more open with U.S. industry is because we've just come to the realization that if there is no cost, then they will continue to do what they're doing," Shenkin said. "So the briefings are like, 'Please American companies, raise your shields, protect yourselves, make it more expensive for the thieves to rob you, and the country is stronger, and you're stronger.'"

It's not your HR department's job to catch a spy

Five years ago when Shenkin started approaching companies, he was trying to convince them the threat wasn't just hypothetical. But hackings by foreign actors now routinely make headlines, and there's been a spate of indictments of individuals, from ex-Apple engineers to researchers, who were accused of smuggling information.

In 2018, the Department of Justice formally launched the China Initiative, and FBI Director Christopher Wray called China's economic espionage and counterintelligence "the greatest long-term threat to our nation's information and intellectual property, and to our economic vitality" in a 2020 speech. (Government estimates of losses from Chinese intellectual property theft run in the hundreds of billions of dollars a year, though some critics say those numbers are inflated.)

"Now you go to these companies and nobody needs to be convinced. Everybody knows that this is a threat, and the big issue becomes how do we defend against it," Shenkin said.

No one expects HR departments to screen out spies when hiring employees — nor is that even the way companies should be thinking about it, Shenkin said. Instead, he's trying to coach tech companies on how to identify vulnerabilities that a person could have and then find ways to protect the individual and the company from those vulnerabilities being taken advantage of by an autocratic government — namely, China and Russia.

There are four main vulnerabilities covered in the briefings: someone being a citizen of an autocracy, doing business with one, having assets in the country or having family members or employees living or working in the autocracy. But it's the family vulnerability in particular that Shenkin says he sees "exploited over and over and over again".

"A lot of what the briefings cover is the idea that this is not about the ethnicity of the individual. This is about: What is any individual's or entity's vulnerability to the jurisdiction of an autocracy? Because what we see overwhelmingly is people who end up stealing intellectual property, very often, they have no desire to be stealing intellectual property," Shenkin said.

While the government used to obsess about state-owned enterprises (or ones that are closely associated, like Huawei), Shenkin said it's shifted focus to what it calls the hybrid threat: autocracies essentially sinking their hooks into people and "forcing them to act as if they are an arm of that government, whether they want to or not."

The general ignorance of the threat — and the lack of incentives for companies to report suspicions — has meant Silicon Valley, in particular, has emerged as a "den of spies," according to POLITICO.

There have been a handful of high-profile cases to reach the level of indictments. The government charged two different Apple engineers in 2018 and early 2019 for allegedly stealing trade secret information about its self-driving car. The most famous case the FBI and experts draw from is the case of Walter Liew, who was found guilty of stealing information about the color white from DuPont. The Center for Strategic & International Studies maintains a list of more than 100 allegedly China-linked IP theft acts since 2000.

The challenge is that these cases are the prosecutable tip of what Shenkin believes is a much larger iceberg when it comes to theft of sensitive information.

To help identify some of the areas that it should be focusing on, the FBI has turned to the venture capital community. It's not that the FBI thinks Sand Hill Road is "housing intelligence officers from foreign countries," Shenkin said. Instead, it's interested in the firms as "knowledge nodes" that can help the FBI understand where the real valuable technological innovations are. The agency is also hoping to learn which companies in an investor's portfolio could most use a briefing to help protect their investments from IP theft.

That doesn't always mean the most cutting-edge tech. "If you're a quantum computing company, or a biotech company, or a green tech company, you are a juicier zebra on the Serengeti," Shenkin said. "But they're also going for just the slowest zebra on the Serengeti."

Not a witch hunt

The challenge with the briefings is not stoking the flames of anti-Chinese or anti-Russian resentment in the U.S., especially at a time when xenophobia is already on the rise. Shenkin said he doesn't want to start a witch hunt, or make companies afraid to hire people with Chinese or Russian names.

"The idea that we're out there, targeting Russian Americans, or Chinese Americans, or anybody of those ethnic groups — I mean, nothing could be further from the truth. We do not live under any delusion that one ethnic group has some sort of a genetic proclivity towards dishonest behavior. Absolutely not the case," Shenkin said.

He says it's a misconception, furthered by the media, that the FBI is targeting Chinese Americans when the reality, as he views it, is that the FBI is trying to protect them from the Chinese government. "From our perspective, the Chinese American community is being exploited by China. They're being targeted and exploited and forced to do illegal things by the government of China," he said.

The problem with that rhetoric is that it treats "China" or "Chinese Americans" as a homogenous body and introduces the idea that a person of Chinese ethnicity could be a threat when it's really based on the individual's vulnerabilities beyond whether they have family in an autocratic state, said Margaret Lewis, a professor at Seton Hall, who has argued for a rethink of the DOJ's larger China Initiative.

"That's creating this construct that Chinese Americans are vulnerable, by reason [of] being Chinese Americans, when I think we need to disaggregate that and look much more at an individual level," Lewis said. While there's no doubt China has exploited family connections some Chinese Americans may have, she said, there's also concern that it's both grouping too many people as vulnerable when they're not, and potentially excluding other vectors of vulnerabilities, like employees with gambling problems who may be desperate to sell information for cash.

Liu Pengyu, a spokesperson for the Chinese embassy in Washington, said in a statement that the media had "frequently hyped" the topic of spies, but that "quite a few later proved to be out of nothing." He added that "the cross-border flow of talent has driven technological and economic progress all across the world" and that he hoped the U.S. would "work to promote instead of disrupting China-US scientific exchange and cooperation."

Shenkin emphasized that the goal of the FBI's briefings, which predate the DOJ's China Initiative, is to focus on individual vulnerabilities, rather than having companies walk away not trusting their Chinese or Russian employees.

"What we're trying to say is, if you hire somebody that has a vulnerability to an autocracy, your best course of action is to help that person, to train that person to understand what their vulnerabilities are so they can protect themselves and the company can help protect that individual from exploitation by that autocratic government," he said. "That's our goal. And that's why we do this brief."

Like a phishing email

The solution the FBI pitches is neither a blanket ban on foreign nationals nor the shrug-emoji approach of assuming it's inevitable. Instead, Shenkin sees it like phishing emails: Companies need to train their employees to know what to look out for and install back-up measures to minimize the damage when someone slips up.

Big tech companies often already have the staff in place to assess insider threats and build the security back-ups needed to counter them, but startups are particularly vulnerable thanks to their size and work on cutting-edge technologies. That's why the FBI developed the Delta Protocol, named after the "delta" between when a company is formed and when it's large enough to have its own security staff trained for internal threats.

In the Delta Protocol, the FBI includes basic best practices like advising companies to log who has access to sensitive IP and install needed physical security, like self-locking doors and alarms. It also has a section on helping companies identify insider threat characteristics, from employees who may be coerced through high-risk activities (like racking up gambling debts that a government could pay off in exchange for information) to the mercenary employee who shows zero loyalty and will sell information to the highest bidder (described as someone who "may have significant issues in the workplace such as an inability to work with others, extreme disgruntlement, belligerence, and frequent violations of workplace rules and policies.")

Getting companies to adopt the Delta Protocol, or at least start grasping the scale of potential IP theft, is why the FBI has been doing more outreach.

"I think the most important thing for us is for people to understand the scope of this threat, and just how absolutely quotidian a large group of people's everyday job is to steal technology from Silicon Valley. That's just what they do for a living," Shenkin said. "And so much of it is not just people who steal because they want to steal technology. A very, very large chunk of it is normal human beings who do not want to steal, who were just trying to protect their families, and have to steal in order to protect their families."

Fintech

Data privacy and harassment could spoil Grindr’s Wall Street romance

As it pursues a long-held goal of going public, the gay dating app has to confront its demons.

Grindr may finally be a public company.

Illustration: woocat/iStock/Getty Images Plus; Protocol

Grindr's looking for more than just a hookup with Wall Street. Finding a stable relationship may be tough.

The location-based dating app favored by gay men was a pioneer, predating Tinder by three years. It’s bounced from owner to owner after founder Joel Simkhai sold it in 2018 for $245 million. A SPAC merger could be the answer, but businesses serving the LGBTQ+ community have had trouble courting investors. And Grindr has its own unique set of challenges.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol, covering breaking news. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

Sponsored Content

Why the digital transformation of industries is creating a more sustainable future

Qualcomm’s chief sustainability officer Angela Baker on how companies can view going “digital” as a way not only toward growth, as laid out in a recent report, but also toward establishing and meeting environmental, social and governance goals.

Three letters dominate business practice at present: ESG, or environmental, social and governance goals. The number of mentions of the environment in financial earnings has doubled in the last five years, according to GlobalData: 600,000 companies mentioned the term in their annual or quarterly results last year.

But meeting those ESG goals can be a challenge — one that businesses can’t and shouldn’t take lightly. Ahead of an exclusive fireside chat at Davos, Angela Baker, chief sustainability officer at Qualcomm, sat down with Protocol to speak about how best to achieve those targets and how Qualcomm thinks about its own sustainability strategy, net zero commitment, other ESG targets and more.

Keep Reading Show less
Chris Stokel-Walker

Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.

Inside the Crypto Cannabis Club

As crypto crashes, an NFT weed club holds on to the high.

The Crypto Cannabis Club’s Discord has 23,000 subscribers, with 28 chapters globally.

Photo: Nat Rubio-Licht/Protocol

On a Saturday night in downtown Los Angeles, a group of high strangers gathered in a smoky, colorful venue less than a mile from Crypto.com Arena. The vibe was relaxed but excited, and the partygoers, many of whom were meeting each other for the very first time, greeted each other like old friends, calling each other by their Discord names. The mood was celebratory: The Crypto Cannabis Club, an NFT community for stoners, was gathering to celebrate the launch of its metaverse dispensary.

The warmth and belonging of the weed-filled party was a contrast to the metaverse store, which was underwhelming by comparison. But the dispensary launch and the NFTs required to buy into the group are just an excuse: As with most Web3 projects, it’s really about the community. Even though crypto is crashing, taking NFTs with it, the Crypto Cannabis Club is unphased, CEO Ryan Hunter told Protocol.

Keep Reading Show less
Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

Climate

The minerals we need to save the planet are getting way too expensive

Supply chain problems and rising demand have sent prices spiraling upward for the minerals and metals essential for the clean energy transition.

Critical mineral prices have exploded over the past year.

Photo: Andrey Rudakov/Bloomberg via Getty Images

The newest source of the alarm bells echoing throughout the renewables industry? Spiking critical mineral and metal prices.

According to a new report from the International Energy Agency, a maelstrom of rising demand and tattered supply chains have caused prices for the materials needed for clean energy technologies to soar in the last year. And this increase has only accelerated since 2022 began.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Enterprise

The 911 system is outdated. Updating it to the cloud is risky.

Unlike tech companies, emergency services departments can’t afford to make mistakes when migrating to the cloud. Integrating new software in an industry where there’s no margin for error is risky, and sometimes deadly.

In an industry where seconds can mean the difference between life and death, many public safety departments are hesitant to take risks on new cloud-based technologies.

Illustration: Christopher T. Fong/Protocol

Dialing 911 could be the most important phone call you will ever make. But what happens when the software that’s supposed to deliver that call fails you? It may seem simple, but the technology behind a call for help is complicated, and when it fails, deadly.

The infrastructure supporting emergency contact centers is one of the most critical assets for any city, town or local government. But just as the pandemic exposed the creaky tech infrastructure that runs local governments, in many cases the technology in those call centers is outdated and hasn’t been touched for decades.

Keep Reading Show less
Aisha Counts

Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at acounts@protocol.com.

Latest Stories
Bulletins