TIME Companies

Apple Fails Again to Ban Sales of Samsung Phones

Apple Samsung Patent
A Samsung and Apple smartphone are displayed in London on Aug. 6, 2014 Peter Macdiarmid—Getty Images

The latest in the Apple-Samsung patent war

A U.S. judge on Wednesday rejected Apple’s bid to permanently ban sales of some Samsung phones that had recently been found to infringe Apple patents.

What Apple pitched as a “narrowly tailed ban” on some older Samsung models was denied by U.S. District Judge Lucy Koh in San Jose, Calif., who had rejected Apple’s previous request to ban some U.S. Samsung sales in August of 2012, according to Bloomberg.

In its bid, Apple specifically identified certain features on nine of Samsung’s patent-infringing smartphones in order to give the South Korean firm a “sunset period” to alter those features, according to court documents.

But Apple’s latest court denial is perhaps its last as both parties have toned down their multiyear patent war. In late July, Apple dropped its appeal of the 2012 case while also announcing that its quarterly profits and smartphone sales had jumped up from the previous year’s, a suggestion that its iPhone sales went largely unaffected by any Samsung patent infringements. Most recently, both Apple and Samsung agreed earlier this month to drop patent disputes against each other outside the U.S.

TIME Security

The Government Is Trying To Explain Bitcoin to Normal People

US Government Issues Bitcoin Warning
A customer purchases bitcoins from the BMEX bitcoin exchange's Robocoin-branded ATM in Tokyo, Japan, on Wednesday, June 18, 2014. Bloomberg via Getty Images

Stepping into the Bitcoin market is like "stepping into the Wild West"

An independent government agency issued an exhaustive warning Monday about the risks of virtual currencies like bitcoin in an attempt to explain cryptocurrencies to the uninitiated.

The 6-page walkthrough from the U.S. Consumer Financial Protection Bureau outlined several of bitcoin’s potential dangers, including vulnerability to hackers, limited security, excessive costs and scams. It also announced a system that accepts virtual currency complaints. Though virtual currencies have become increasingly integrated into society, with states, companies, political organizations and even schools approving their use, the Internal Revenue Service has not granted it legal tender status in any U.S. jurisdiction.

“Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market,” CFPB Director Richard Cordray said in the statement.

Bitcoin risks, the CFPB said, include hackers who steal users’ private keys—the password to your digital wallet—using viruses and other malware. Unlike banks or credit unions, in which deposits are protected by federal agencies in case of failure, bitcoin isn’t insured by any government agency. If you lose your bitcoin stash, then “you are own your own,” the CFPB warns, and “there is no other party to help you.” Some digital wallet companies promise reimbursements for fraudulent transactions, but if there’s a widespread fraud event, it would probably be hard for most of these firms to come through on that promise. So what’s a bitcoin user to do?

“Read your agreement with your wallet provider carefully,” the report states. “Really, read your agreement with your wallet provider carefully.”

The report also tries to clarify bitcoin ATMs, which the CFPB points out don’t actually spew out bitcoin. Rather, the ATMs allow you to insert cash to be transferred into bitcoin to be moved into your digital wallet. The ATMs’ transaction fees may run as high as 7% and exchange fees $50 more than what you’d get elsewhere — and perhaps even more given bitcoin’s high volatility, the warning said.

The CFPB additionally warned customers of scams enticing users to invest bitcoin on the promise of high interest rates and no risk. In actuality, their bitcoin may be funneled into something else entirely, like someone’s food, shopping and gambling habits. The U.S. Securities and Exchange Commission previously warned of these so-called Ponzi schemes involving virtual currencies, and noted that such “fraudsters are not beyond the reach of the SEC just because they use bitcoin or another virtual currency.” And while the SEC’s authority provides some comfort, there’s generally few safeguards for average folks who step into the so-called Wild West without their guns and bugles.

Moral of the story? Using bitcoin may have its benefits, but don’t let it be your fool’s gold. Because “if it’s too good to be true,” the report said, “it just may be.”

 

TIME Security

Here’s How the Feds Are Teaming Up With Hackers to Save Us All from Robocalls

Hacking Conference
Hackers participating at the 2011 Defcon conference in Las Vegas, Aug. 5, 2011. Isaac Brekken—AP

The FTC wants hackers to build "honeypots" to defeat a robocaller named Rachel

The Federal Trade Commission is at one of the world’s biggest hacker conferences this weekend, where hackers are competing to help save us all from robocalls.

No one has ever seen her, but she may have the most infamous voice in America. “Rachel” is the most prolific robocall bot in the United States, and the FTC has turned to some of the best hackers in the world to try to stop her. At Defcon—one of (if not the) biggest hacker conferences on earth—the agency is hosting a three-phase competition to build a “honeypot” to lure and catch robocallers in the act. The “Zapping Rachel” competition is handing out $17,000 in cash prizes to winners of three competitions: one to build a honeypot, one to attack a honeypot to find its vulnerabilities, and one to analyze data a honeypot collects on robocalls.

A honeypot is essentially an information system that can collect information about robocalls,” said Patti Hsue, a staff attorney representing the FTC at Defcon. “How it’s designed, how it operates is completely up to the designer.”

As with many happenings at a conference of hackers, the technical details can get complex fast. But the basic idea is familiar to any fan of spy fiction—in espionage a honeypot is a trap in which a mark, like a secret agent, is lured into a trap by sexual seduction (think of about half the vixens who show up in James Bond flicks). In this case, hackers are building and testing the honeypot. Rachel and her ilk are the mark.

“It’s ‘Rachel from Cardholder Services.’” Hsue said. “She is one of the most, I think, hated voices in the U.S. We get so many complaints against Rachel and her clones or her minions or whatever you want to call them. There are a lot of companies that try to perpetrate the same scam using the same, you know, pickup line.”

The Robocall problem has become markedly worse in the last decade, as the Internet has matured and become increasingly intertwined with a digitized phone system. Under FTC regulations, all robocalls to cell phones are illegal, as are unsolicited robocalls to any phone number on the federal Do Not Call registry. The FTC does have its own honeypot already, but the agency won’t comment on it beyond the fact of its existence.

Just how many illegal robocalls are made in the U.S. is difficult to pin down. The best data the FTC has on robocalls comes from complaints the agency receives regarding violations of the Do Not Call registry. In 2009, the FTC received 1.8 million complaints for violations of the registry; in 2011, 2.3 million complaints. In 2013, with about 223.4 million phone numbers on the registry, the FTC received 3.75 million complaints. And that only represents people who take the time to file a formal complaint. Many others surely just let out a disgusted huff and hang up the phone.

From among all those millions of illegal robocalls made to Americans, the FTC has brought a little over 100 enforcement actions against violators. It’s not that regulators aren’t trying, but making a robocall these days is extremely easy from a technical perspective, while busting a robocaller—not to mention bringing legal action against one—is quite difficult.

Which is why the FTC has turned to a community of hackers at a conference notorious—somewhat unfairly—for activity that stretches the bounds of legality. The top competitors will be announced Sunday, though final winners won’t be announced until a later date.

E1nstein—a.k.a. Hugo Dominguez, Jr. to people outside of the hacker scene, a naval reservist who works in IT—is competing in phase 2 of the competition, testing a honeypot for flaws by trying to circumvent the technology, place an undetected call to a honeypot, or provide false information about the origin of the call.

“That’s something I’m good at,” he said. “I’m able to find flaws in things whether it’s physical security or technology. Anything.”

MONEY investor protection

Why You Might Get Shut Out of Wall Street Deals

Exterior visual door security system
Rudi Tapper—Getty Images/iStockphoto

The SEC is reviewing its rules governing who can invest in privately traded securities.

A Securities and Exchange Commission review of its “accredited investor” rule could ultimately make it tougher for people to invest in privately traded securities — high-risk investments with potentially high rewards.

Under the rule, only well-heeled investors are permitted to buy these private placements — securities that are not registered with regulators or traded on exchanges. The idea is to protect Mom and Pop investors from the risks of these illiquid securities, typically issued by small or startup companies and sometimes found to be issued or sold fraudulently.

The criteria, in place since the rule was established in 1982 and never adjusted for inflation, generally require that investors have $1 million in assets or earn at least $200,000 a year to qualify to buy these securities.

But some critics want the SEC to impose other criteria, such as certain professions, arguing that net worth and income are not the best measures of investor sophistication. Others, including the U.S. Government Accountability Office, say the 1982 levels are too low.

The review marks the SEC’s first under the 2010 Dodd-Frank financial reform law, which requires one every four years. The SEC can develop new rules to change the standards but does not have to make any changes.

Investor advocates see the review as their chance to persuade the SEC to tighten requirements for buying the securities. In 2011, Dodd-Frank required the SEC to exclude the value of an investor’s primary residence from the net worth calculation, but the securities still are reaching investors who lack the financial sophistication to take on the risk, they say.

Companies that issue the securities worry that changes could limit their access to capital.

Small brokerage firms that often sell private securities can earn commissions of roughly between 7 percent and 9 percent.

The SEC’s Investor Advisory Committee discussed the issue at a July 10 meeting and expects to propose recommendations when it reconvenes in October.

SEC staff members have met directly with other groups, including the Angel Capital Association, a trade group for investors in start-ups, and the Public Investors Arbitration Bar Association, an organization of lawyers who represent investors in securities arbitration disputes.

JOBS Act Interactions

Consumer advocates have become more concerned about the accredited investor rule because of a related issue raised by the 2012 Jumpstart Our Business Startups Act, which loosened a long-standing ban on advertising the offerings.

Under that law, issuers may advertise their private offerings to mass consumers, such as in television commercials, even though their sale is still restricted to accredited investors.

“Thanks to the JOBS act, once private offerings are now essentially public offerings,” said Barbara Roper, investor protection director of the Consumer Federation of America, and a member of the SEC’s Investor Advisory Committee. Her concern: that unsophisticated investors who meet the requirements of “accredited investor” advertising will see those pitches and buy in.

The SEC could leave the financial thresholds in place but limit the percentage of total assets that someone can invest in private offerings, Roper said.

Another choice would be to deem some investors as “sophisticated” because of their professions. Accountants and certified financial analysts, for example, would be deemed savvy enough to take on the risk. SEC Chair Mary Jo White described the approach as possible “alternative criteria” in a letter to U.S. lawmakers last year.

The SEC declined to comment on its review and would have to vote on any changes.

MONEY alternative assets

New York Proposes Bitcoin Regulations

Bitcoin (virtual currency) coins
Benoit Tessier—Reuters

New regulations may make Bitcoin safer. But some people think they will also ruin what made virtual currencies attractive.

Bitcoin may have just taken a huge step toward entering the financial mainstream.

On Thursday, Benjamin Lawsky, superintendent for New York’s Department of Financial Services, proposed new rules for virtual currency businesses. The “BitLicense” plan, which if approved would apply to all companies that store, control, buy, sell, transfer, or exchange Bitcoins (or other cryptocurrency), makes New York the first state to attempt virtual currency regulation.

“In developing this regulatory framework, we have sought to strike an appropriate balance that helps protect consumers and root out illegal activity—without stifling beneficial innovation,” wrote Lawsky in a post on Reddit.com’s Bitcoin discussion board, a popular gathering places for the currency’s advocates.

“These regulations include provisions to help safeguard customer assets, protect against cyber hacking, and prevent the abuse of virtual currencies for illegal activity, such as money laundering.”

The proposed rules won’t take effect yet. First is a public comment period of 45 days, starting on July 23rd. After that, the department will revise the proposal and release it for another round of review.

Regulation represents a turning point in Bitcoin’s history. The currency is perhaps best known for not being subject to government oversight and has been championed (and vilified) for its freedom from official scrutiny. Bitcoin transactions are anonymous, providing a new level of privacy to online commerce. Unfortunately, this feature has also proven attractive to criminals. Detractors frequently cite the currency’s widely publicized use as a means to sell drugs, launder money, and allegedly fund murder-for-hire.

The failure of Mt. Gox, one of Bitcoin’s largest exchanges, following the theft of more than $450 million in virtual currency, also drew attention to Bitcoin’s lack of consumer protections. In his Reddit post, Lawsky specifically referenced Mt. Gox as a reason why “setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.”

New York’s proposed regulations require digital currency companies operating within the state to record the identity of their customers, including their name and physical address. All Bitcoin transactions must be recorded, and companies would be required to inform regulators if they observe any activity involving Bitcoins worth $10,000 or more.

The proposal also places a strong emphasis on protecting legitimate users of virtual currency. New York is seeking to require that Bitcoin businesses explain “all material risks” associated with Bitcoin use to their customers, as well as provide strong cybersecurity to shield their virtual vaults from hackers. In order to ensure companies remain solvent, Bitcoin licensees would have to hold as much Bitcoin as they owe in some combination of virtual currency and actual dollars.

Cameron and Tyler Winklevoss, two of Bitcoin’s largest investors, endorsed the new proposal. “We are pleased that Superintendent Lawsky and the Department of Financial Services have embraced bitcoin and digital assets and created a regulatory framework that protects consumers,” Cameron Winklevoss said in an email to the Wall Street Journal. “We look forward to New York State becoming the hub of this exciting new technology.”

Gil Luria, an analyst at Wedbush Securities, also saw the regulations as beneficial for companies built around virtual currency. “Bitcoin businesses in the U.S. have been looking forward to being regulated,” Luria told the New York Times. “This is a very big important first step, but it’s not the ultimate step.”

However, this excitement was not universally shared by the internet Bitcoin community. Soon after posting a statement on Reddit, Lawsky was inundated with comments calling his proposal everything from misguided to fascist. “These rules and regulations are so totalitarian it’s almost hilarious,” wrote one user. Others suggested New York’s proposal would increase the value of Bitcoins not tied to a known identity or push major Bitcoin operations outside the United States.

One particularly controversial aspect of the law appears to ban the creation of any new cryptocurrency by an unlicensed entity. This would not only put a stop to virtual currency innovation (other Bitcoin-like monies include Litecoin, Peercoin, and the mostly satirical Dogecoin) but could theoretically put Bitcoin’s anonymous creator, known by the name Satoshi Nakamoto, in danger of prosecution if he failed to apply for a BitLicense.

One major issue not yet settled is whether other states, or the federal government, will use this proposal as a model for their own regulations. Until some form of regulation is widely adopted, New York’s effort will have a limited effect on Bitcoin business. “I think ultimately, these rules are going to be good for the industry,” Lawsky told the Times. “The question is if this will spread further.”

TIME apps

NYC to Lyft Drivers: We May Impound Your Car

A Post-Taxi Population Opts For Ride-sharing
Hunter Perry, a regular Lyft user, gets picked up on July 16, 2013 near his office on Harrison Avenue. Boston Globe—Boston Globe/Getty Images

Regulators warn Lyft drivers that safety and emissions violations could carry stiff penalties

Just two days before Lyft was planning to debut its ride sharing service in New York City’s outer boroughs, city officials warned that the service remained “unauthorized” and that participating drivers could face stiff penalties.

“Lyft has not complied with [the New York City Taxi and Limousine Commission's] safety requirements and other licensing criteria to verify the integrity and qualifications of the drivers or vehicles used in their service,” the New York City TLC said in a statement, “and Lyft does not hold a license to dispatch cars to pick up passengers.”

Unlicensed drivers who fall short of drug, background, emissions or safety standards could face fines of up to $2,000 or even risk losing their vehicles, the agency warned. Licensed drivers could also be subject to fines of up to $2,000 for accepting a ride through an unlicensed dispatcher.

The warning came as Lyft prepared to debut its service on Friday in Brooklyn and Queens, recruiting 500 new drivers and promoting two weeks of free trips for new riders.

Lyft argues that its drivers face stricter background and safety standards than New York taxi drivers, and that some 75,000 people have already used the app to hail one of their iconic mustachioed cars.

“The public is reminded that they should not get into a vehicle without a TLC license,” the TLC warned (emphasis theirs). The public may decide for themselves, however, on Friday at 7 p.m., when the service is scheduled to roll out regardless of the TLC’s warnings.

MONEY

Does Anybody Need a Money-Market Fund Anymore?

New regulations are meant to protect money market mutual funds from another 2008-like panic.

On Thursday, the Wall Street Journal reported that the Securities and Exchange Commission is expected to approve new regulations for money-market mutual funds. Remember money-market funds? Before the financial crisis, these funds were very popular places to stash money because each share was expected to maintain $1 value. Your principal would remain the same, and the fund would pay substantially higher interest rates than a bank savings account.

But these days for retail investors, money-market mutual funds are something of an afterthought.

So why is the SEC intent on regulating them now? And will tighter rules push them further into irrelevance? Here’s what you need to know:

What going on?

A money-market fund is a mutual fund that’s required by law to invest only in low-risk securities. (Don’t confuse funds with money-market accounts at FDIC-insured banks. These rules don’t affect those.)

There are different kinds of money-market funds. Some are aimed at retail investors. So-called prime institutional funds, on the other hand, are higher-yielding products used by companies and large investors to stash their cash. The big news in the proposed rules affects just the prime institutional funds.

Prime institutional funds would have to let their share price float with the market, effectively removing the $1 share price expectation.

The SEC reportedly also wants to impose restrictions preventing investors from pulling their money out of these funds during times of instability, or discouraging them from doing so by charging a withdrawal fee. It’s unclear from the reporting so far which kinds of funds this would affect.

Why is the SEC doing this?

As MONEY’s Penelope Wang wrote in 2012 when rumors of new regulations were first circulating, the financial crisis revealed serious vulnerabilities to money-market funds. When shares in a $62 billion fund fell under $1 in 2008, it triggered a run on money markets.

In order to stabilize the funds, Washington was forced to step in and offer FDIC insurance (the same insurance that protects your bank account). That insurance ran out in 2009, and now the funds are once again unprotected against another run.

The majority of the SEC believes a primary way to prevent future panics is to remind investors that money-market funds are not the same as an FDIC-insured money-market account at a bank. Before the crisis, the funds seemed like a can’t-lose proposition. The safety of a savings account with double the return? Sign me up. But as investors learned, you actually can lose.

What does it mean for you?

Not much, at least not right away. The floating rate rules only apply to prime institutional funds, which the Wall Street Journal says make up about 37% of the industry.

The change also won’t be very important until money-market funds look more attractive than they do today. Historically low interest rates from the Federal Reserve have actually made conventional savings accounts a more lucrative place to deposit money than money-market funds. The average money-market fund returns 0.01% interest according to iMoney.net. That’s slightly less than a checking account.

Investors have already responded to money funds’ poor value proposition by pulling their money out. In August of 2008, iMoney shows there was $758.3 billion invested in prime money fund assets. In March of 2014, that number had gone down to $497.3 billion.

Finally, it appears unlikely that money-market funds will ever be as desirable as they were pre-crisis. As the WSJ’s Andrew Ackerman points out, money funds previously offered high returns, $1-to-$1 security, and liquidity. Interest rates have killed the returns, and the new regulations will limit liquidity and kill the dollar-for-dollar promise.

Don’t count the lobbyists out yet

Fund companies are really, really unhappy about the SEC’s proposed regulations. They’ve been fighting the rules for years, and until there’s an official announcement, you shouldn’t be sure anything is actually going to happen.

Others are worried the new regulations, specifically redemption restrictions, might actually cause runs on the market as investors fear they could be prevented from pulling money out if things get worse.

But the SEC may have picked a perfect time to do this. With rates so low, few retail savers care much about money-market funds. That wasn’t true back when yields were richer and any new regulation of money-market funds might have been met with a hue and cry from middle-class savers. Today? Crickets.

MONEY Tourism

7 Cities Where the Sharing Economy Is Freshly Under Attack

140529_FF_NerdWallet_Lyft_1
A Lyft car in San Francisco courtesy of Lyft

As Uber, Lyft, and airbnb expand around the globe, even smaller cities like Grand Rapids are feeling forced to regulate sharing economy businesses.

Big cities such as San Francisco and New York have been confronting the unusual tax and regulatory conundrums posed by sharing economy businesses like Lyft, Uber, and Airbnb for years. Now it’s Grand Rapids’ turn.

As rideshare services like Uber and Lyft expand rapidly around the globe, and as short-term rental operations like airbnb grow to the point of being genuine competitors to hotels, local officials don’t quite know what to make of them—and the kneejerk reaction of regulators is often to side with the tradition businesses these sharing economy services intend to disrupt.

It hasn’t helped that sharing economy businesses have been featured in a string of ugly incidents lately. There was the “XXX Freak Fest” orgy that took place when an unsuspecting tenant rented out his New York City apartment on airbnb last Month. Then there was an Uber driver accused of assault in Oklahoma City, and another Uber driver in San Francisco who was charged with hitting a passenger, and who was found to have convictions for felony drug dealing and misdemeanor battery, despite being subjected to Uber’s background check.

What’s more, no fewer than 14 states have issued warnings–fairly vague, sometimes misleading, but still scary warnings–about the insurance risks in driving or being a passenger in rideshare operations. The companies whose business models are being threatened by the sharing economy are taking action too: In Las Vegas, for instance, a local cab company posted a memo warning that it would terminate any “driver that picks up a passenger using an Uber, Lyft or Sidecar application” in a company taxi or limo. And even cities that seem more open to rideshare businesses sometimes aren’t entirely on board with how these tech companies operate. The Times-Picayune reported that the New Orleans city council is discussing new regulations that would allow Uber’s ridesharing service, but would keep certain taxi rules–such as $25 minimums for luxury sedan rides–that defy “Uber’s insistence on open market pricing.”

As for individual cities in the U.S. and Europe that are stepping up efforts to rein in or ban sharing economy businesses entirely, here are seven hot spots:

Albuquerque, New Mexico
In late May, the New Mexico Public Regulation Commission voted unanimously to order the ridesharing service Lyft to cease operations in the state. Why? The same reason most often cited against ridesharing companies: They’re accused of being commercial taxi services whose drivers don’t have the appropriate licenses and certificates, and who haven’t paid the same fees as taxis. The commission warned Lyft and its drivers that each violation is subjected to a fine up to $10,000.

Barcelona, Spain
After being pressured by taxi companies and hotels, among others, officials in Barcelona are trying to crack down on Uber and airbnb and other sharing economy businesses, with tough fines for unlicensed drivers and a temporary freeze on licenses for owners who want to rent apartments as tourist lodging.

Brussels, Belgium
Uber launched in Brussels in February, and in April, officials banned the service in the city, threatening to hit drivers with a €10,000 fine for picking up a passenger via the app.

Buffalo, New York
A month after Lyft introduced its rideshare service in Buffalo in late April, the city’s director of permits and inspections recommended that police issue summonses to Lyft drivers, who he has determined to be the equivalent of unlicensed livery cab drivers. He also threatened that cars used in rideshare operations could be impounded.

Grand Rapids, Michigan
Strict new regulations are being proposed for owners who want to rent rooms via airbnb or other short-term services. If accepted, a homeowner would have to pay $291 for a license, the home must be owner-occupied in order to advertise room rentals (i.e., no vacation rentals), and only one room in the home can be rented at a time. Also, the city would grant no more than 200 licenses, and owners would have to notify all neighbors within 300 feet of the property about the rental situation. As tough as these rules seem, they could have been worse: A year ago, Grand Rapids was suggesting that homeowners would have to pay $2,000 for a license to advertise and rent via airbnb.

Kansas City, Missouri
Police began issuing tickets to Lyft drivers in Kansas City soon after the service was launched in late April. City officials had deemed that the rideshare service was illegal because drivers hadn’t gone through the training and certification required of taxi drivers. After some legal maneuvering, Lyft is still in action in the city, and a lengthy court battle is expected before the situation is settled.

Malibu, California
The Malibu city council recent voted in favor of issuing subpoenas to over 60 short-term lodging rental websites, including airbnb, according to the Los Angeles Times. There are hundreds of ads for short-term vacation rentals in Malibu, but only around 50 are officially registered with the city and pay the same 12% tax that hotels pay. Officials want to make sure that the city isn’t missing out on hundreds of thousands of dollars in taxes from other rentals. They’re also hoping to crack down on the “party house” atmosphere in neighborhoods that have become popular for vacation rentals.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser
Follow

Get every new post delivered to your Inbox.

Join 46,226 other followers