Feds: Would-be Satellite TV Pirate Offered $250,000 Reward to Smartcard Cracker

* By Kim Zetter

A would-be satellite TV pirate was arrested after offering a $250,000 reward for secret code from a satellite TV smartcard, according to a federal grand jury indictment unsealed Monday in California.

Jung Kwak, who owns a company that imports receiver boxes that pick up satellite TV signals, allegedly conspired with two others to hire someone to break the latest encryption scheme used by Echostar’s Dish Network, authorities say.

The encryption scheme, known as Nagra 3, is the current Holy Grail for digital content pirates and was implemented by the network in 2007 to thwart pirates who had already cracked previous versions of its encryption to steal its programs. The encryption scheme requires subscribers to use special smartcards, made for Dish by a company named Nagrastar, in their receiver boxes to unscramble the network’s paid proprietary content.

Digital content providers and pirates have played a cat-and-mouse game for years with crackers deciphering encryption schemes to produce cloned smartcards or selling coding for receiver boxes that would fool the networks into thinking the user had a legitimate card in their box.

According to the indictment (.pdf), this is exactly what Kwak was doing. His company, Viewtech, imports and sells Viewsat receiver boxes, which are supposed to capture only free satellite TV programs.

But even though the types of digital programming available for free are very limited and consist mostly of niche ethnic and religious programs, sales of Viewsat boxes were brisk — in the millions, authorities say. Their popularity was allegedly due to the fact that the devices were being used to intercept encrypted subscription satellite programming as well. After pirates unscrambled Dish Network’s previous encryption scheme, Kwak’s receiver boxes were updated with code that fooled the network into thinking a legitimate Dish card was in their box.

But sale of Kwak’s receiver boxes “dramatically reduced” after Dish introduced its new scheme, according to the indictment. So Kwak had two co-conspirators secure the services of a cracker and allegedly reimbursed the unidentified person about $8,500 to buy a specialized and expensive microscope used for reverse engineering smart cards.

He also allegedly offered the cracker more than $250,000 if he successfully secured a Nagra card’s EPROM (eraseable programmable read-only memory), the guts of the chip that is needed to reverse-engineer Dish Network’s encryption (see video below of my interview with Christopher Tarnovsky last year, showing how the reverse-engineering is done).

On April 5 this year, Kwak met with the cracker in person in California and allegedly paid him $20,000 for photographs said to depict a dis-assembled Nagra 3 card.

Kwak and his two co-conspirators, Phillip Allison (aka “the broken”) and Robert Ward (aka “thedssguy”), have been charged with one count of conspiring to violate the Digital Millennium Copyright Act.

A lawyer for Kwak said he had no response to the allegations at this time.