The Escobar Phone and Imaginary Flamethrowers

Speaker 1: First thing I wanna talk about is a Swedish entrepreneur who licensed the likeness of deceased drug kingpin Pablo Escobar in order to sell imaginary flamethrowers.

Speaker 2: Cool. Cool. I don't know anything about that, but it sounds fun.

Speaker 1: As names to license for a consumer electronics Internet fraud go, Pablo Escobar is both really weird and kind of a perfect choice. For anyone who is unfamiliar, Pablo Escobar is the Colombian drug lord who founded and led the Medellin Cartel. At his peak, he was smuggling hundreds of tons of cocaine into The US, was one of the richest criminals in history, and essentially ruled parts of Colombia. He had a lot to do with crime and very little to do with folding phones. He is, importantly for this story, dead, and had been for twenty six years prior to the start of this new enterprise. Alive is his brother, Roberto de Jesus Escobar Gaviria, one of our two protagonists. The other, Olaf Kiros Gustafsson, a Swedish businessman and entrepreneur. Olaf saw an opportunity to leverage the creator economy, the Escobar name, and a tapestry of mail and wire fraud schemes in order to facilitate an elaborate influencer boosted consumer tech scam that came to something of a head this past week when he plead guilty to six federal charges. We've got a few different stories to talk about this episode, but to start, I read a bunch of court documents on the plane, so now we've got to talk about the story of the Escobar phone. Here on Hacked. How you doing, Scott?

Speaker 2: Good. How are you, Jordan?

Speaker 1: I'm doing good. I'm keeping busy. I'm keeping moving. Mhmm. I'm reading court documents on airplanes. I'm driving.

Speaker 2: I just got back from a a set of airplane rides myself, and I I did none of the such. I had known nothing about this case, and I'm excited for you to explain it to me.

Speaker 1: It's pretty good. It's a lot. It involves some, like, Internet celebrities. What is, I would say, a pretty obvious scam from the outset, but with some really interesting characters in the middle of it. Later in the episode, we have, like, a an interesting deep technical infrastructure story, but this story concerns flamethrowers. So, like, we just kinda have to start with it.

Speaker 2: I I I got the impression from the intro that this is a lot of trading on the family name.

Speaker 3: Yeah. Yeah.

Speaker 2: It's a

Speaker 1: lot of trading on a lot of names, which is kinda what makes it interesting. It's much more of like an Internet culture wire fraud y type story than a pure cybercrime story, but it's also still a cybercrime story.

Speaker 2: But this isn't like the Elon Musk flamethrowers? These are, like, different flamethrowers?

Speaker 1: Sort of. Okay. It definitely involves the Elon Musk flamethrower. It Oh. Yeah. So there is a connection there, because it's fraud. Mhmm. There's a lot of connections to legitimate things that have nothing to do with this very illegitimate operation, which we're bringing to the people, of course, brought to them by Push.

Speaker 2: Push security. Push security. More on them later.

Speaker 1: More on them later. Okay. So you're unfamiliar with this, which makes this really, really fun because I get to start by telling you about how I got into this story, actually five years ago now at this point. Early twenty twenty when we were all stuck inside watching a lot of YouTube unlike now, I, along with millions of other viewers watched as tech reviewer Marques MKBHD Brownlee, peeled a cheap golden decal off of a brand new Escobar fold two phone to reveal a Samsung logo underneath. The Samsung Galaxy Fold, it's a book style folding phone, is worth about 2,000 US dollars. This device was being promoted as a $399 foldable smartphone, quote from Pablo Escobar's family. Immediate red flags.

Speaker 2: And it was gold. And it was gold. And it

Speaker 1: was a Samsung phone wrapped in gold. Even decal it's sticker. It has sticker on it. It had a gold sticker. It had a big old gold sticker.

Speaker 2: They they tried.

Speaker 1: They shipped it to Marques Brownlee. He made a video about it. He called this very early on. They, he was actually contacted by the FBI regarding the story. Go check out his little string of videos about this. We're gonna take a different angle on it, but they're totally worth a watch. To dig in a little deeper, Escobar Inc, the corporate entity at the heart of the story, presents itself as the official corporate heir to Pablo Escobar's empire. According to federal prosecutors, the company actually did hold a legal right I was unfamiliar with. It's something called successor in interest rights, which is like the right to Pablo Escobar's name and likeness, a legal license to profit off of the late narco traffickers identity, basically. Infamy. Infamy is a better word. Roberto de Jesus Escobar Gaviria, Pablo's older brother founded Escobar Inc and claimed to sort of, like, this entity exists to manage Escobar family's assets and intellectual property. It was formally registered in Guayanabo, Puerto Rico in 2015, so registered in The US territory while Roberto remained off in Colombia. Important for later.

Speaker 2: The these assets were largely oil barrels full of cash buried throughout the desert. Correct?

Speaker 1: He'll never tell. It wasn't until Swedish entrepreneur yeah. That sounds right. It wasn't until Swedish entrepreneur Olaf Gustafsson, otherwise known as El Silencio, I never did find an explanation for that nickname, came on board to the company as CEO. And it is at that point that Escobar Inc really started to cook. Gustafsson, then in his early thirties, became the very, like, flamboyant public face of the company. Under his tenure, Escobar Inc shifted from that kind of intellectual property successor and rights holding company, into basically a company doing a series of outrageous publicity stunts, trying to harness the the influencer and creator economy to go through a couple. They got in a fight with Netflix demanding a billion dollars for what they alleged was unauthorized use of Pablo's story in the, TV series Narcos before abruptly dropping the claim. An aside, great show. Totally worth watching.

Speaker 2: Mhmm. Concur.

Speaker 1: This is, foreshadowing and speaks to something you brought up. In 2019, Roberto Escobar and Gustafsson made headlines by accusing Elon Musk of stealing their flamethrower design. This is it's pretty rich given where this is all going. They threatened to sue Musk's boring company unless they got a $100,000,000 payout. For context, Musk, as you alluded to earlier, sold a $500 quote, not a flamethrower. Is this is, like, a novelty gadget? This is a flamethrower. And Roberto claimed he had the idea first. Sure. Sure. Just the idea of flamethrowers.

Speaker 2: I I have lots of ideas. I mean, should I sue people that actually execute them?

Speaker 1: Well, if you wanna really bang our publicity stunt, like, kind of apparently you should, because this in a weird way worked really well until it, worked very, very poorly. That suit went nowhere. That same year, Escobar Inc launched a $50,000,000 crowdfunding campaign to, quote, impeach president Trump, which was promptly shut down by GoFundMe because there are some things no matter how much you might want to, you just can't crowdfund. Behind these, like, big carnival Barker press releases, and I guess kind of their purpose, was Gustafsson's real master plan, which was an international fraudulent e commerce operation that would lure thousands of buyers with impossible deals on exotic tech toys. Gustafsson would later admit in court, that he and his coconspirators deliberately, quote, identified popular products on the market and then use that Escobar name and likeness to, create these absurd publicity stunts to reliably get press to function as an advertising channel. Smart. For his real product, which was outlandish, obvious knockoffs sold at implausibly low prices.

Speaker 2: Not so smart.

Speaker 1: Less smart.

Speaker 2: Less smart. Inviting some mail

Speaker 1: fraud charges as we will see across all of these. And these sites are you can find them in the Wayback Machine. You can find them archived. They're all very interesting to look at because they're taking this, like, photography and iconography of Pablo Escobar and the, the Medellin cartel, and they're sort of just trying to transpose it over onto electronics and gadgets and all that kind of stuff. So it's very

Speaker 2: dis spend lots of disposable income on?

Speaker 1: Exactly. None of which were being manufactured. Okay. As the US Department of Justice later summarized, Gustafsson, air quote, sold all these Escobar branded flamethrowers and phones and took all the payments for it, but never delivered the products because the products never actually existed. Only dummy units and a lot of YouTube hype. To fuel demand for the fictional gadgets they weren't really selling, Gustafsson seeded the tech press with dummy units. So the average buyer would never get their Escobar phone or their flamethrower. Escobar Inc made sure that a handful of really high profile tech reviewers did or at least something that would kind of seem convincing on camera until you peeled the gold decal off revealing Samsung logo underneath. Gustafsson later in those core documents admitted he'd mailed the line was crudely made samples of the supposed products to online tech influencers, quote, in order to attempt to increase demand among the public.

Speaker 2: It's like we didn't take the time to make less crudely made samples. We just wanted to, like, bang it out and send it out.

Speaker 1: It's really

Speaker 2: Slap the sticker on it, put it in a box, and mail it away.

Speaker 1: I so the thing I never got to in all of this was how the relationship between Olaf and, Roberto started. Mhmm. I don't know where he would have come from. I have to like, this is purely speculation, but I really do wonder if it was just like a Swedish came to the brother of Pablo Escobar and said, I have a really crazy idea. Can I talk to you about it? And the idea being

Speaker 2: Let's get this grift in.

Speaker 1: Let's get this grift going with some tech influencers and see if we can sell some fake folding phones, which is, we'll start with that product. There was the Samsung Galaxy Folds. They were wrapped in this gold foil. They were sent out. They called them the Escobar Fold one and two. It was Aurora Flexpai and then Samsung, Marques Brownlee, mister who's the boss. The biggest names in tech, I'll cover this because it was obviously a scam. They talked about it obviously being a scam. But if you get that message out in front of that many people with any ambiguity as to whether it's a scam, some small subset of them are gonna basically roll the dice on saying, well, maybe I lose $400. Maybe I get a folding phone out of it. Mhmm. They would not, but that was kind of, I think, the arithmetic that was going on here.

Speaker 2: To to to to me, it sounds like bad arithmetic.

Speaker 1: Mhmm.

Speaker 2: Like, it sounds like if you really wanted to, like, like, if they had made not a crudely put together prototype, if they had spent $10,000 and had, like, a decent prototype put together,

Speaker 1: Yeah.

Speaker 2: They could've converted instead of a fraction, like, three standard deviations from the mean. They could've might've, you know, had a few standard, like, if they brought in one more chunk or one more standard deviation, they would've the fraud would've been massive. So a $10,000 investment might have returned millions instead

Speaker 1: of

Speaker 2: hundreds of thousands.

Speaker 1: Yeah. If you and some prominent people in recent months have, I think, done a version of this. If you were to go on Alibaba or AliExpress right now, you will find white label phones. You can go to a phone manufacturer that makes a perfectly serviceable entry level Android phone, and they will customize it. They'll put your logo on it. They'll Totally. Put whatever software on it you want. But they'll make you a real phone and sell it to you for not that much money with a relatively low minimum order quantity. But that would cost more than $2,000 and some gold foil. Yeah. And this isn't that kind of an operation.

Speaker 2: One barrel of cash from the desert would have made this way better.

Speaker 1: Well, Scott, the bad news about the barrels of cash is it seems they all burned them as evidenced by by the press release for their other product, which was the Escobar flamethrower. This was back in 2019. It was marketed as a $249, propane in the style of Musk, not a flamethrower. It was, it was marketed as a mainstream tactical tactical toy modeled after the Musk design, who they were in a lawsuit with. It's all very sloppy. But the line from the press release that I I bring this up because of is, quote, I want the people to be able to burn money like me and Pablo used to do. I burned probably a couple of billion dollars. The Escobar Inc. Flamethrower will sell out very fast.

Speaker 2: Sure. Sure, dude.

Speaker 4: I just I really like that. Like, it's such a weird flex tree.

Speaker 1: Like, I burned billions of dollars, and it's like, clearly, you shouldn't have. Yeah. Because now you're shilling fake flamethrowers. Like Totally. Maybe you shouldn't have done that.

Speaker 2: Yeah. Maybe you should have kept at least one of those billions.

Speaker 1: Yeah.

Speaker 2: And then then you wouldn't be trying to commit the worst tech fraud.

Speaker 1: Just the jankiest tech fraud I've ever seen.

Speaker 2: It's got the that sorry.

Speaker 1: No. No.

Speaker 2: I was gonna say I do love that their their marketing strategy is, like, just wickedly underpriced them. It's like, you'll like, we'll get more people that'll just roll the dice if these are, like, 80% less than they should

Speaker 1: be. That's all it is. It's it's some tiny subset of people will do the gamble. Yeah. They'll go, this seems like it's probably a fraud.

Speaker 2: But

Speaker 1: It is literally being done by the Escobar family. Like, but maybe I get a a there was this sort of meta narrative that they're like, yes. These are Samsung products. Yes. These are preexisting products that we're we're reskinning, but it was always, framed as like, oh, these were, basically offcuts from the manufacturer. There was some marginal thing wrong with them, but we've checked it works, and that's why we're selling it for so cheap. It's a fire sale brought to you by Escobar Inc.

Speaker 2: Sure. It's like the winners of the winners of tech goods.

Speaker 1: Exactly.

Speaker 2: Or Ross's for the American listeners.

Speaker 1: I didn't know that Winners was Canadian.

Speaker 2: Yeah. They do now.

Speaker 1: Who knew? Flamethrowers, folding phones. They did it with the iPhone, but same basic grift. They also tried to get into crypto, like, 2021 peak of it. You can really see what

Speaker 2: was going on. Escobar coin.

Speaker 1: Escobar cash. It was billed as the world's first, physical cryptocurrency. They promised, like, they were gonna do a gold tinted coin that would merge the two. This this one seems like for as much as the folding phone was nothing, this is somehow less purely made up from what I can tell.

Speaker 2: I feel like in the $20.20 meme coins, like, just Escobar coin put out by the Escobar family would have just in itself somehow memed itself to a few billion dollars.

Speaker 1: Yeah. Honestly. There there's a version of that that would have done quite well. If he had just gone all in on a good old fashioned rug pull on a meme coin, would have made probably a lot more money. And based on the, level of enforcement occurring right now, probably would have got away with it scot free.

Speaker 2: Yeah. Like, if Hock Tua can do, like, I don't know what the full the rug pull value on the Hock coin was, but, like, if that Yep. I feel like the Escobar name carries more, you know, societal clout than Haaktu does.

Speaker 1: Well, Haaktu is a cultural institution, but I take your point. Yeah. I mean, as Coffeezilla, great YouTuber, I wanna check him out, says right now regarding crypto crimes, it's crime is legal. He's making T shirts that just say crime is legal now, and that seems to be the case. But, selling fake phones and wire fraud, that type of crime seems to not be legal. So he makes this fake crypto. He makes this they don't make them. They're selling and marketing this, like, fake flamethrower, the folding phone, the iPhone, the digital coin thing. They're using this this this dummy unit YouTube pipe thing to get it out in front of a ton of different people. Meanwhile, Gustafsson is also orchestrating a series of stunts in the traditional media. He's sending out these press releases that are just like, like cartel fanfic, basically. Like, they're talking about literally burning money in the jungle type thing, and so can you. It was all just really outrageous and quotable and over the top and Newsweek and all these big outlets start covering it, amplifying the story and increasing that surface of people, some tiny subset of which will Top

Speaker 2: of the funnel.

Speaker 1: Exactly. Making that funnel big. That's a great way of

Speaker 2: thinking about it.

Speaker 1: Just every one of these press releases makes that funnel bigger. And behind the scenes, Gustafsson is starting to work on, like, the next phase of this con, which is designed to keep the customer's money even as the truth starts to become apparent to people what's occurring here. Eventually, everyone who pays for one of these products notice that nothing is arriving. Time goes by. There's no flamethrower in the mail. There's no foldable phone on the doorstep. People start asking for refunds. Rather than ignore customers entirely, Escobar Inc. Used a tactic to trick payment processors and stall chargebacks. They did send something to the customer, just enough to record a shipment in the system. According to the court filings, instead of shipping the actual merchandise, Gustafsson would mail customers an envelope containing a, quote, certificate of ownership. Basically, just like a little cheap booklet that they made, some pieces of promotional material. The certificate, just like a little glossy thing saying that the customer now, quote, owned an Escamar product, maybe promising that it's under production. Importantly, these mailings had a tracking number and delivery confirmations. So when the angry customer demanded their money back because they didn't get a folding phone or a flamethrower, they got a piece of paper, Gustafsson fraudulently pointed the payment platform to the mailing record as proof that the product had been delivered. In other words, he used that shipping tracking number for a worthless certificate to contest the refund requests, PayPal, Visa, Mastercard, Klarna, a bunch of other payment processors were shown a postal receipt. And this was typically enough, to deny the customer's refund.

Speaker 2: Mhmm. Smart in a criminal way, but also more fraud?

Speaker 1: It more fraud, very shrewd and smart in a very short term way because this is a very trackable thing because you're gonna have this giant paper trail of refund requests, complaints. It's pretty easy to piece together what happened here. Buyers are not happy. They got the package. Where's the flamethrower? By the time they figure out the certificate is a scam, they might have figured it out a little earlier, but that window for chargebacks is closed. The dispute has been decided against them. The scheme was very effective at thwarting people's attempts to get their money back. Courthouse News later observed that, quote, the vast majority of hundreds of people who paid for a nonexistant Escobar flamethrower never got their money back. It got so bad that PayPal eventually terminated Escobar Inc's account after realizing the pattern, but Gustafsson had a, like, panoply of other payment processors that he was using. There's just so many of these. It's like, oh, PayPal knocks you. Just go over to Stripe. Yeah. Oh, Mastercard. Can you go over to Klarna? And at one point, they started taking cryptocurrency payments, Coinbase, coin payments, like, just taking money wherever they can get it.

Speaker 2: So they should've just should've just instituted that all refunds would be an Escobar coin.

Speaker 1: And you get you get, like, a quarter wrapped in gold foil.

Speaker 2: Exactly. Exactly. But the market value of which is whatever we dictate it to be.

Speaker 1: So Precisely. Yeah. It's, it's worth small fortune. Gustafsson, meanwhile so Escobar Inc operating from outside The United States, charting largely US customer base. Meanwhile, Gustafsson himself is documenting his life on various social media platforms living like a a then pretty high roller lifestyle in Dubai's luxury hotels and European beaches.

Speaker 2: Mhmm. Mhmm.

Speaker 1: US investigators, while he's posting all this content, are starting to trace how this money is flowing around. And it turns out that Gustafsson and his coconspirators had this, like, I mean, to to use a word you used earlier, funnel accounts in a bunch of different countries to collect and disperse the proceeds from this scam. According to the Department of Justice, bank accounts were opened in The US, Sweden, UAE, under Gustafsson's name, and shell companies that he controlled. A victim in LA, for instance, might pay $250 via PayPal for a flamethrower. That money quickly gets bounced all over the world to an Escobar bank account in Sweden and wired to an account in The UAE. Good old fashioned money laundering.

Speaker 2: I feel like there's another world where they actually just built the flamethrowers

Speaker 3: in Mhmm.

Speaker 2: Mexico or some other country where the the cost of goods sold would be half of what they were charging, and then they would have actually made a successful little trade business that produced things and sold things.

Speaker 1: Yeah. They they kinda made the mistake of trying to layer two different scams, and one of one of them isn't even really a scam. Like, you can send out outlandish press releases piggybacking on the Escobar name, which as we established in the intro, you hold the legitimate legal right to do. Mhmm.

Speaker 2: So if

Speaker 1: you just made, like, a crappy Android phone and sold it as an Escobar phone with all the crazy iconography, Let's say you get 80% of the news coverage without the price fraud. Yeah. You just as you said, you have, like, a little weird novelty tech business that probably over time would make about as much money as this ended up making in a shorter period of time.

Speaker 2: Totally.

Speaker 1: I don't know why he didn't do that. Because that was

Speaker 2: actually remember can't remember what the Boring Company sold the flamethrowers for. I wanna say it was, like, 600, maybe. It was about

Speaker 1: 500 it was $4.99 if I'm $4.99.

Speaker 2: So yes. I feel like and that's gonna be over engineered Elon Musk stuff extra thing. Like, he did it like, Elon did it as like a they sold 20,000 of them.

Speaker 1: It was like a novelty tech thing. Yeah. Fun press cycle. Totally. It was yeah.

Speaker 2: Just a little cash generation, and I'm sure Elon profited probably decently off of each of those. And if these guys had just taken one more month of, like, hey, we need somebody to to replicate this exact thing, They probably and, like, I doubt Elon Musk would've sued them. He probably would've gave an I can't swear anymore. He probably wouldn't have cared. And the,

Speaker 1: Maybe we just curse on this show.

Speaker 2: Maybe we just curse. No. They gotta think about the children, Jordan. The children.

Speaker 1: The children love cybercrime. Yeah.

Speaker 2: The cool ones do.

Speaker 1: They call the cool kids. Too. Act as for the children. Over 307,000 US dollars was wired by Gustafsson out of the scheme's accounts between December 2019 and June 2020. So just in a six month random in a random six month period during this multi year heist, made about 300,000 US dollars. This stolen cash was just being, like, taken out, and it seems like enjoyed in real time on the dumbest stuff imaginable. He's not keeping the money. It seems like he was sort of just getting it and spending it as fast as he could on this, like, string of luxury penthouse hotel rooms and just, like, fleeting stuff that's gone as quick as you got the money.

Speaker 2: Living for the moment. But the the the thing Figuratively

Speaker 1: burning it in the barrels. Sorry. Go ahead.

Speaker 2: Figuratively burning it in the barrels. The $307 is not No. Like, that goes pretty fast if you're doing, like, Dubai penthouses, like, talking, like, weeks.

Speaker 1: That's a massive windfall in a crazy amount of money. But if you're spending it like an idiot and it's illicit and law enforcement's going to come for you, I was like, I don't think this.

Speaker 2: Yeah. Yeah. Yeah. I gotta think about the legal bills. You gotta be saving for the legal bills.

Speaker 1: You gotta think about the opportunity cost of being in prison for several years. Like, you you gotta, like, amortize that amount out. It ends up being more than that, but that was just a six month chunk.

Speaker 2: What's the what's legally, what's going on? Sentencing?

Speaker 1: Yeah. So by 2021 and 2022, this, like, trail of fraud had gotten the attention of US federal authorities. IRS is looking at it. FDR are looking at it. FDIC is looking at it. This sounded like a huge pain in the butt to untangle. Europe had to get involved because that was where he seemed to be operating out of Eurojust their agency. They get involved in all of it. 11/21/2023, a federal grand jury in Los Angeles returned a blistering 115 count indictment against Olaf Gustafsson. It charged him with conspiracy to commit wire fraud, mail fraud, engaging in transaction with criminal proceeds, a bunch of stuff, a 115 of which I am not going to list here and now. Yeah. But, basically, every aspect of the scheme from the initial influencer lying to handling of the funds was covered by another discreet criminal charge. Notably, despite references to, coconspirators, Gustafsson was the only person named. By that time, Gustafsson was hiding out in Marbella, Spain. Thought he maybe I don't know if he'd thought or didn't care he was out of range of you in law US law enforcement, but they have extradition laws there.

Speaker 2: Totally. Yeah. Spain's not the place you go when you're on the run.

Speaker 1: On December 4, he's arrested by Spanish law enforcement taken into custody. Spanish media noted he was also suspected of an unrelated art smuggling case. It hadn't come up before. It hasn't come up again. A true renaissance man of selling stuff he didn't own. Yeah. Exactly. Over the next year, US officials worked through, like, diplomatic and legal channels, bringing El Silencio to justice. Gustafsson gets brought over to The US, arrives in LA in 03/20/2025 is under arrest by us marshals. It is a Raymond. He pleads not guilty. The trial set. He ends up pleading guilty July 18. The reason we're talking about this now, Gustafsson chose to strike a plea deal, in front of the LA district court judge pleaded guilty to six felony counts. Basically, he admitted to the core of the scheme, which was defrauding customers via wire communications, like the Internet payment and ad system that we talked about Yep. Using mail and furtherance of all that. In the plea agreement, a 31 page document, Gustafsson confessed that from 2019 through 2023, he ran Escobar Inc as a fraud front, never delivering the advertised products to paying customers. He acknowledged the dummy units. In the end, hundreds of victims were left without nothing for the money they sent to Escobar Inc. Total intended loss at the scheme topped out about $1,300,000 A significant sum considering it was effectively stolen, like, 2 to $500 at a time. Mhmm. Like, it's a big number made out of that small number. And while a huge amount of money, I don't know if it's worth this much heat, Olaf.

Speaker 2: Now, well, the thing that lands at me is, like, a 115 charges. The legal operation to execute that probably cost more than $1,300,000. So like literally, his real crime is like that against the people and the tax paying, you know, the tax base because it probably cost $20,000,000 to persecute him to which he then copped a plea, and it's probably

Speaker 1: yeah. Yeah. Yeah. If he as I said earlier, if he tried to just run a influencer marketing based novelty tech business using the Escobar name, A lot of people would have liked that, but he probably would have made a a lot of money. If he had tried to just do fraudulent like, if he just done mail fraud, he probably wouldn't have had a consortium of different international law enforcement coming down on him because the Escobar name wouldn't have been involved. There's something about, like Totally. Using this, like

Speaker 2: Yeah.

Speaker 1: Yeah. Criminal. Like, this name that means so much to so many people as a means by which to sort of, like, spit in law enforcement's face a little bit. And it's like, oh, if you put those two together, they're gonna get really, really mad. They're gonna spend a lot of energy in coming after you.

Speaker 2: So so if he just made a product business, he probably would have been successful. Yep. If he'd just wanted to be a fraudulent criminal, he could have just done meme coin rug pulls

Speaker 1: Yeah.

Speaker 2: And made way more money.

Speaker 1: That too. So

Speaker 2: really, what it sounds like is he wasn't that smart.

Speaker 1: You know, I don't I don't know what's going on inside of his head, but I'll say he didn't do it he didn't do it as nearly a good job at crime as the Escobar name with did he borrowed. I'll say that.

Speaker 2: That's true. Yeah. That's true.

Speaker 1: He pleads guilty, probably gets some leniency. I mean, he did. The government, you know, dismissed the remaining 100 plus charges. They started at 01:15, and he confessed to six. Mhmm. There's a sentencing hearing scheduled for December 2025. We'll check back in on the story then. He faces a statutory maximum of twenty years in federal prison for each fraud count and up to ten years for each money laundering count. That is the sake of the Escobar phone.

Speaker 2: I wonder I wonder how hard they come down on him because, like, intent is a big thing, and his intent was clearly to just do fraud. Like, it wasn't like he slipped up and, like, took a wrong turn and, like, then was like, oh my god. I'm, like, have to, like, you know, compensate for this loss and now I'm committing, like, some basic white collar crimes and, like, cooking the books. It's like, no. This is a person who is like, yeah. I got access to this, like, notorious name, and I'm gonna use it to commit fraud under. So I wonder I wonder how lenient they will actually be.

Speaker 1: I'm curious to see where that goes. I don't really know what it means or what it does to put this guy in jail forever. I Mhmm. I don't know if he's the kind of person to try and run this a second time remains to be seen. It's just really fascinating to think back to that MKBHD video in 2020 where I and a lot of people learned about this weird thing for the first time, and just to see where it went from there, which is a a saga that shows the power of, I would say, creator economy and influencer marketing.

Speaker 2: Kind of reminds me a bit of the Honey story

Speaker 3: we talked about in a

Speaker 2: previous episode, where it's like you're leveraging that economy for your own gains. Honey obviously wasn't, you know, pure fraud.

Speaker 1: No. No. No.

Speaker 2: But Yeah.

Speaker 1: Worthy of criticism, not a fake flamethrower company. Exactly. Like, very, very different things.

Speaker 2: Very different, like, insubstantiation, but but also, like, kinda similar. Like and I feel like we're only gonna see more and more of that stuff. Oh, yeah. Yeah. The more and more that that like, the even ourselves, like, we get enough criticism for the ads that we choose to put on this podcast. It's like

Speaker 1: Yeah. Which are very boring boilerplate brought to us from an advertising network kinds of ads. Totally. Like, there is a whole wherever you feel about there being some ads in the middle of a podcast, there is this other corner of the inbox that you possess when you make a show that is just sort of a a black hole of crazy fraudulent nonsense Yes. That shows up to you every single day. And it's interesting to know that probably at some point, and this is me speculating, but, like, the Esk Escobar Inc at some point received such an email from, I'm assuming, a Swedish guy named Olaf, and this is what that has wrought.

Speaker 2: Yes. I concur.

Speaker 1: Yeah.

Speaker 2: I've got a great idea. We should have a have a, like, a quick Google chat about it. Totally. About it.

Speaker 1: Make me CEO of your company. That guy's gotta be so good on a call. Like, I like, trust me. Make me CEO of this. I have an idea. Like, let let me cook.

Speaker 2: We're all gonna be rich.

Speaker 1: We're all gonna be rich. Like, I wanna see yeah. Totally. I I wanna see that slideshow.

Speaker 2: Let's get back to the days of burning billions.

Speaker 1: Yeah. Totally. Do you want more billions to burn in barrels? I have a flamethrower you can do it with, except no, I don't. Good good stuff.

Speaker 2: Should we cozy up into the ad break?

Speaker 1: Speaking of, yeah, let's go over and read some comparatively very, very boring advertisements. And, when we get back, we're gonna chatty chat about a couple of different stories. If you're into that, we'll catch you on the other side. Identity attacks, phishing, credential stuffing, session hijacking, account takeover. These are the number one causes of breaches right now, but most security tools still focus on endpoints and networks and infrastructure. And meanwhile, the browser, the place where all that stuff is really happening, where people actually work, that's been mostly ignored. Push changes that. They do. They've built a lightweight browser extension that observes identity activity in real time. It gives you visibility into how identities are being used across your organization, like when logins get multifactor, when passwords get reused, or when someone unknowingly enters credentials into a spoofed login page.

Speaker 2: Then when something risky is detected, Push enforces protections right there in the browser. No waiting. No tickets. No compromise. It's visibility and control directly at the identity layer.

Speaker 1: And it's not just about prevention. They monitor for real time threats like adversary in the middle attacks, stolen session tokens, and even newer techniques like cross IDP impersonation, where the attacker bypasses SSO and MFA and registers their own identity provider. Think about it all taken together. It's sort of like endpoint detection response, but for the browser.

Speaker 2: Yeah. And the people behind it, amazing. All offensive security pros, published tons of research, came on our pod, talked about their their software, their backgrounds, their everything. They break down exactly how these things work. And, yeah. They are great. So definitely check it out. Identity is the new endpoint, and Push is treating it that way. Check them out. Pushsecurity.com.

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Speaker 1: And we are

Speaker 2: back. Welcome back, Jordan.

Speaker 1: Welcome back, Scott. Yeah. It's the chatty chat corner.

Speaker 2: Where do we wanna start? Should we start in The Philippines?

Speaker 1: I think we should probably start in The Philippines because, a much more technical but very interesting and very kind of urgent story sort of popped off recently, specifically on 05/29/2025 when the US Treasury sanctioned Funnel Technology, a Philippines based company. Funnel, and we'll dig into this a little bit more. The charges are that they were supporting hundreds of thousands of fake crypto investment websites tied to a widespread kind of genre of scam we've talked about in the show before called pig butchering. The Treasury also sanctioned Liu Steve Lijie, a 40 year old Chinese national and Funnel's alleged operator. Lijie is linked to scams causing over much bigger number than the first story, dollars 200,000,000 in losses to Americans. Fundals, infrastructure powered the majority of scam sites reported to the FBI. They were essential. It's insane.

Speaker 2: That's it's I like this from a law enforcement perspective where they've not just gone after the individual gangs and criminal organizations that are executing these, but they've actually gone for a piece of their critical infrastructure. But I'm also wary that we're not just gonna see a backup version of the spin up if it already has not instantaneously.

Speaker 1: Yeah. It's interesting how kind of in the weeds yet essential a piece of infrastructure this ultimately was. Mhmm. At the heart of all this is a is a kind of thing called a content delivery network, a CDN. You're gonna hear us refer to that a bunch throughout this. Basic idea, though, is that what they did was they function as a as a tool that could route scam sites through US based cloud services, making these fake sketchy scam sites look a lot more legitimate and a lot harder to trace and a lot better at targeting, their end victims. Legitimate CDNs basically just speed up how fast websites and content, are delivered by distributing that content all around the world, closer to the end user. Funnel, at certain point, we just call it funnel. It's spelled f u n n u l l.

Speaker 2: Yeah. It's like fun and then null. So it's like fun null. Funnel?

Speaker 1: Call

Speaker 2: it let's just go with funnel.

Speaker 1: We'll call it funnel. They use the same idea to serve fraud at a massive unprecedented scale. But so legitimate CDNs. There's common ones. You've heard it like Cloudflare. I don't actually know how to say Acme. Huge. Massive, massive platforms. This is that, but crime.

Speaker 2: For scamming.

Speaker 1: For, scamming. Pig butchering, I don't know that we need to dig into this too much. I I'm assuming most people are familiar. If you are not, pig butchering, which was one of the main it was pig butchering and crypto were two of the big things that used this system, allegedly. But, pig butchering is a scammer fraudsters, like, basically just use social media or dating apps or even sometimes email to, like, groom a victim over a very, very long period of time. Typically, at some point, getting the victim to then either send the money, invest in a fake crypto platform. And then once the funds are in, the scammer vanishes, having, butchered the pig, which is where the terminology comes from.

Speaker 2: We did, did an entire episode on this Mhmm. In the back catalog Yep. As well as we talked about it at length in our interview with Zeke Fox, Number Door. This is true. Because he he ran into a lot of these Southeast Asian

Speaker 4: Literally.

Speaker 2: Pig pig butchering scams that were being run by organized crime groups, and a lot of human trafficking

Speaker 1: on the

Speaker 2: on the on the back end of them.

Speaker 1: So There are victims, both in the Zeke Fox episode and the first time we talked about this, there's victims on both side of pig butchering. Like, there are people that have been human trafficked into having to be the pig butcher, essentially. There are obviously, victims on the other side of the scam. In 2022, this genre of scam, the long term grooming of a victim for an Internet crime became the number one reported crypto crime in The United States. It was, I think, a $5,800,000,000 in losses. So it's a massive, massive genre of crime. The way funnel worked, was basically they they leased or controlled these giant blocks of IP addresses from known well established legitimate cloud providers. It registered thousands of domain names then used in scams so the traffic would appear to be coming from trusted services like AWS or Azure, making detection, much, much, much harder by law enforcement. They use something called domain generation algorithms, DGAs, to create, like, just, an endless stream of new domains every single day, which would let the scam sites constantly rotate addresses to evade getting taken down.

Speaker 2: Yeah. So, essentially, just using keywords and then generating patterns and and combinations of those words into new domains.

Speaker 1: They also, so that content delivery side of things is the is the big part of it. They had, like, a small sub business, it seems like, where they basically worked as, like, crime Squarespace, which I find really, really interesting. They offered, like, prebuilt website templates for, like, faking a well established crypto platform. Hey. You want a fake bank website? We got a template for you. So the criminals could quickly spin up the febs the fake website, deliver it via their CDM, using a DJ generated domain brought to you by them, like a a true one stop shop.

Speaker 2: Like an ecosystem of financial crime.

Speaker 1: In 2024, Funnel bought polyfill.io, which is this, like, trusted JavaScript library.

Speaker 2: Yeah. Polyfill essentially just took modern web features and allowed it to be pushed back into older browsers. So, essentially, it was using JavaScript to bridge new functionality in the new browsers by putting them into older ones. So it was pretty widely used for for websites that wanted to reach compliance and usability on in older browsers but didn't have that natively built in. So they would just use polyfill to kind of push through that, allow them to deploy features and functionality into, you know, antiquated browsers.

Speaker 1: And because it was being deployed to so many different sites, when Funnel bought it, they basically used it as like a vector for a supply chain attack Mhmm. To get a bunch of malicious code, into all of these preexisting websites that would then redirect the users to the other network of fraudulent crime sites that they were acting as basically a vendor for. So you're just gonna start getting redirected to, like, gambling scam sites, porn sites, what whatever. 384,000 websites, including a bunch of major brands, government websites, all got affected by this polyfil.io acquisition slash supply chain attack that existed as, like, again, another appendage like the Squarespace metaphor thing on the core CDN business. It was very interesting network of crime and extremely different than the Escobar

Speaker 2: phone. I'm surprised that they didn't get into more trouble for that one. Yeah. Because, like, taking over a popular open source library and then essentially turning it into a redirect to criminal websites seems like something that we get flagged and punished pretty quickly.

Speaker 1: Yes.

Speaker 2: Yes.

Speaker 1: Yes. Which is, I mean, probably what brought us to this point, which was the May 29, sanctioning of funnel technologies by the US treasury secretary and against you, Steve Ligier, this 40 year old, alleged operator of the scam.

Speaker 2: Alleged. Alleged.

Speaker 1: Yeah. After being sanctioned, Lou's online presence slowly starts just vanishing from the mainstream platforms. LinkedIn removes his his old profile after being contacted by journalists. And that brings us to now where Steve and Funnel face all of these sanctions, and we all get to kinda see what happens next.

Speaker 2: Yeah. I'm intrigued to see how much of an impact it makes. Like, if they're looking at, you know, 200,000,000 plus plus, with an average loss per victim of over a $150,000, which is a wild number.

Speaker 1: Yeah. It's really big.

Speaker 2: I'm intrigued to see in in the post funnel world before the next version of it gets spun up, if it hasn't already, what that looks like.

Speaker 1: Yeah. I mean, this was clearly the big fish, but I feel like typically, when you have one of those, there's also a second biggest fish.

Speaker 2: Totally. Yeah.

Speaker 1: And even if law enforcement's looking at that, a lot of fish in the sea. Take one take one out, another one's just gonna get bigger.

Speaker 2: Yeah. And and nowadays, especially with some of the new AI tools, like, you can duplicate any major website instantaneously. Like, there's an entire AI app for that now. You just feed it a URL, and it pulls you and builds you out the source code for it. So I think that some of these tools will be facilitated going forward given our new AI friends, which probably will be the next adaptation of of the funnels.

Speaker 1: For sure. Yeah. Fascinating story. I'm curious to see where it goes. Kate, I literally have one in front of me, so this is kind of interesting.

Speaker 2: Hey, man.

Speaker 1: DGI. DGI. DGI is a a drone and camera manufacturer. They make really good stuff in my personal opinion. They aren't really available. There's been, like, a unofficial ban at US customs, it would seem. They're hard to get in The United States to varying degrees depending on where you are. Really?

Speaker 2: Yeah. I did not know this. Yeah. This thing surprised me, but I I didn't know this.

Speaker 1: Right? Because in in mainstream consumer technology, they're they're a really big brand.

Speaker 2: We own a number of DJI products.

Speaker 1: Yeah. Totally.

Speaker 2: We have a couple drones. Some of their lab packs.

Speaker 5: We

Speaker 2: have camera stabilizers. Like, we have a bunch of things for DJI.

Speaker 1: Yeah. They're not officially banned in The United States, but there's just this they're apparently struggling to get them into the country. This is according to DJI. This is an evolving story. But the reason I bring it up is because, a a story broke recently that on Amazon, you can now buy a drone that looks conspicuously like the DJI Mini four Pro. It's called the Sky Rover x one. Costs about the same amount of money, looks basically identical, it's just a different color, and that is likely because, it is just being sold by DJI. This was originally reported in a a platform I was unfamiliar with called DroneXL. Security researchers figured out that, the Sky Rover x one has the exact same specs, the exact same features. It features an incredibly, conspicuously similar app to the one that DJI provides. It also connects to, DJI support, DJI global, DJI enterprise, like, social media platforms, existing infrastructure. Sure seems like this is just DJI, drone that they're selling under a different name.

Speaker 2: Well, I feel like there's a lot of this stuff going around with with trade, federal trade being an upheaval. Also, the fact that there's a whole national security aspect that I think has been, like, brought into the forefront on some of these things. Like, do we really wanna have all these autonomous vehicles in our country that potentially can be controlled from another foreign entity, etcetera, etcetera? How closely linked is DGI with the Chinese government? Blah blah blah. It probably sucks to be DJI.

Speaker 1: Yeah. Big chunk of your consumer base. They're not identical drones. There's some technical differences about, like, the specific little sensor and, like, the the battery connection.

Speaker 2: Sure. They're worse.

Speaker 3: Yeah. Probably a little bit worse, which

Speaker 1: is what happens in situations like this. I just found that really fascinating.

Speaker 2: No. It's I I totally see it happening more and more until kind of

Speaker 1: Yeah.

Speaker 2: International trade stabilizes Just a smidge. Yeah.

Speaker 1: Yeah. I'll be curious to see what happens there because I you know, not an official endorsement or anything, but I really like my DJI stuff. Like, they they make cool products.

Speaker 2: They do. And they're reasonably priced.

Speaker 3: Totally. Very pretty.

Speaker 1: Yeah. I was just flying a little my little drone around off the balcony the other day. It's really fun. Like, you make a good product. I mean, hypothetically, I did that. I don't know if that's a lie.

Speaker 2: Hypothetically. Hypothetically. Yeah. You might be within stone's throw of a hospital and not allowed to.

Speaker 1: Maybe. Maybe.

Speaker 2: Yeah. Yeah. I I I don't know. It's gonna be fascinating to see how all this trade stuff washes out and the impacts it's gonna have on security. Apparently, NVIDIA's backdooring chips I read an article the other day that, like, there's some rumors that, like, NVIDIA's figured out a way to because they're essentially I don't know. It was the US government has said you can't sell, like, premium NVIDIA chips to China. And I think, apparently, there's been some workaround for that. Like, I saw some news article. Nothing confirmed, allegedly. Alleged workaround for it, but but NVIDIA is back to selling chips to China. So and with the amount of, like, Chinese AI models, like, coming out, it would only make sense that, you know, in the AI arms race, as they're calling it, that that China wants to be a player.

Speaker 1: So Yeah. I've never really I haven't read a ton about NVIDIA's, like, corporate structure. It says they're based out of Santa Clara, California, which I honestly I I wouldn't have known. I think I had a vague sense that they were an American company, but I really, at this point, think of them as, like, a worldwide technology provider.

Speaker 2: Yeah. They are.

Speaker 1: I do not think of them as being, like, a specific it's like I know they're an American company, but I'm like, I think of them as a company that sells a core piece of infrastructure all around the world.

Speaker 2: I think they are an American entity as far as, like, probably corporate headquarters go, but I know that they have a significant, portion of the company who operates out of Taiwan. They have a deep partnership with Taiwan Semi's TSMC. I think, yeah, I think Jensen Huang is Taiwanese, if I'm not mistaken, as is his cousin, Lisa Hsu, who runs AMD, which is a funny thing that two of the world's largest semiconductor CEOs are family.

Speaker 1: There's like a Christmas dinner table Yeah. Yeah. With, like, the heads of, like, cumulatively a trillion and a half dollars probably just, like, hanging out at it.

Speaker 2: Or way more than that, actually. That.

Speaker 1: Yeah. I

Speaker 2: think it'd be I think it's multi trillion.

Speaker 1: Is it really? Because I I knew NVIDIA hit a trillion dollar valuation, but I didn't know that they'd cooked past, and I have no idea what AMD is at.

Speaker 2: Oh, I think yeah. 4,300,000,000,000 NVIDIA.

Speaker 1: Good lord.

Speaker 2: And AMD is that can't be right.

Speaker 3: Yeah.

Speaker 2: Only 300,000,000,000? That seems low.

Speaker 1: AMD. Steel of a deal.

Speaker 2: Investment thesis inbound. Yeah. Exactly. The only company that has any potential to combat NVIDIA and AI dominance is is worth a tenth less than a tenth of fifteenth of what NVIDIA's worth. That's crazy.

Speaker 1: Yeah. Anyway No. It's fascinating.

Speaker 2: But, yeah, could you imagine the Christmas dinners? Like, the the two private jets parked side by side on the runway in Taiwan.

Speaker 1: Do you just take the dinner on the private jet at that point? A question I will never and don't really want to have to know the answer to. Escobar phones, fun null.

Speaker 2: Fun null?

Speaker 1: It's been a good one.

Speaker 2: See you very soon.

Speaker 1: See you very soon. Catch you in the next one.

Speaker 2: Yeah.