Monthly Archives: April 2021

News: KKR closes $15 billion fund targeting consumption and urbanization in Asia

KKR has just closed $15 billion for its Asia-focused private equity fund, exceeding its original target size after receiving “strong support” from new and existing global investors, including those in the Asia Pacific region. The new close came nearly four years after KKR raised its Asian Fund III of $9.3 billion and marks the New

KKR has just closed $15 billion for its Asia-focused private equity fund, exceeding its original target size after receiving “strong support” from new and existing global investors, including those in the Asia Pacific region.

The new close came nearly four years after KKR raised its Asian Fund III of $9.3 billion and marks the New York-based alternative asset management titan’s ongoing interest in Asia. It also makes KKR Asian Fund IV one of the largest private equity funds dedicated to the Asia Pacific region.

KKR itself will inject about $1.3 billion into Fund IV alongside investors through the firm and its employees’ commitments. The new fund will be on the lookout for opportunities in consumption and urbanization trends, as well as corporate carve-outs, spin-offs, and consolidation.

KKR has been a prolific investor in Asia-Pacific since it entered the region 16 years ago with a multifaceted approach that spans private equity, infrastructure, real estate and credit. It currently has $30 billion in assets under management in the region.

The firm has been active during COVID-19 as well. On the one hand, the pandemic has accelerated the transition to online activities and singled out tech firms that proved resilient during the health crisis. Market disruption in the last year has also made valuations more attractive and pressured companies to seek new sources of capital. All in all, these forces provide “increasingly interesting opportunities for flexible capital providers like KKR,” the firm’s spokesperson Anita Davis told TechCrunch.

Since the pandemic, KKR has deployed about $7 billion across multiple strategies in Asia.

While KKR looks for deals across Asia, each market provides different opportunities pertaining to the state of its economy. For deals in consumption upgrades, KKR seeks out companies in emerging markets like China, Southeast Asia and India, said Davis. In developed countries like Japan, Korea and Australia, KKR observed that continued governance reform, along with a focus on return on equity (ROE), has driven carve-outs from conglomerates and spin-offs from multinational corporations, Davis added.

Specifically, KKR’s private equity portfolio in Asia consists of about 60 companies across 11 countries. Some of its more notable deals include co-leading ByteDance’s $3 billion raise in 2018 amid the TikTok parent’s rapid growth and bankrolling Reliance Jio with $1.5 billion in 2020.

“The opportunity for private equity investment across Asia-Pacific is phenomenal,” said Hiro Hirano, co-head of Asia Pacific Private Equity at KKR. “While each market is unique, the long-term fundamentals underpinning the region’s growth are consistent — the demand for consumption upgrades, a fast-growing middle class, rising urbanization, and technological disruption.”

The Asian Fund IV followed in the footsteps of KKR’s two other Asia-focused funds that closed in January, the $3.9 billion Asia Pacific Infrastructure Investors Fund and the $1.7 billion Asia Real Estate Partners Fund.

News: Hipmunk’s founders launch Flight Penguin to bring back Hipmunk-style flight search

Hipmunk’s founders are building a successor to their now-defunct flight search service. The startup was acquired by SAP-owned travel and expense platform Concur in 2016, and its CEO Adam Goldstein departed in 2018. But Goldstein told me he and his co-founder Steve Huffman (also co-founder and CEO of Reddit) were still disappointed when Concur shut

Hipmunk’s founders are building a successor to their now-defunct flight search service.

The startup was acquired by SAP-owned travel and expense platform Concur in 2016, and its CEO Adam Goldstein departed in 2018. But Goldstein told me he and his co-founder Steve Huffman (also co-founder and CEO of Reddit) were still disappointed when Concur shut the service down at the beginning of last year.

“Over the years, there were millions and millions of people who used it and loved it,” Goldstein said. (I was one of those people — even before I knew what he was working on, I started out our call by telling Goldstein how much I miss Hipmunk.)

So the pair seed funded a project called Flight Penguin, with Goldstein serving as the new company’s chairman. And he said the actual product was built by former Hipmunk developer Sheri Zada.

The Flight Penguin interface will be very familiar to old Hipmunk users, with a visual layout that makes it easy to see the timing of flights and length of layovers. And just as Hipmunk allowed users to organize results by “agony” (so that the top results aren’t just cheap flights with inconvenient timing or ridiculous layovers), Flight Penguin allows them to sort their flights by “pain.”

Flight Penguin screenshot

Image Credits: Flight Penguin

But this isn’t just the old experience with a fresh coat of paint — it’s also meant to improve on Hipmunk in a few key ways. For one thing, it allows users to search by Chase Ultimate Rewards Points (as well as U.S. dollars, with the goal of adding more currencies and rewards programs in the future).

And the product itself is a Google Chrome extension, rather than a traditional flight search website. The extension actually presents a full, standalone web experience (rather than an overlay on another website), but Goldstein said this approach is still important, because it allows Flight Penguin to pull its data “through the frontend instead of the backend,” giving it the most up-to-date information. This helps to avoid situations where a flight or price shows up in search results but isn’t available on the airline’s or other seller’s website.

In addition, Goldstein said Flight Penguin will show “all the flights.” In other words, it won’t be making any deals with the airlines to hide certain flights or prices, and it will also show airlines that don’t normally make their flights available on other search platforms.

“There are actually many, many flights available but consumers don’t see them because travel search sites work out these deals,” he said. “We’re choosing not to play that game.”

That has the obvious benefit of offering more comprehensive results, but also the disadvantage that Flight Penguin will not be able to collect affiliate fees for flight purchases. Instead, after a 30-day trial period, it will charge users $10 per month. (This is an introductory fee and will likely change in the future.)

Goldstein acknowledged that this is probably “not going to be a mainstream product that 50 million Americans use,” but he’s hoping that it can attract a significant subscriber base of frequent travelers who “value their time and care about the flight booking experience.”

“What we learned from Hipmunk was […] the way business has traditionally been done in online travel worked for consumers in an era with lots of competition between airlines and travel agencies,” he added. “In a world where there’s much less competition, you’re basically becoming an agent for the people you’re working with, and it’s hard to build a business model around providing a great user experience. That’s why we’re saying that we’re going to opt out of this game and play by our own rules.”

Flight Penguin is currently accepting signups for its waitlist, but Goldstein said the company is simply using this to bring users on-board in a controlled fashion, and that it plans to move people off the wait list pretty quickly.

News: Clubhouse launches payments so creators can make money

Clubhouse, a one-year-old social audio app reportedly valued at $1 billion, will now allow users to send money to their favorite creators — or speakers — on the platform. In a blog post, the startup announced the new monetization feature, Clubhouse Payments, as the “the first of many features that allow creators to get paid

Clubhouse, a one-year-old social audio app reportedly valued at $1 billion, will now allow users to send money to their favorite creators — or speakers — on the platform. In a blog post, the startup announced the new monetization feature, Clubhouse Payments, as the “the first of many features that allow creators to get paid directly on Clubhouse.”

Clubhouse declined to comment. Paul Davison, the co-founder of Clubhouse, mentioned in the company’s latest town hall that the startup wants to focus on direct monetization on creators, instead of advertisements.

Here’s how it will work: A user can send a payment in Clubhouse by going to the profile of the creator to whom they want to give money. If the creator has the feature enabled, the user will be able to tap “Send Money” and enter an amount. It’s like a virtual tip jar, or a Clubhouse-branded version of Venmo (although the payments feature doesn’t currently let the user send a personalized message along with the money).

“100% of the payment will go to the creator. The person sending the money will also be charged a small card processing fee, which will go directly to our payment processing partner, Stripe,” the post reads. “Clubhouse will take nothing.”

Stripe CEO Patrick Collison tweeted shortly after the blog post went up that “It’s cool to see a new social platform focus first on participant income rather than internalized monetization / advertising.”

It’s cool to see a new social platform focus first on *participant* income rather than internalized monetization / advertising. Excited for the burgeoning creator economy and next era of internet business models.

— Patrick Collison (@patrickc) April 5, 2021

When the startup raised a Series B led by Andreessen Horowitz in January, part of the reported $100 million funding was said to go to a creator grant program. The program would be used to “support emerging Clubhouse creators,” according to a blog post. It’s unclear how they define emerging, but cultivating influencers (and rewarding them with money) is one way the startup is promoting high-quality content on its platform.

The synergies here are obvious. A Clubhouse creator can now get tips for a great show, or raise money for a great cause, while also being rewarded by the platform itself for being a recurring host.

The fact that Clubhouse’s first attempt at monetization includes no percentage cut of its own is certainly noteworthy. Monetization, or Clubhouse’s lack thereof, has been a topic of discussion about the buzzy startup since it took off in the early pandemic months. While it currently relies on venture capital to keep the wheels churning, it will need to make money eventually in order to be a self-sustaining business.

Creator monetization, with a cut for the platform, has led to the growth of large businesses. Cameo, a startup that sends personalized messages from creators and celebrities, takes about a 25% cut of each video sold on its platform. The startup reached unicorn status last week with a $100 million raise. OnlyFans, another platform that helps creators directly raise money from fans in exchange for paywalled contact, is projecting $1 billion in revenue for 2021.

Clubhouse’s payments feature will first be tested by a “small test group” starting today, but it is unclear who is in this group. Eventually, the payments feature will be rolled out to other users in waves.

News: Daily Crunch: The Supreme Court sides with Google in Oracle suit

The Supreme Court announces several tech-related rulings, LG will shut down its smartphone business and we take a deep dive into the story of StockX. This is your Daily Crunch for April 5, 2021. The big story: The Supreme Court sides with Google in Oracle suit The U.S. Supreme Court announced a couple of tech-related

The Supreme Court announces several tech-related rulings, LG will shut down its smartphone business and we take a deep dive into the story of StockX. This is your Daily Crunch for April 5, 2021.

The big story: The Supreme Court sides with Google in Oracle suit

The U.S. Supreme Court announced a couple of tech-related rulings today. In one, it overturned Oracle’s victory in its copyright battle with Google, which would have otherwise required Google to pay Oracle $8 billion for incorporating pieces of Oracle’s Java software language into the Android mobile operating system.

“In reviewing that decision, we assume, for argument’s sake, that the material was copyrightable,” wrote Justice Stephen Breyer. “But we hold that the copying here at issue nonetheless constituted a fair use. Hence, Google’s copying did not violate the copyright law.”

In addition, the court vacated a ruling declaring that then-President Donald Trump had violated the First Amendment by clocking critics on Twitter. In his opinion on the case, Justice Clarence Thomas argued that companies like Facebook and Google are “at bottom communications networks, and they ‘carry’ information from one user to another” and can therefore be regulated in the same way as telecom carriers.

The tech giants

LG is shutting down its smartphone business worldwide — LG said it will focus its resources in “growth areas” such as electric vehicle components.

Labor relations board sides with Amazon employees over firing — Before being fired last year, Emily Cunningham and Maren Costa had been among the company’s most outspoken critics on staff.

Spotify opens a second personalized playlist to sponsors, after Discover Weekly in 2019 — On Repeat is now open to advertising sponsorships.

Startups, funding and venture capital

India’s Swiggy nears $5B valuation in new $800M fundraise — Swiggy is preparing to expand its business after cutting its workforce to navigate the pandemic.

Knotel co-founder leaves company, describes investor Newmark as ‘a stalking horse’ — The startup filed for bankruptcy earlier this year, its assets acquired by investor and commercial real estate brokerage Newmark.

Byju’s acquires Indian tutor Aakash for nearly $1B — Akash is a 33-year-old chain of physical coaching centers.

Advice and analysis from Extra Crunch

The StockX EC-1 — Now valued at $2.8 billion, StockX has facilitated over 10 million transactions.

Chinese startups rush to bring alternative protein to people’s plates — 2020 could well have been the dawn of alternative protein in China.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

What happens to your NFTs and crypto assets after you die? — A new study finds that only one in four consumers have someone in their life who knows all of their passwords and account details.

Fueled by pandemic, contactless mobile payments to surpass half of all smartphone users in US by 2025 — According to a recent report by analyst firm eMarketer, in-store mobile payments usage grew 29% last year in the U.S.

Start your engines, TechCrunch is (virtually) headed to Detroit — Mark April 15 on your calendars!

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

News: LG’s exit from the smartphone market comes as no surprise

It was time for LG to move on. Frankly, the only surprise was that it didn’t do so sooner.

For those who follow the space, LG will be remembered fondly as a smartphone trailblazer. For a decade-and-a-half, the company was a major player in the Android category and a driving force behind a number of innovations that have since become standard.

Perhaps the most notable story is that of the LG Prada. Announced a month before the first iPhone, the device helped pioneer the touchscreen form factor that has come to define virtually every smartphone since. At the time, the company openly accused Apple of ripping off its design, noting, “We consider that Apple copycat Prada phone after the design was unveiled when it was presented in the iF Design Award and won the prize in September 2006.”

LG has continued pushing envelopes – albeit to mixed effect. In the end, however, the company just couldn’t keep up. This week, the South Korean electronics giant announced it will be getting out of the “incredibly competitive” category, choosing instead to focus on its myriad other departments.

The news comes as little surprise following months of rumors that the company was actively looking for a buyer for the smartphone unit. In the end, it seems, none were forthcoming. This July, the company will stop selling phones beyond what remains of its existing inventory.

The smartphone category is, indeed, a competitive one. And frankly, LG’s numbers have pretty consistently fallen into the “Others” category of global smartphone market share figures ruled by names like Samsung, Apple, Huawei and Xiaomi. The other names clustered beneath the top five have been, more often than not, other Chinese manufacturers like Vivo.

News: Tim Cook drops hints about autonomous tech and the Apple car

Apple CEO Tim Cook dropped a few hints in an interview released Monday about the direction of the much-anticipated Apple car, including that autonomous vehicle technology will likely be a key feature. “The autonomy itself is a core technology, in my view,” Cook told Kara Swisher in an interview on the “Sway” podcast. “If you

Apple CEO Tim Cook dropped a few hints in an interview released Monday about the direction of the much-anticipated Apple car, including that autonomous vehicle technology will likely be a key feature.

“The autonomy itself is a core technology, in my view,” Cook told Kara Swisher in an interview on the “Sway” podcast. “If you sort of step back, the car, in a lot of ways, is a robot. An autonomous car is a robot. And so there’s lots of things you can do with autonomy. And we’ll see what Apple does.”

Cook was careful not to reveal too much, declining to answer Swisher’s question outright if Apple is planning to produce a car itself or the tech within the car. What clues he did drop, suggests Project Titan is working on something in the middle.

“We love to integrate hardware, software and services, and find the intersection points of those because we think that’s where the magic occurs,” said Cook. “And we love to own the primary technology that’s around that.”

To which Swisher responded: “I’m going to go with car for that, if you don’t mind. I’m just going to jump to car.”

We are, too.

Many people in the micromobility industry like to say that e-scooters are basically iPhones on wheels, but it’s more likely that the Apple car will actually be the iPhone on wheels. Apple is generally known for owning all of its hardware and software, so it wouldn’t be surprising to see Apple engineers working closely with a manufacturer to produce an Apple car, with the potential to one day cut out the middle man and become the manufacturer.

The so-called Project Titan appeared at risk of failing before a car was ever seen by the public with mass layoffs in 2019. However, more recent reports suggest that the project is alive and well with plans to make a self-driving electric passenger vehicle by 2024.

Earlier this year, CNBC reported that Apple was close to finalizing a deal with Hyundai-Kia to build an Apple-branded self-driving car at the Kia assembly plant in West Point, Georgia. Sources familiar with Apple’s interest in Hyundai say the company wants to work with an automaker that will let Apple hold the reins on the software and hardware that will go into the car.

The two companies never reached a deal and talks fell apart in February, according to multiple reports. That hasn’t stopped the flow of rumors and reports about Apple and its plans, which have previously been linked to other suppliers, automakers such as Nissan and even startups.

It’s still unclear what the Apple car will look like, but as a passenger vehicle, rather than a robotaxi or delivery vehicle, it will be going up against the likes of Tesla.

“I’ve never spoken to Elon, although I have great admiration and respect for the company he’s built,” said Cook. “I think Tesla has done an unbelievable job of not only establishing the lead, but keeping the lead for such a long period of time in the EV space. So I have great appreciation for them.”

Project Titan is being led by Doug Field, who was formerly senior vice president of engineering at Tesla and one of the key players behind the Model 3 launch.

News: Clarence Thomas plays a poor devil’s advocate in floating First Amendment limits for tech companies

Supreme Court Justice Clarence Thomas flaunted a dangerous ignorance regarding matters digital in an opinion published today. In attempting to explain the legal difficulties of social media platforms, particularly those arising from Twitter’s ban of Trump, he makes an ill-informed, bordering on bizarre, argument as to why such companies may need their First Amendment rights

Supreme Court Justice Clarence Thomas flaunted a dangerous ignorance regarding matters digital in an opinion published today. In attempting to explain the legal difficulties of social media platforms, particularly those arising from Twitter’s ban of Trump, he makes an ill-informed, bordering on bizarre, argument as to why such companies may need their First Amendment rights curtailed.

There are several points on which Thomas seems to willfully misconstrue or misunderstand the issues.

The first is in his characterization of Trump’s use of Twitter. You may remember that several people sued after being blocked by Trump, alleging that his use of the platform amounted to creating a “public forum” in a legal sense, meaning it was unlawful to exclude anyone from it for political reasons. (The case, as it happens, was rendered moot after its appeal and dismissed by the court except as a Thomas’s temporary soapbox.)

“But Mr. Trump, it turned out, had only limited control of the account; Twitter has permanently removed the account from the platform,” writes Thomas. “[I]t seems rather odd to say something is a government forum when a private company has unrestricted authority to do away with it.”

Does it? Does it seem odd? Because a few paragraphs later, he uses the example of a government agency using a conference room in a hotel to hold a public hearing. They can’t kick people out for voicing their political opinions, certainly, because the room is a de facto public forum. But if someone is loud and disruptive, they can ask hotel security to remove that person, because the room is de jure a privately owned space.

Yet the obvious third example, and the one clearly most relevant to the situation at hand, is skipped. What if it is the government representatives who are being loud and disruptive, to the point where the hotel must make the choice whether to remove them?

It says something that this scenario, so remarkably close a metaphor for what actually happened, is not considered. Perhaps it casts the ostensibly “odd” situation and actors in too clear a light, for Thomas’s other arguments suggest he is not for clarity here but for muddying the waters ahead of a partisan knife fight over free speech.

In his best “I’m not saying, I’m just saying” tone, Thomas presents his reasoning why, if the problem is that these platforms have too much power over free speech, then historically there just happen to be some legal options to limit that power.

Thomas argues first, and worst, that platforms like Facebook and Google may amount to “common carriers,” a term that goes back centuries to actual carriers of cargo, but which is now a common legal concept that refers to services that act as simple distribution – “bound to serve all customers alike, without discrimination.” A telephone company is the most common example, in that it cannot and does not choose what connections it makes, nor what conversations happen over those connections – it moves electric signals from one phone to another.

But as he notes at the outset of his commentary, “applying old doctrines to new digital platforms is rarely straightforward.” And Thomas’s method of doing so is spurious.

“Though digital instead of physical, they are at bottom communications networks, and they ‘carry’ information from one user to another,” he says, and equates telephone companies laying cable with companies like Google laying “information infrastructure that can be controlled in much the same way.”

Now, this is certainly wrong. So wrong in so many ways that it’s hard to know where to start and when to stop.

The idea that companies like Facebook and Google are equivalent to telephone lines is such a reach that it seems almost like a joke. These are companies that have built entire business empires by adding enormous amounts of storage, processing, analysis, and other services on top of the element of pure communication. One might as easily suggest that because computers are just a simple piece of hardware that moves data around, that Apple is a common carrier as well. It’s really not so far a logical leap!

There’s no real need to get into the technical and legal reasons why this opinion is wrong, however, because these grounds have been covered so extensively over the years, particularly by the FCC — which the Supreme Court has deferred to as an expert agency on this matter. If Facebook were a common carrier (or telecommunications service), it would fall under the FCC’s jurisdiction — but it doesn’t, because it isn’t, and really, no one thinks it is. This has been supported over and over, by multiple FCCs and administrations, and the deferral is itself a Supreme Court precedent that has become doctrine.

In fact, and this is really the cherry on top, freshman Justice Kavanaugh in a truly stupefying legal opinion a few years ago argued so far in the other direction that it became wrong in a totally different way! It was Kavanaugh’s considered opinion that the bar for qualifying as a common carrier was actually so high that even broadband providers don’t qualify for it (This was all in service of taking down net neutrality, a saga we are in danger of resuming soon). As his erudite colleague Judge Srinivasan explained to him at the time, this approach too is embarrassingly wrong.

Looking at these two opinions, of two sitting conservative Supreme Court Justices, you may find the arguments strangely at odds, yet they are wrong after a common fashion.

Kavanaugh claims that broadband providers, the plainest form of digital common carrier conceivable, are in fact providing all kinds sophisticated services over and above their functionality as a pipe (they aren’t). Thomas claims that companies actually providing all kinds of sophisticated services are nothing more than pipes.

Simply stated, these men have no regard for the facts but have chosen the definition that best suits their political purposes: for Kavanaugh, thwarting a Democrat-led push for strong net neutrality rules; for Thomas, asserting control over social media companies perceived as having an anti-conservative bias.

The case Thomas uses for his sounding board on these topics was rightly rendered moot — Trump is no longer president and the account no longer exists — but he makes it clear that he regrets this extremely.

“As Twitter made clear, the right to cut off speech lies most powerfully in the hands of private digital platforms,” he concludes. “The extent to which that power matters for purposes of the First Amendment and the extent to which that power could lawfully be modified raise interesting and important questions. This petition, unfortunately, affords us no opportunity to confront them.”

Between the common carrier argument and questioning the form of Section 230 (of which in this article), Thomas’s hypotheticals break the seals on several legal avenues to restrict First Amendment rights of digital platforms, as well as legitimizing those (largely on one side of the political spectrum) who claim a grievance along these lines. (Slate legal commentator Mark Joseph Stern, who spotted the opinion early, goes further, calling Thomas’s argument a “paranoid Marxist delusion” and providing some other interesting context.)

This is not to say that social media and tech do not deserve scrutiny on any number of fronts — they exist in an alarming global vacuum of regulatory powers, and hardly anyone would suggest they have been entirely responsible with this freedom. But the arguments of Thomas and Kavanaugh stink of cynical partisan sophistry. This endorsement by Thomas amounts accomplishes nothing legally, but will provide valuable fuel for the bitter fires of contention — though they hardly needed it.

News: Labor relations board sides with Amazon employees over firings

Last year, Amazon fired Emily Cunningham and Maren Costa. The pair of employees had been among the company’s most outspoken critics on staff, openly taking Amazon to task for environmental and labor issues. This week, the National Labor Relations Board determined that the pair’s firing was an illegal form of retaliation. Speaking with The New

Last year, Amazon fired Emily Cunningham and Maren Costa. The pair of employees had been among the company’s most outspoken critics on staff, openly taking Amazon to task for environmental and labor issues.

This week, the National Labor Relations Board determined that the pair’s firing was an illegal form of retaliation. Speaking with The New York Times, Cunningham noted that the board would issue a more public criticism of Amazon’s action if the company does not take steps to address the issue.

TechCrunch has reached out to Amazon for comment, but has yet to hear back. Cunningham, meanwhile, called the decision a “moral victory.”

Following last year’s firing, Amazon told TechCrunch that the decision was not a direct result of the pair’s criticism, but rather a product of other, unstated polices. “We support every employee’s right to criticize their employer’s working conditions,” a spokesperson said at the time, “but that does not come with blanket immunity against any and all internal policies. We terminated these employees for repeatedly violating internal policies.”

The news came amid widescale ramp-ups as Amazon was declared an essential service while COVID-19 bore down on the U.S. in April. Two weeks prior, the company opened a massive fulfillment center in Bessemer, Alabama, which has become the focal point of yet another labor battle for the online retail giant.

The warehouse is currently ground zero for the largest unionizing effort in the company’s history. The National Labor Relations Board is tasked with ballot counting, which kicked off on Tuesday of last week. In the final days of voting, the company made an aggressive social media push against union allies, though it has since walked it back some, including a soft apology for comments surrounding reports that employees regularly pee in bottles to meet stringent quotas.

In addition to its rulings on Cunningham and Costa, the NLRB has also found for Amazonians United co-founder, Jonathan Bailey.

 

News: US indicts California man accused of stealing Shopify customer data

A grand jury has indicted a California resident accused of stealing Shopify customer data on over a hundred merchants, TechCrunch has learned. The indictment charges Tassilo Heinrich with aggravated identity theft and conspiracy to commit wire fraud by allegedly working with two Shopify customer support agents to steal merchant and customer data from Shopify customers

A grand jury has indicted a California resident accused of stealing Shopify customer data on over a hundred merchants, TechCrunch has learned.

The indictment charges Tassilo Heinrich with aggravated identity theft and conspiracy to commit wire fraud by allegedly working with two Shopify customer support agents to steal merchant and customer data from Shopify customers to gain a competitive edge and “take business away from those merchants,” the indictment reads. The indictment also accuses Heinrich, believed to be around 18 years old at the time of the alleged scheme, of selling the data to other co-conspirators to commit fraud.

A person with direct knowledge of the security breach confirmed Shopify was the unnamed victim company referenced in the indictment.

Last September, Shopify, an online e-commerce platform for small businesses, revealed a data breach in which two “rogue members” of its third-party customer support team of “less than 200 merchants.” Shopify said it fired the two contractors for engaging “in a scheme to obtain customer transactional records of certain merchants.”

Shopify said the contractors stole customer data, including names, postal addresses and order details, like which products and services were purchased. One merchant who received the data breach notice from Shopify said the last four digits of affected customers’ payment cards were also taken, which the indictment confirms.

Another one of the victims was Kylie Jenner’s cosmetics and make-up company, Kylie Cosmetics, the BBC reported.

The indictment accuses Heinrich of paying an employee of a third-party customer support company in the Philippines to access parts of Shopify’s internal network by either taking screenshots or uploading the data to Google Drive in exchange for kickbacks. Heinrich paid the employee in thousands of dollars worth of cryptocurrency, and also fake positive reviews claiming to be from merchants to whom the employee had provided customer service but had not left feedback. The indictment alleges that Heinrich received a year’s worth of some merchants’ data.

Heinrich allegedly spent at least a year siphoning off incrementing amounts of data from Shopify’s internal network, at one point asking if he could “remotely access” the customer support employee’s computer while they were asleep.

In a brief statement, Shopify spokesperson Rebecca Feigelsohn said: “Shopify has cooperated with the FBI to investigate an incident involving the data of a small number of our merchants in September 2020. As previously stated, the perpetrators involved no longer work with Shopify. Because there is an active criminal investigation, we are unable to provide further comment at this time.”

Heinrich was arrested by the FBI at Los Angeles International Airport in February and is currently detained in federal custody pending trial, set to begin on September 7. Heinrich has pleaded not guilty.

Updated with comment from Shopify.

News: What happens to your NFTs and crypto assets after you die?

Consumers are increasingly adding digital assets, from cryptocurrency to NFTs, to their wealth mix. But how do you prevent them from disappearing into the digital ether when you die?

Erin Bury
Contributor

Erin Bury is CEO and co-founder of Willful, a comprehensive online estate planning service based in Toronto.

As consumers build their wealth, assets are typically tangible: cash, investments, property, cars, jewelry, art. But increasingly we’re adding a new type of asset to the mix: digital assets, whether in the form of cryptocurrency or a new asset class, NFTs.

We’re going through the biggest wealth transfer in history right now, with an estimated $16 trillion expected to change hands in the coming decades. While it’s easy to hand over the reins of a physical asset in the event of an emergency or death, it’s not as simple with digital assets.

A new Angus Reid study commissioned by Canadian online will platform Willful finds that only one in four consumers have someone in their life who knows all of their passwords and account details, which begs the question: Will consumers be prepared to pass on digital assets, or will billions in virtual goods be stuck in the digital ether?

While it’s easy to hand over the reins of a physical asset in the event of an emergency or death, it’s not as simple with digital assets.

Digital assets have been dominating the news cycle in 2021. While cryptocurrency isn’t new, it’s attracted a lot of attention in the past year because of its skyrocketing value, promotion from prominent figures like billionaire Elon Musk, and bitcoin offerings from traditional financial firms like Morgan Stanley. If you hold any type of cryptocurrency, the only way to access it is via a private key — typically a 64-digit passcode. No private key, no access to the virtual currency.

There have been many stories reported about people who purchased bitcoin and would be millionaires today if they hadn’t thrown out their hard drive or lost track of their key. One high-profile case is that of Gerald Cotten, the founder of cryptocurrency exchange Quadriga. When Cotten died in 2018, he took with him the private keys to over $250 million in client assets.

Consumers have also been inundated with stories about NFTs, or non-fungible tokens, which are digital assets hosted on the same blockchain that makes cryptocurrency possible. To most, it seems absurd that artist Beeple could sell a $69 million piece of art through a Christie’s auction, or that a virtual home in Toronto could sell for over $600,000, or that people would spend over $200 million trading virtual NBA highlights like we used to trade baseball cards. But this new asset class is proving that digital assets can be as valuable if not more valuable than physical assets — and similar to cryptocurrency, they likely require a private key to access them.

When someone dies, they either have a will that dictates how their assets will be distributed, or, if they die without a will, a government formula outlines how their assets will be divided. While a will outlines who should receive what, it typically doesn’t have an up-to-date asset list, nor does it contain passwords or access keys. There’s an estimated tens of billions in unclaimed assets sitting in banks today as a result of a family or executor not knowing about those accounts following an individual’s death.

But an executor can do due diligence by calling financial institutions to double-check whether the person held accounts and get access to those funds, which typically requires providing copies of the will and/or death certificate. With digital assets, it’s not as simple as calling the bank and finding out a relative had a valuable NFT. There’s no directory or central body that governs NFTs or cryptocurrency — it’s purposely decentralized, which is great for privacy but less than ideal for family members who want to figure out if someone held valuable digital assets.

And it’s not just about knowing digital assets exist — it’s about knowing how to access them. A recent study from the Angus Reid Forum, commissioned by Willful, showed that consumers under 35 are way less likely to have shared account access with loved ones (19% of those under 35 have shared account info, compared with 32% of those over 55). This makes sense, since the younger you are, the less likely you are to think about passing on assets after you die. But this tech-savvy younger demographic may leave their families in the lurch if something happens.

So what can consumers do to ensure their digital assets are protected? First, consider using a password manager like 1Password — which can store all of your account information, logins, private keys to digital assets and any other key information — and share the master access password with your executor or store it with your will.

While this can ensure easy access to your accounts in an emergency, Lee Poskanzer, the founder of Directive Communication Systems, says it can also put your family or executors at risk, highlighting that in many cases, website and app owners explicitly prohibit password sharing in their terms of service, and privacy laws in some jurisdictions prohibit account holder impersonation (in the U.S., that’s covered by the Stored Communications and Electronic Communications Privacy Act). Not to mention, accounts increasingly require two-factor authentication, which may not be easy to confirm if executors don’t have access to the person’s smartphone.

Directive Communication Systems’ platform helps manage the transfer of digital assets upon death, and Poskanzer says they don’t collect passwords for this reason. Instead, they work with the estate to provide content providers (Google, social media platforms, etc.) with required documentation, which can include a death certificate, obituary, ID or other documents. Upon meeting those requirements, which vary by company, content providers provide a data dump of an account’s contents, making them available via the cloud.

Second, consider using a digital wallet or exchange to store your digital assets — if your family has access to that, it may also include access to your private keys, depending on the wallet’s features, or the exchange itself may have a death-management process.

For example, Coinbase clearly outlines what an executor or family member can do to retrieve digital assets in case of the death of the account holder. As a backup, you can store your private key on a physical piece of paper and ensure it’s stored in a safe deposit box, fireproof safe or other safe place your executor can access in the event of your passing.

Third, create an up-to-date list of your assets that your executor and/or key family members have access to — this should include physical and digital assets, and should be reviewed and updated either annually or when you acquire a new asset or change financial institutions. Finally, create a will that clearly outlines how you want your assets to be distributed and provide specific instructions on how you want digital assets to be distributed.

Not only is this best practice to protect your assets of any kind and to appoint key roles like guardians for minor children, it will also likely be required in order to release any account contents (for example, Coinbase requires a copy of the will as part of its process to release funds to an estate).

As we go through this major wealth transfer between generations, it’s likely that banks, fintechs, crypto exchanges, social media platforms and other content providers will create clear death-management processes that make it easier to alert people about digital assets before you die and provide easy access instructions. But until that happens, following these steps means you can ensure your assets go to the people or organizations you want them to — and that they won’t be stuck in digital purgatory.

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