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     For the Inner Circle, cracking software is a challenge.

     For the wannabe underground, collecting it is an
     obsession. For the software industry, it's a billion-dollar

     By David McCandless

     Sunday morning, 7 a.m., somewhere in US Eastern Standard
     Time: Mad Hatter gets up, has a glass of Seagram's Ginger
     Ale and a cigarette, and checks his machine, which has been
     running automated scripts all night. He looks for errors and
     then reads his email. He has 30 messages from all over the
     world: some fan mail, a couple of flames, a few snippets of
     interesting information, three or four requests - some clear,
     some PGP-encoded. After a quick espresso and another
     cigarette, he surveys the contents of a few private FTP sites,
     filters through a bunch of new files, and then reroutes the good
     stuff to his newsreader. After breakfast with the family,
     another wave of automated scripts kicks in. The ISDN
     connection hums to life. A steady stream of bytes departs his
     machine 128 Kbps and vanishes into the ether. By the end of
     the day Mad Hatter, a ringleader of the software piracy group
     called the Inner Circle, will have poured 300 Mbytes of illegal
     "warez" onto the Internet.

     Monday morning, 9 a.m., Greenwich Mean Time: Phil arrives
     for work in Bracknell, England, in a suit and tie, just back from
     a few days in Switzerland. Inside Novell UK's glossy five-story
     headquarters, he lets himself into his office. It looks like a
     mad, bad bedroom - shiny desktops and derelict ones,
     disemboweled minitowers and battered servers, every last
     expansion slot distended with DAT machines, CD-ROM
     burners, extra hard drives. A metal shelf unit contains a rack
     of monitors, some video equipment, spare keyboards.
     Everything is wired insanely to a single ISDN line. After a
     coffee, Phil boots up and skims his email. Twenty minutes
     later he has ceased to be Phil. For the next week, he will
     pretend to be a trader, a courier, a cracker, a newbie, a
     lamer, a lurker, a leecher. He is an undercover Internet
     detective, a "technical investigator." He spends his days
     roving the Net, finding people like Mad Hatter - and busting

     This is a story about a universe with two parallel, overlapping
     worlds. One is the familiar, dull world of the software industry,
     with its development costs, marketing teams, profit, and loss.
     Phil's world, at least part of the day. 

     And then there is warez world, the Mad Hatter's world, a
     strange place of IRC channels and Usenet groups, of thrills,
     prestige, and fear. A world of expert crackers who strip the
     protection from expensive new software and upload copies
     onto the Net within days of its release. A world of wannabes
     and collectors, whose hard drives are stuffed like stamp
     albums, with programs they'll never use. And a world of profit
     pirates, who do exactly what the software makers say: rip off
     other people's stuff and sell it for their own benefit. 

     In Phil's world, software is a valuable tool that commands high
     prices - programs like QuarkXPress, Windows NT, and
     AutoCAD, costing thousands of dollars a shot. But in Mad
     Hatter's world, those sticker prices means nothing - except
     inasmuch as more expensive programs are harder to crack,
     and that makes them the most desirable, spectacular trophies
     of all.

     In Phil's world, warez are a menace. In warez world, Phil is.

     Filthy lucre

     Phil's world is full of nasty numbers. Antipiracy organizations
     like the Software Publishers Association and Business
     Software Alliance estimate that more than US$5 million worth
     of software is cracked and uploaded daily to the Net, where
     anyone can download it free of charge. A running scoreboard
     on the BSA Web site charts the industry's losses to piracy:
     $482 a second, $28,900 a minute, $1.7 million an hour, $41.6
     million a day, $291.5 million a week. A lot of that is
     garden-variety unlicensed copying and Far East-style
     counterfeiting. But an estimated one-third leaks out through
     warez world, which can be anywhere there's a computer, a
     phone, and a modem.

     This is bad news for the business. Think of the lost revenue!
     The lost customers! "It's a frightening scenario out there,"
     says Martin Smith, Novell's product-licensing manager for
     Europe, the Middle East, and Africa. "We are seeing a very,
     very rapid development of crime on the Internet."

     He's not being paranoid: look at the thousands of messages
     that pour through and the other
     Usenet sites that are the warez world's pulsing heart. In a
     typical week, you'll see Microsoft Office Pro and Visual C++,
     Autodesk 3D Studio MAX, SoftImage 3D, SoundForge,
     Cakewalk Pro Audio, WordPerfect, Adobe Photoshop 4.0 -
     virtually every high-end package in existence. All this plus
     impossibly early betas and alphas. Add a smattering of
     mundane Web tools, Net apps, registered shareware,
     games, and utilities, and you have everything for the
     forward-looking computer user.

     Warez world's volumes are impressive, too - a good 65
     Mbytes a day of freshly cracked, quality new releases,
     chopped into disk-sized portions (to make it from one hop to
     the next without clogging the servers), compressed, and
     uploaded. Postings can vary from a few bytes (for a crack) to
     hundreds of megabytes. The nine main warez sites alone
     account for 30 to 40 percent of the traffic on Usenet, an
     average of more than 500 Mbytes in downloads every 24
     hours, according to OpNet.

     Bad news indeed for Phil and his friends, gazing at those
     endless dollar signs. But warez world's leading citizens say
     that filthy lucre is beside the point - at least for them and the
     hungry collectors they supply.

     "No money ever exchanges hands in our forum," says
     California Red, one of a half dozen of the Mad Hatter's Inner
     Circle colleagues gathered for an IRC chat.

     "We're on the nonprofit side of the warez feeding chain,"
     insists another, TAG (The Analog Guy).

     "It's a trade. You give what you have, get something you need.
     No money needed," adds Clickety.

     "We're not in it for the money. I would never sell something I
     got from warez," California Red reiterates.

     "Never made a dime," says Mad Hatter.

     Even Phil admits these are not the people responsible - not
     directly, anyhow - for the 500-Mbyte, $50 bundled software
     CD-ROMs from Asia that are the industry's most prominent
     nightmare. Warez crackers, traders, and collectors don't
     pirate software to make a living: they pirate software because
     they can. The more the manufacturers harden a product, with
     tricky serial numbers and anticopy systems, the more fun it
     becomes to break. Theft? No: it's a game, a pissing contest;
     a bunch of dicks and a ruler. It's a hobby, an act of bloodless
     terrorism. It's "Fuck you, Microsoft." It's about having
     something the other guy doesn't. It's about telling him that you
     have something he doesn't and forcing him to trade
     something he has for something you don't.

     In other words, it's an addiction. Listen to a typical dialog on
     an IRC warez trading channel:

     "What you got?"

     "Cubase three."

     "What's that?"

     "A music program."

     "I got it. What else?"

     "No, but it's Cubase three-oh-three - the latest bugfix."

     "Shit. Gimme."

     "It's not a patch. It's another seven meg download."

     "Don't care. I want it."

     Warez traders scour the newsgroups every night, planting
     requests, downloading file parts they don't need. Warezheads
     feel unfulfilled unless they've swelled their coffers by at least
     one application a day. They don't need this Java
     Development Kit tool, or that Photoshop plug-in - the thrill is in
     creating the new subdirectory and placing the tightly packed
     and zipped file cleanly, reverently, into the collection. They
     may even install it. Then toy absentmindedly with its toolbars
     and palettes before tucking it away and never running it again.

     Look at Michael, an 18-year-old warez junkie who's also into
     weight lifting. In the evenings, while his friends pursue women,
     he's either at the gym or home at his machine, combing the
     planet for the latest dot releases of 3D Studio MAX. "I bought
     a Zip drive so I could store it all. The SoftImage rip is 20
     disks. It took me three months to get the entire set." A
     directory called WAREZ on his D:/ drive has $50,000 worth of
     cracked software, more than any one person could ever use,
     ludicrous amounts of applications. The more high-end and
     toolbar-tastic the app, the better. Without technical support or
     manuals, he hasn't a clue how to use most of it. But it's there
     and will stay there. "Warez give you a weird kind of feeling,"
     he says. "You end up collecting programs you don't need and
     never use. Just so you can say, 'I've got this or I've got that.' Or
     'My version of Photoshop is higher than yours.'"

     Mad Hatter knows the feeling. "It's an obsessive game. We
     see it every day - people begging for something to 'finish their
     collection.'" He's not much better himself. "When I was out of
     work on disability, I was totally motivated by the thrill of
     massive uploads, uploading at least 40 Mbytes a day for four
     months straight." Fellow Inner Circle member Clickety used to
     spend 12 hours a day online until college got "awful heavy."
     Another, Abraxas, spends 6 to 10 hours online on weekdays,
     12 to 16 on weekends. But Mad Hatter - who runs the
     semi-tongue-in-cheek, semi-poker-faced discussion group - is making progress: he's down to
     30 Mbytes a day. "My computer is online 24 hours a day," he
     says. "A warez pirate is always online." 

     As gods

     For Joe Warez Addict at the end of the cracked software food
     chain, membership in a group like the Inner Circle is the
     ultimate collectible. A way to legitimize their addiction, work
     for the common good, and, of course, get a nice fresh supply
     of warez. The drug addict becomes dealer. A sizable chunk of
     Mad Hatter's daily mail is begging letters.
     "I hope that if I ask this question, you will not be offended in
     any way. But can I join the Inner Circle? I mean, I respect the
     Inner Circle ... but never got a chance to join it. I was just
     wondering, can I? Please mail me back ASAP."

     Needless to say, this lone obsessive didn't get his chance.
     Joining the Inner Circle is nigh on impossible. Reaching its
     members, though, is easy enough. They keep a high profile,
     both in posting files on Usenet and flaming lamers. When I
     first tried to contact them I thought that they weren't so good at
     answering email, but it turned out their provider had just been
     taken offline for illegal spamming. They relocated en masse,
     and my mail had been lost in transit. So I posted a message
     to one of their newsgroups, made sure it was correctly
     labeled, politely worded, and not crossposted (a cardinal sin
     anywhere on Usenet). A reply arrived within eight hours. Mad
     Hatter was more than happy to talk, but not on the phone, not
     in person, and not on conventional IRC. "It has a bit of a habit
     of advertising my IP address," he said. He and six other Inner
     Circle members set up their own IRC server, configured a
     secret channel, and arranged a mutually convenient time for a
     live interview. We met and talked for nine hours, in the bizarre
     overlapping conversational style of IRC. They were frank and
     open, friendly and articulate - and, like any new start-up,
     flattered by the attention.

     A 17-strong force, the Inner Circle has its own iconography
     and its own ideals. Its members are warez gods. They
     preach, police, advise, flame. Their commandments? Good
     manners, good use of bandwidth, and good warez. Give unto
     others as you would have them give unto you. When the Inner
     Circle is not sourcing warez from secret sites, its members
     are hunting and gathering from more conventional sources.
     Clickety borrows fresh stuff from his clients. A few have
     attended Microsoft Solution seminars. "Some of us are actual
     beta testers, too," says Mad Hatter. "That's got to be scary for
     the developers." One way or another, they help maintain the
     steady flow of warez onto Usenet. From there, various
     wannabes, lamers, and aspirants copy their work to countless
     BBSes, FTP sites, and Web pages.

     These are not pimply teenagers devoid of social life and
     graces, little ferrets who talk in bIFF text and make napalm out
     of soap and lightbulbs; they're not downloading porn or being
     careful not to wake their parents or spelling "cool" as "kewl."
     According to the interviews I conducted, not one member is
     younger than 20; Clickety-Clack is the youngest at 23. Most
     are 30-plus. Champion uploader Digital has been happily
     married for 22 of his 46 years. Most are well-adjusted white
     males with day jobs and thoroughly nuclear families. Founding
     member Abraxas has three kids, one over 18. Mad Hatter
     runs a small business from home. Technical guru TAG is a
     computer animator. Irrelevant maintains commercial real
     estate. They're spread all over the United States. A few are
     concentrated around Orlando, Florida. Two or three others
     are California-based. For obvious reasons, that's as precise
     as they like to get.

     The Inner Circle was born of a sense of outrage that their
     beloved pirate-wares newsgroups were going to pot. Warez
     had been around for more than a decade, but the growth of
     the Internet was bringing clueless newbies onto the boards.
     Warez needed a code of ethics and a group of leaders to set
     some examples. The leaders would be the best crackers -
     some of whom became the Inner Circle.

     "We took over in early '96," explains
     Abraxas, "and then leaked the first Nashville [Windows 97]
     beta. The groups were being overrun by clueless people.
     They needed help. They were wasting Internet resources.
     Perhaps if we could encourage responsible use of the
     available bandwidth, the whole Usenet warez 'scene' might
     last a while longer. Warez was around before we were, and
     will be after, but we wanted to help people and preserve
     resources using common sense."

     As enforcers of the warez code, the Inner Circle can be swift
     and sure. In April 1996, a pirate gang called Nomad,
     convinced that posts to warez groups were being
     suppressed, decided to get themselves some unsupervised
     elbow room. They selected an antiwork newsgroup -
     alt.binaries.slack, relatively empty and off the beaten track -
     where software could be slipped past news providers who
     had firewalled the usual warez forums. Within 24 hours, the
     forum was flooded with the latest releases. The slackers
     bestirred themselves from their apathy and fought back,
     posting files that told the pirates politely to push off. The warez
     kept coming. Then the Inner Circle waded in on the slackers'
     side and castigated the invaders for their poor manners. The
     pirates left meekly - though as a parting gift, one of them
     posted Microsoft NT, Beta 3, all 48 Mbytes of it, in 5,734
     parts. The slackers' newsfeed was clogged for days.

     A slightly disturbing revelation came out of the slacker
     invasion. "After the first attempted takeover, we discovered
     just how scary search engines like Deja News and AltaVista
     were," explains TAG. "You could dig up real email addresses
     pretty easy on about 75 percent of people posting warez." A
     worried TAG hacked into the code of Forte Agent, an industry
     standard newsreader already cracked to bypass the
     shareware cripples, and stripped away the X-newsreader
     header, giving posters far greater anonymity. As a side effect,
     the patch also reduced email spams by two-thirds. "The hack
     went over so well with even nonwarez people that Forte
     eventually incorporated it into Agent as a feature," TAG says
     proudly, "although I don't think they'll be giving us credit."

     By mid-'96, Mad Hatter decided that police work was getting
     to be too much of a chore. The newsfeed was being clogged
     by lamers, requesters, and partials posters with
     "room-temperature IQs." Those genuinely into warez were
     seeing less and less complete software uploaded; in its place
     were hundreds of stray disks and clammy begging posts. In a
     rare fit of pique, Mad Hatter took his revenge.

     "If I continue to see the 'here's what I have' threads," he wrote,
     "I will stop uploading here. I will not help and will laugh my ass
     off that everyone is suffering. If for some reason you doubt that
     I make a difference, it's your loss, as I personally have
     uploaded 85 percent of all the shit that's getting posted now
     when it was zero day or still fresh. Keep fighting over stale shit
     - I like to watch; keep posting partials, and I'll stop upping my
     100 to 300 Mbytes a week. In fact, I think I'll stop now."

     And stop the Inner Circle did. "We became burnt out on
     educating the masses," Mad Hatter says. Instead, a range of
     guaranteed lamer-free encrypted newsgroups was created
     for posting PGP-encoded warez, for Inner Circle-approved
     members only. Those on the select interested-parties list are
     given the codes to unlock the software, and anyone can apply
     to join. Requirement: a reasonable knowledge of PGP.
     "Hopefully this is a sign you won't be totally incompetent if you
     choose to post," says TAG. At the last count, the IPL had 500
     subscribers, happily trading warez under the protection of the
     latest in antilamer technology.

     New economy

     Warez on Usenet are basically gifts - testimony to the power
     and stature of the giver. Files are posted for all to download,
     free. Just fire up your newsreader, point it at an appropriate
     forum, and a list like a home-shopping catalog of the latest
     software spills down your screen. There is no pressure, but if
     you download and you like the vibe, you are expected to join
     the community and contribute uploads whenever possible.

     On the freewheeling IRC chat forums, warez are no longer
     gifts - they're trade goods. The rewards are greater, but
     you've got to work for them. The IRC channels are 24-hour
     stock exchanges cum street markets: FreeWarez, Warez96,
     Warez4Free, WarezSitez, WarezAppz, and WarezGamez.
     There are private channels, hidden areas, and invite-only
     piracy parties. And there are no free lunches - every piece of
     software has to be paid for, in software. The more recent the
     application, the higher its value. The ultimate bartering tools
     are zero-day warez - software released by a commercial
     house in the last 24 hours, cracked if necessary and
     uploaded. The prizes for good zero-day warez vary; you may
     get instant download status on a particular server, logins and
     passwords for exclusive FTP sites, or admission to the ranks
     of a powerful cartel like the Inner Circle.

     "Zero-day sites are very élite stuff," explains paid-up élitist
     TAG. "People can get access only if they can move a few
     hundred Mbytes a day. Most are invite only. The average IRC
     warez trader doesn't get that kind of access unless he puts a
     lot of effort into it." Zero-day warez trading is a fraught
     business; competition between groups often leads to
     malpractice. "You get a lot of first releases with bad cracks,"
     says TAG, "just so someone can say they released first. Then
     two days later, you get a working crack. We get most of our
     freshest stuff from private FTP and courier drop sites."

     If your software collection is more mundane, you can trade
     one piece directly for another. But with so many unpoliced
     egos in one place, this can be risky. People will often welsh
     on deals, allowing you to pass them a file and then
     disappearing into the ether. Cunning traders will barter with
     "trojans" - zipped-up files of gunk, realistic enough to carry out
     half the transaction. In extreme cases, someone may feed you
     a virus.

     A step down from zero-day warez are drop sites, where fresh
     cracks can be found for the cost of a download. Some drop
     sites run on the trader's own machine; others piggyback on
     government or corporate mainframes, shareware mirrors, and
     university networks. Often they're only in existence for 24
     hours, or on weekends when the sysops are at home.

     Wherever you end up, you'll be struck by the extreme
     politesse and measured courtesy, united by a common
     language. "Greets m8. Have appz, gamez and crackz on Looking for Pshop 4.0 beta. L8ter." "Have 1.5
     gigs of warez on anonymous T1. Upload for leech access. /
     me for more info. No lamers."

     Real money

     Back in Phil's world, they can't quite cope with the idea of this
     ferocious brag-driven barter economy cloaked in courtesy.
     The SPA and the BSA just don't believe it. "Considering the
     amount of time they dedicate, they must be making a return to
     justify it," says Phil.

     Casual observers of the BSA's Web site may well be
     convinced, if only because they're stunned by the money that's
     involved - or seems to be. Fifteen point five billion dollars a
     year! But those figures are based on the assumption that if
     piracy were stopped, someone would be willing to pay for
     every pirated copy in circulation. 

     "Billions of dollars?" scoffs East London BBS operator Time
     Bandit. "I know guys who have thousands and thousands of
     pounds worth of software, but the values are meaningless.
     Win95 may cost, like, £75 in the shops, but in warez, it's
     worthless. It's just another file that you might swap for another
     program, which might cost four grand. How much it costs in
     real money is meaningless."

     How do you ram home sales figures and quarterly losses to a
     bunch of teenagers who see warez trading as their passport
     to acceptance on the scurrilous side of a brave new world?
     How do you convince middle-aged men who see
     incandescently expensive software as monopoly money in a
     vast, global boardgame that what they're doing is "harmful"?
     In the software industry's latest campaign, you scare them - or
     try. The BSA's mandate used to be "not to capture pirates,
     but to eradicate piracy." Now exemplary punishment is the big

     To do that, the BSA and the SPA are willing to push the law to
     its limits. Prosecuting clear offenders - warez-vending BBS
     operators and FTP-site pirates, for instance - is one thing;
     suing ISPs for carrying Web pages containing pirate links and
     cracks is another. A typical case was against C2Net, a
     Buffalo, New York-based ISP that the SPA sued for doing just
     that. In what smacked of a token prosecution - or, in the words
     of C2Net's president, Sameer Parekh, "legal terrorism" - the
     action by Adobe, Claris, and Traveling Software, under the
     aegis of the SPA, held the provider responsible as
     "publishers" for the contents of its server, and for the activities
     of individual account holders. The SPA eventually backed off
     but threatens to revive the suit if C2Net and other ISPs don't
     agree to monitor their users for copyright infringement. C2Net
     says it will not give in to litigious "bullying."

     And then there are straightforward busts. On January 12,
     1996, Microsoft and Novell jointly announced a settlement
     with Scott W. Morris, who was "doing business as the
     Assassin's Guild BBS ... billed ... as the worldwide
     headquarters for two large pirate groups, Pirates With
     Attitude (PWA) and Razor 1911." According to the statement,
     "marshals seized 13 computers, 11 modems, a satellite dish,
     9 gigabytes of online data, and over 40 gigabytes of offline
     data storage dating back to 1992.... Mr. Morris agrees to
     assist Microsoft and Novell in their continuing BBS

     Phil, our undercover Internet detective, wasn't responsible for
     that particular drama, but he's been integral to others. His
     latest victory was in Zürich - "a landmark case against
     individuals and organizations distributing unlicensed software
     on the Internet," he calls it. A 27-year-old computer technician
     who helpfully called himself "The Pirate" was running an FTP
     site filled to the brim with warez, including US$60,000 worth
     of unlicensed Novell software. Phil, impersonating a trader,
     infiltrated the site (admittedly no great feat), collected
     evidence, then handed it over to the Swiss police. He
     accompanied them on the raid to ensure no evidence was
     damaged. "He was one of a new breed who advertise on the
     Internet," says Phil. "He made his files available via email
     requests and telnet." Swiss police also raided the home of a
     BBS called M-E-M-O, run by "The Shadow," a friend of The
     Pirate. Unfortunately, The Shadow was on holiday with his
     parents. The family returned two weeks later to find their front
     door broken down; the son was arrested. If convicted, the
     young pirates face up to three years in jail and possible
     $80,000 fines.

     The Pirate's mistake - aside from his suicidal choice of
     nickname - was to plant himself geographically. Phil, a former
     corporate network manager, was able to trace him through
     his FTP site's IP address. Phil knows his networks; this
     makes him the perfect undercover agent - and one of Novell
     UK's most envied employees. "I play on the Net all day," he
     says, "and get paid for it." 

     There's a bit more to it than that. Phil and his counterparts in
     Asia and the US are deployed to infiltrate pirate groups; to
     study IRC; to get under the skin of the lamers, the dabblers,
     and the professionals; to chat, seduce, charm, and interact
     with the denizens of this bizarre over-underworld. Phil talks to
     traders in their own language, understands the tricks and
     traps. After busting The Pirate, he says, "we were talking and
     he was moaning about the sluggishness of his network. I
     pointed out that, aside from using LANtastic, he was using a
     75-ohm terminator on the back of his file server, slowing the
     whole thing down."

     Now that he's back from Zürich, Phil will be getting some new
     toys: the spoils of war. In many jurisdictions, any hardware
     deemed to be part of an illegal setup can be taken by
     investigators and - if part of a civil prosecution - can be
     worked in as part of the settlement. Once sucked dry of
     evidence and incriminating data, the cannibalized machines
     are moved to Bracknell and hooked up to the network.

     But despite the resources at his disposal and his status as a
     network ninja, Phil doesn't always get his man. "If there's a
     person out there who has a decent level of technological
     awareness of the ways he can be located, it's quite true to say
     he could successfully hide himself, or use a system where it
     would be impossible to track him. It's technically possible for
     them to bounce their messages all around the world and have
     us running around like blue-arsed flies." It's a reluctant
     admission, but then Phil is one person pitted against

     Successful prosecutions aren't always that easy either. Take
     David LaMacchia, an MIT engineering student who turned two
     of the school's servers into drop sites and downloaded an
     estimated $1 million worth of pirated software. LaMacchia
     was arrested in 1995, only to have the case thrown out by a
     judge who ruled that no "commercial motive" was involved.
     Prosecutors tried charging him with wire fraud, but this was
     ruled an unacceptable stretching of the law. LaMacchia
     walked free. "Bringing Internet cases through the judicial
     system is a nightmare," says Novell's Martin Smith. "Try
     talking to a judge about 'dynamically allocated IP addresses.'
     We don't have a chance."

     Tell that to the former warez traders of America Online, which
     had a meteoric history as a pirate mecca. For years,
     instructions on how to crack AOL's security and obtain free
     accounts were a Usenet staple. Online, "freewarez" chat
     rooms were packed with traders, 24 hours a day. Megabytes
     of warez were kept in permanent circulation.

     Then came the crackdown of 1996, a dark period in warez
     history. Goaded by software-industry watchdogs, AOL
     introduced countermeasures to disinfect its system;
     alt.binaries.warez was removed from the Internet newsfeed.
     CATwatch automated sentinels were placed on AOL's warez
     chat channels, logging off anyone who entered. "Free"
     accounts were traced and nuked. Michael, the weight-lifting
     trader and also an AOL veteran, says everyone thought that
     "the FBI had infiltrated the warez groups, and we were all
     going to get busted." On the cusp of the big time - a top pirate
     outfit named Hybrid had a position open - Michael had been
     hoping to prove himself by doing a CD rip of the soccer game
     Euro 96. "I was halfway through removing the FMV and CD
     audio. I reckon I could've got it down from 58 disks to 9. But
     then everything went haywire."

     Profit-driven crackers are actually the easiest to catch: they
     have links to the real world, starting with the money trail from
     credit cards. And the easiest prey of all are BBSes, with their
     telltale telephone connections. In January, FBI agents led by
     the bureau's San Francisco-based International Computer
     Crime Squad raided homes and businesses in California and
     half a dozen other states. They seized computers, hard
     drives, and modems, though no arrests were made. Along
     with Adobe, Autodesk, and other BSA stalwarts, the list of
     software companies involved included Sega and Sony - a hint
     that the targets included gold-disk dupers who counterfeit
     mass-market videogames.

     Mad Hatter was not impressed. "Wow, I'm in hiding," he
     cracked the day after the raids. But "Cyber Strike" was, as
     BSA vice president Bob Kruger said later in a statement,
     "the most ambitious law enforcement action to date against
     Internet piracy" - specifically, the first US case in which the
     FBI, rather than local police, took the lead. And that can't help
     but augment the BSA's number-one antipiracy tactic for 1997:
     creating the "perception of threat." And even warez gods
     don't necessarily want the FBI on their case.

     But bluster aside, people like Mad Hatter are intrinsically -
     and deliberately - much harder to catch. The most prestigious
     pirate groups - Razor 1911, DOD, Pirates With Attitude, the
     Inner Circle - are tightly knit clubs whose members have
     known each other for years and call each other "good friends"
     - though they rarely, if ever, meet. Joining is no easy task.
     Positions become vacant only when members quit or are
     busted, or a vote is taken to expand operations. Kudos and
     reputation are everything. Unofficial homepages can be found
     here and there, constructed by acolytes who celebrate the
     groups' best releases and victories. These are often padded
     out with cryptic biographies and obituaries for those busted
     by the cops ("We feel for ya!"). Despite the boasting, and the
     draping of their releases with corporate motifs - logos, front
     ends, graphics, even signature tunes and Java applets -
     crackers' true identities typically remain secret, even to one

     The anonymity, however, works both ways. Cloaked in his
     own secret identity, Phil says he has managed to get deep
     within several major groups in the past 18 months and is
     skimming the surface of several others. He can convincingly
     portray himself as a caring, sharing warez god. "You make
     some good friends," he says with a smile. And, it seems, you
     can end up pretty impressed. "Some of these people are
     incredibly talented. The logic and programming behind their
     setups are just amazing." Or maybe he's just bluffing?

     Warez and whyfores

     In Phil's world, warez dealers are thieves. In warez world, the
     software companies are the criminals. 

     "Most products you buy from a store can be returned if you
     are unsatisfied," reads the beautifully crafted Warez FAQ, on
     the Inner Circle's Web site. "Software cannot." The Inner
     Circle thus can claim to have a practical motivation -
     providing "a place to find something you might want to
     evaluate before purchasing." All right. "I personally have
     bought progs that I demo'd first from warez," declares
     Clickety. "I have more warez than I could ever hope to install
     on my poor drives. Tested a lot of crap also that I was glad I
     didn't pay for - deleted it right off the bat. I have recommended
     software to clients based upon using a pirate version at

     "Software developers have families, and should be able to
     support them," reads the Warez FAQ. "We do advocate
     buying your own software if you really like it and use it
     heavily," adds Mad Hatter. 

     As Phil and his friends are well aware, the line between piracy
     and ownership is very blurred. For example, it's
     commonplace for 3-D animators and modelers to use
     pirated, cracked, or at least unlicensed copies of their office
     software at home, for overtime or experimentation. In some
     minds, it's even a "necessary evil," a slightly arcane
     marketing strategy, a rather reckless approach to branding -
     look at Netscape. Indeed, many software executives privately
     acknowledge that piracy - especially the attention it brings to
     new releases - can be a valuable way to develop markets.

     Novell's Martin Smith might disagree. He spends "99.9
     percent" of his time fighting piracy, and he worries that the
     next generation of browsers will seamlessly marry the Web
     with Usenet. "The newsgroups will be a lot more accessible,"
     he says, with something close to resignation, "which is going
     to make the whole thing a lot more widespread and give
     these guys a much bigger market. There's not much we can
     do, other than encourage ISPs not to take them."

     The difficulty is that, once it's up, a Usenet post can generally
     be canceled only by the author or a sysop from the post's
     point of origin, "server zero." Even if a cancel is issued, it
     takes time to ripple across the network. A warez regular
     would be able to grab the file before it was vaped. Some
     servers refuse on principle to honor cancels. "Even the most
     diehard warez hater in news.admin.hierarchy would defend
     your right to be safe from cancels," claims TAG. Many
     commercial ISPs have taken the industry's encouragement
     and dropped the warez groups, but lots of free servers are
     carrying on. And things aren't helped by the lack of a clear
     legal framework. Imagine the scenario: a program that
     belongs to a UScompany is uploaded via a router in
     Canada to a server in South Africa, where it is downloaded
     by a Norwegian operating out of Germany using a US-based
     anonymous remailer, then burnt onto a CD in the UK and sold
     in Bulgaria. "How would you prosecute that mess?" asks
     Smith. "It's a jurisdictional nightmare."

     And the profit pirates are getting more creative. Smith cites
     the Web page of one warez guru, offering a premium-line
     phone number: for $3 a minute, you can listen to details about
     the best warez FTP sites, their addresses, and their login
     passwords. "Updated every three days for your convenience,"
     it declares. It also makes provisions for those dialing from
     outside the US. The selling of information that leads to illegal
     use of information - a difficult case to prosecute.

     "Our strategy is to bring a critical mass of prosecutions," says
     Smith. "We'll take out some people who're downloading this
     material - the gnats - and then we'll take out some of the
     larger, more organized guys. The people who are packaging
     it up and zipping it onto CD-ROMs." Which might work in a
     world where software was always bought on CD-ROM. But in
     pushing ever deeper into electronic commerce, where more
     and more real commercial software (browsers, little applets)
     is being given out for free, where the Internet is the ultimate
     distribution network, this looks a little ropey. Friction-free
     markets and friction-free piracy run in tandem. The Inner
     Circle already has its PGP-encoded giveaway mall in place.

     Smith knows all this. There's just not much he can do about it.
     "All it needs is one server in one country where there are no
     laws to counter copyright theft, and there are plenty who will -
     the likes of Libya, Bulgaria, and Iran. One country with a
     decent enough telephone infrastructure is enough to undo a
     hundred busts in the West." Even if laws are constitutional or
     enforced, larger biases come into play. "Try asking a Saudi
     policeman to arrest a Saudi software pirate on behalf of an
     American company. Forget it."

     Dingle my dongle

     The alternative to policing is burglar-proofing: making things
     harder to crack. In principle, you might think that the
     gazillion-dollar software industry would be able to produce
     uncrackable software. In practice, it can't, although it certainly
     keeps trying.

     Take the dongle, for example. It is the summit of copy
     protection, an explicit melding of software and hardware.
     Without the right hardware key - the dongle - plugged into the
     machine's parallel port, the software won't run. And without the
     right software, the dongle is a mindless doorstop. Calls to the
     dongle are woven into the code at the lowest level. "The
     program may call the dongle every 150 mouseclicks, or every
     time you print, or every time you select flesh tones as your
     desktop color scheme," says one dongle expert. If the
     response to the call is false or not forthcoming, the program
     shuts down. All communications between the two are
     encrypted by uncrackable algorithms. Internal security fuses
     ensure that any attempt to hack the dongle mechanically will
     cause it to self-destruct. "Nothing short of an electron
     microscope," says the expert, "could extract the algorithm
     from that mess."

     The biggest player in the dongle market is Rainbow
     Technologies, whose Sentinel hardware keys are used by 55
     percent of all protected software. There are 8 million Sentinel
     keys attached to 8 million printer ports the world over. The
     company calls it "the world's most effective way to stop
     piracy" - a clarion call to crackers if ever there was.

     The logical approach to cracking a hardware key is to create
     a "pseudodongle" - a chunk of code that sits in memory,
     giving the correct answers to any query. To do this, a cracker
     would have to monitor and trap traffic to-ing and fro-ing
     across the parallel port, then use this information to build an
     infallible query/ table. Unfortunately, if the query is, say, six
     characters long, it can have more than 280 trillion responses
     (281,474,976,710,700 to be exact). With the speed of
     modern machines, this would take approximately 44,627
     years to collate. With the SentinelSuperPro dongle ("the most
     secure and flexible protection available") the query length can
     be 56 characters - requiring a mere 10 125 years (in theory)
     for a complete table. However, the dongle in
     SentinelSuperPro for Autodesk 3D Studio MAX was cracked
     in just under seven days of its retail release - substantially less
     than the 44 millennia emblazoned on the sales brochures.
     Other expensive high-end applications that use Sentinel -
     including NewTek's LightWave 5 and Microsoft's SoftImage -
     have ended up the same way: cracked, repackaged, and
     redistributed to every corner of the Internet within weeks of
     their release. How? Instead of attempting to simulate the
     dongle, expert crackers simply remove its tendrils from the
     program code, unraveling the relationship skein by skein,
     function by function, call by call, until the application ceases to
     need the dongle to function. Then it's ready for anyone and
     everyone to use - or, more likely, gawk at.

     Nobody says this is easy. There may be only three or four
     crackers in the world who could manage such an opus. But
     with the Internet to transmit the result, only one needs to

     With the latest wave of dongles, warez world looked to Russia
     to get the job done - and a shadowy group called DOD "won"
     the contract. The self-styled "Warez Bearz of Russia and
     Beyond," DOD appears to have arms throughout Europe,
     Asia, and the US. It undid Microsoft SoftImage's dongle
     protection in two weeks, which wasn't easy. The crew
     riotously celebrated in their "NFO" file: "Totally awesome
     work of glorious DOD cracker - Replicator after five other
     crackers gave up! We decided not a do a crack patch 'coz it
     will take too much time to code it ... you ask why? 'Coz there
     are only 72 (!!!) EXEs patched. All options now work 100%!"

     NFO files do more than brag or supply installation
     instructions; they testify that the ware is a bona fide release,
     guaranteed to work. And this is more than just posturing; a
     group's reputation is paramount. Each release is
     painstakingly beta-tested. These are their products now, their
     labors of love. Nobody wants to find a "bad crack" in his
     hands after a seven-hour download. Nobody wants to be
     accused of being "unprofessional." Nobody wants the
     ignominy of anything like the bad crack for Autodesk's 3D
     Studio that made the rounds in 1992. For all intents and
     purposes it ran correctly, all features seemed 100 percent
     functional. Except that the dedongled program slowly and
     subtly corrupted any 3-D model built with it. After a few hours
     of use, a mesh would become a crumpled mass of broken
     triangles, irrevocably damaged. Cleverly, Autodesk had used
     the dongle to create a dynamic vector table within the
     program. Without the table, the program struggled to create
     mathematically accurate geometry - and eventually failed.
     Many a dodgy CAD house saw its cost-cutting measures end
     in ruin. Autodesk support forums and newsgroups were
     flooded with strangely unregistered users moaning about the
     "bug in their version of 3D Studio." A rectified "100 percent
     cracked" version appeared soon after, but the damage was
     done. The Myth of the Bad Crack was born, and the pirate
     groups' reputations tarnished.

     But the pirates bounced back. They always do. And there's no
     reason to think that there's any way to stop them. Software
     security people are at an intrinsic disadvantage. Compare
     their job to that of securing something in the real world that's
     valuable and under threat - a bank, say. Typically, only one set
     of armed robbers will hold up a bank at a time, and they'll get
     only one crack at it. Imagine an army of robbers, all in different
     parts of the world, all attacking the same bank at the same
     time. And in the comfort of their own homes. Not just once, but
     over and over again. Imagine that each set of robbers is
     competing against every other, racing to be first in. Imagine,
     too, that some of the robbers are so technically adept that
     they could have built the alarms, the safe, and even the jewels
     themselves. And that they have cracked more than 30 banks
     with the same protection system. And that they're learning
     from all their failures, because they're never caught. No
     security could realistically resist such an onslaught. It may be
     that the only way to avoid having your software cracked is to
     put no protection whatsoever on it. No challenge, no crack. 

     Popularity only feeds the frenzy. Doom is a good example. In
     1993, id Software distributed the original shareware version
     of its nasty-guns-in-nasty-dungeons masterpiece on bulletin
     boards, CompuServe, and a then-little-known system called
     the Internet. Downloaded by more than 6 million people
     worldwide, Doom was a trailblazer in the world of modem
     marketing. The shareware gave you a third of the game: if you
     liked it, you had to buy the rest on disks. Millions did.

     Doom and its makers became a dream target. Weeks before
     Doom II's release, the sequel was available on the Internet -
     not as shareware, but warez. And not just as a teaser, but the
     whole damn thing. "Yeah, that was leaked," says Mike Wilson,
     id's then-vice president of marketing, now CEO at Ion Storm.
     "Can't tell you how much that hurt." The leaked copy was
     rapidly traced - rumors abounded that the version was a
     review copy fingerprinted to a British PC games magazine -
     but too late. It was already on Usenet, doing the rounds on
     IRC, filling up FTP sites. The pirates were in ecstasy and id
     was left with recoding the final retail release, to ensure future
     patches and upgrades would not work on the pirated version.
     Then they shut the stable door. No more external beta testing;
     no more prelaunch reviews. "We assured ourselves it would
     never happen again," says Wilson. "No copy of our games
     would leave the building."

     Nice try. Quake, Doom's much-anticipated follow-up, turned
     up on an FTP server in Finland three days before the
     shareware come-on was due to be released. The pirate
     version was a final beta of the full game - complete with eerily
     empty unfinished levels and bare, unartworked walls. Within
     hours, it had been funneled to sites all over the globe. IRC
     was swamped with traders and couriers desperate to

     "Somebody actually broke into our then poorly secured
     network and started to download it right before our eyes,"
     Wilson recalls. "We managed to stop the transfer before he
     got all of it. We traced the call, got his name and address. He
     was pretty scared, but, of course, it was some kid. We didn't
     pursue that one. It hurt, but not enough to put some little kid in

     When the legitimate Quake hit the stores last year, it was
     initially in the form of an encrypted CD, which let you play a
     shareware version for free but would only unlock the rest on
     receipt of a password, available for purchase by phone. The
     encryption scheme, an industry standard called TestDrive,
     was eventually cracked by a lone European pirate called
     Agony. And id's crown jewel was now available, courtesy a
     29K program. "In order to unlock the full version, you are
     supposed to call 1-800-IDGAMES," Agony gloated in a
     posting. "Hahahahahah."

     "We knew it was going to be hacked," says Wilson. "We of all
     people knew. But we thought it was safe enough, certainly
     safer than Doom II." And, truth to tell, it didn't matter too much.
     The gap between the game's release and the warez version
     becoming widespread was enough for id to sell the copies
     they expected. "Copy-protection schemes are just speed
     bumps," laments Wilson. 

     Nobody really knows how much actual damage cracking does
     to the software companies. But as the industry rolls
     apprehensively toward the uncertain future of an ever-more
     frictionless electronic marketplace, almost everyone thinks
     piracy will increase. "The level of activity out there is
     overwhelming. We know that we have to take action to take
     control of it. We will continue to bring a critical mass of
     prosecutions," says Novell UK's Smith. He doesn't sound all
     that convinced.

     Somewhere back on the US East Coast, Mad Hatter has a
     final swig of ginger ale and settles down to bed with his wife,
     White Rabbit. She thinks his obsession is a wasted resource,
     but didn't complain when he installed the latest version of
     Quicken on her computer - a cracked copy, of course. "We
     are all family men, married with children, day jobs, dedicated
     accounts, and multiple phone lines," Mad Hatter says. "Our
     kids have been looking over our shoulders for years. They will
     be the next couriers, the next warez gods." 


     David McCandless ([email protected]), a
     London-based writer, musician, and film editor, is still bitter
     about being dethroned as UK Doom champion.