Illicit streaming devices bring piracy to the mass market

Federal investigators shut down an El Cajon storefront that sold piracy streaming devices to viewers looking to bypass Netflix and Hulu

SAN DIEGO —

No longer tucked away in the dark reaches of the internet, the streaming of pirated television shows and films has gone mainstream.

Just look at Heroes IPTV.

Not satisfied with online sales alone, business partners Hisham Alshaikhli and Laith Alqaraghuli opened a storefront in El Cajon to sell the latest craze in pirated media: set-top boxes similar to a Roku, but preloaded with illicit streaming apps. For a one-time price — $150 to $350 — viewers could gain access to thousands of pirated films and shows, no subscription necessary.

The brick-and-mortar shop gave customers a rare in-person shopping experience and lent the business the luster of legitimacy. But despite the openness with which the company operated, it was illegal.

The black-market entrepreneurs are the first in the nation to be successfully criminally prosecuted for selling such illicit streaming devices, according to Homeland Security Investigations.

Many more cases are in the pipeline. Criminal investigations into streaming piracy devices at the National Intellectual Property Rights Coordination Center — a clearinghouse partnering U.S. law enforcement agencies with foreign allies — have more than doubled over the past two years, according to an estimate by the FBI.

Pirated movies and shows in the digital age have long been available on massive online servers, called cyberlockers, as well as shared on peer-to-peer networks. But the online portals haven’t always been that simple for novices to access or navigate.

It wasn’t until the advent of illicit streaming devices, paired with user-friendly interfaces, that the trend truly opened up to the mass market.

The set-top boxes, which can be plugged into a TV, come preloaded with legitimate-looking streaming apps that open the door to massive unauthorized media collections.

The growing popularity has content creators terrified.

“We have been devalued because piracy has become rampant,” said Ruth Vitale, a veteran Hollywood producer and CEO of CreativeFuture, a nonprofit coalition of more than 550 companies and organizations working to protect creative rights. “Audiences don’t understand that over 85 percent of the businesses in film and television are small businesses employing under 10 people,” she added, noting the 2.2 million people who work in the U.S. film and TV industry.

“Red carpets telegraph that we are all wealthy; we are working people.”

The Global Innovation Policy Center, an affiliate of the U.S. Chamber of Commerce, estimates that global online piracy costs the U.S. economy at least $29.2 billion in lost revenue each year, according to a study released in June.

But the law protecting copyrighted works hasn’t evolved as fast as the technology.

Downloading and distributing unauthorized content is a felony, a crime that carries a prison sentence of up to five years. Streaming that same content without permission, on the other hand, is considered infringing on a public performance and treated as a misdemeanor, punishable by up to a year in prison.

In other words, the law is more Napster era than Netflix.

The criminal copyright code hasn’t been revised since 2008 — when streaming wasn’t considered a viable option.

“Now 80 percent of all piracy happens through streaming,” Vitale said. “Things are going to have to change.”

The so-called “streaming loophole” has been briefed in front of the Senate Subcommittee on Intellectual Property earlier this year, and the U.S. Copyright Office has put its support behind felony-level penalties in illicit streaming cases, noting in a letter to the subcommittee “the failure of the current law to effectively address unauthorized streaming.”

Much of the battle against digital piracy, especially when it comes to streaming, has been waged in civil litigation, with major studios going after illicit services after cease-and-desist letters go ignored.

Criminal prosecutions involving streaming devices have been particularly rare.

The Motion Pictures Association, a trade group that represents major studios from Disney to Sony to Netflix, has been one of the loudest voices calling on the federal government to go after violators criminally. In recent testimony to Congress, the association has also urged U.S. Customs and Border Enforcement to aggressively interdict illicit streaming devices coming into the U.S. from other countries.

“The industry has a role to play to fight for their rights, but we need the support of law enforcement badly to get the message out that this is illegal and this should not happen,” said Jan van Voorn, chief of global content protection for the Motion Pictures Association.

But investigating such cases can be challenging, according to the FBI and Homeland Security Investigations.

The identities of streaming service operators or illicit device sellers are often cloaked in sham business and fake addresses, with many based overseas.

The U.S. works closely with law enforcement on intellectual property issues in Europe, Canada and Mexico, but many other countries that shelter violators don’t have similar copyright laws, making diplomatic cooperation difficult at times, said Anthony Frazier, an FBI special agent at the National Intellectual Property Rights Coordination Center.

Often, an illicit streaming device is just one part of a global ecosystem, said Nathan Loehr, an intelligence analyst at the coordination center.

“Hypothetically, you could have a California reseller obtaining a device built and shipped from China using software from India that’s allowing the streaming of content from Southeast Asia that’s being hosted on servers from the Netherlands,” said Loehr.

And similar to other forms of organized crime, the players structure the operation in a way that limits interaction with each other.

“That becomes really, really difficult to work our way up to develop that chain, but not impossible,” Loehr said.

The El Cajon case was different, though.

The operators of Heroes IPTV — a California corporation launched in 2015 — actually sold face-to-face out of its store, located in an office complex on Main Street at Jamacha Road. Undercover agents visited multiple times in 2017 and heard the sales pitch that blatantly described the product’s illegal purpose, according to Homeland Security Investigations, which handled the case.

The set-top boxes were sourced from China and, once in the U.S., loaded with the illicit apps, including Show Box, according to HSI.

Alshaikhli and Alqaraghuli pleaded guilty to aiding and abetting in the infringement of a public performance of a copyrighted work. While they faced up to a year in custody, a San Diego federal judge last month sentenced both to a year of unsupervised probation and $1,000 restitution each.

The two are the first in the nation to plead guilty to selling such devices, according to HSI.

While the El Cajon case has been quietly wrapping up in the courts, the streaming industry has been closely watching a new major prosecution unfold.

In August, the U.S. Attorney’s Office in the Eastern District of Virginia charged eight people linked to Jetflicks, a Las Vegas-based subscription streaming service designed to work on many different types of devices, from computers to set-top boxes to smartphones, according to the FBI.

Jetflicks allegedly used sophisticated computer code to scour pirate websites around the world to pull in new content, according to the indictment.

At one point, Jetflicks claimed to have more than 183,200 different television episodes, and the company distributed them to tens of thousands of paid subscribers around the U.S., the FBI said.

One of the defendants left Jetflicks to launch his own service, iStreamItAll, the indictment alleges.

The two lead defendants are facing felony charges, including reproduction and distribution of copyrighted material and money laundering.

Law enforcement efforts to stamp out streaming piracy have focused on the supply chain, not individual viewers. Still, authorities and industry officials continue to search for ways to grab the attention of consumers.

If the ethical argument isn’t enough to dissuade consumers, there’s something else they should consider: the possibility that these illicit streaming device are also preloaded with malware.

By plugging a set-top device into a home’s internet network to stream, users have willingly bypassed router firewall protection and have invited potential intruders inside, making any other device on the network also vulnerable, experts say.

Research by Digital Citizens Alliance and cybersecurity company Dark Wolfe Consulting found malware on piracy apps that stole user names and passwords, uploaded data without consent and probed user networks for weak spots, according to the findings released in April.

“You’re supporting illegal activity by stealing creative content,” Voorn of the Motion Pictures Association said. “You don’t know who you’re doing business with.”

And with the recent crackdowns against such streaming services and devices, there is also the real possibility of suddenly losing access. “You see a blank screen and nothing works anymore,” Voorn said. “Obviously that’s not a great consumer experience.”