December 18, 2003

Blast from the not-so-distant past: Sealand


By Kim Gilmour


In August 2002, I took a day trip from London to visit the offshore "principality" of Sealand, a disused gun platform off the coast of Harwich to interview its Ryan Lackey, the founder of Sealand's offshore hosting company HavenCo. The company claims to be able to host contentious content simply because it's "outside" the UK. But is it really its own sovereignty?

Anyway, it was a very surreal place. You get winched up by a crane to get there! As we thought, Ryan has since left Sealand to pursue other dreams. I took loads of photographs which I've had on my other website for a while, but you can see some more of my Sealand photographs, and a copy of the whole article as it was published in Internet Magazine. By the way, HavenCo is now closed due to an acrimonious split between founder Ryan Lackey and Prince Michael. amid security fears. It's an interesting story. But read on for mine...

Wish You Were Here?


prince michael bates and ryan lackey, august 2002It's a beautiful day on the Essex coast and for the past two hours I've been sitting outside a sleepy cafe, in Harwich Town Quay with Steve Hill, Internet Magazine's now former news & features editor.

We're waiting to take a L300 speedboat ride to the principality of Sealand, but our pilot, 'Prince' Michael Bates, is late.

Although it might sound like an amusement park, Sealand is actually an old World War II gun fortress about 10km off the east coast. This rusty, dilapidated platform plonked on top of two hollow concrete pillars in the North Sea claims to be its own sovereign state. It also claims to be a truly secure data haven--which is what we're off to look at.

Sealand's wafer-thin claim to sovereignty began in 1967 when Michael's father, Roy Bates, declared the site his own and crowned himself king of Sealand. After a few legal skirmishes, Sealand received a limited degree of de facto recognition--until 1987 is was outside British territorial waters, so the UK wanted nothing to do with it. The main reason it still operates as a micro-country today is because no one has taken any major legal actions against it.

Sovereign status doesn't necessarily mean earning potential, and Sealand had no real source of income until 1999, when 23 year old American Internet geek and cypherpunk pioneer Ryan Lackey set up a colocation style Web hosting business there. Called HavenCo (www.havenco.com), the business was financed by a few angel investors, including Avi Freedman, a Net expert who's now number two at Akamai.

HavenCo's proposition appealed to those who appreciated the notion of a free Internet. A physically secure fortress in the middle of nowhere manned by armed guards, it offered encrypted data, anonymous network traffic, tax avoidance and, most of all, immunity against draconian information laws such as the US Digital Millennium Copyright Act (DMCA) and the UK's Regulation of Investigatory Powers Act (RIP). It essentially offers the political freedom to post almost anything you like online, without fear of legal ramifications.

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As HavenCo states on its website: "Sealand currently has no regulations regarding copyright, patents, libel, restrictions on political speech, nondisclosure agreements, cryptography, restrictions on maintaining customer records, tax or mandatory licensing, DMCA, music sharing services, or other issues."

The strategy worked. HavenCo has been profitable since the summer of 2001, thanks to low capital investment, low expenses, a focus on business users and a steady revenue stream. Customers can do whatever they want once they buy a box at Sealand, as long as it's not related to spamming, child pornography, terrorism and there's no hacking originating directly from HavenCo's servers. Anything else goes.

Across the sea

Prince Michael finally arrives, dressed more like a playboy than a prince. "Sorry I'm late," he says, leading us towards his speedboat. "I was at a 56th birthday party and I've got a hangover!" He grabs a couple of harnesses--"these might have come straight out of a fetish shop!"--and gives us a couple of flimsy red life-jackets. Then we're off, guided towards Sealand by the small GPS system on board.

Also in the speedboat is a large fridge that Ryan has requested, four oscillating fans, and three other people, all in their late 50s. One of them, a white-haired man, was apparently the birthday boy, and the couple sitting in the back, Angie and Michael NumberTwo, are his friends. Like us, it's their first trip to Sealand.

The voyage is meant to take around 20 minutes, but we're too preoccupied to keep track of time. The trip is a real roller coaster ride--Michael takes great pleasure scaring us by tilting the speeding boat from side to side, laughing maniacally at the fear in our faces. Angie is screaming and there's froth everywhere.

As we approach the tiny fortress Michael accelerates towards it at full throttle. Just as it seems we're about to crash into the one of the two concrete towers, he whizzes between them.

When he finally slows down, we get our first look at Sealand. It's small--smaller than I had expected. The platform is about the size of a tennis-court, and I can see four or five people beside a yellow crane peering over its edge.

I tell myself to have more faith in my flimsy harness as I'm hooked to the crane and lifted up. Within 30 seconds, my feet reach the platform and I'm slowly lowered onto the rusty deck by amiable-looking guards in green overalls and orange hard hats.

Ryan is also there, a pale, shaven-headed, bespectacled figure, quietly spoken and intelligent, and dressed from head to toe in black.

Security clearance--taking place in the kitchen--is informal. Before stamping our passports, the security guard tests the stamp on the vinyl tablecloth to make sure it's facing upright, then wipes the ink off with his sleeve.

steve on sealand
"Have any refugees sought asylum here?" asks Steve.

"No," he says.

Into the depths

Sealand reportedly has a big stock of firearms that it uses to defend itself, but we don't see any. They've got rid of the rusty old gun that had been sitting on the platform for decades--Sealand's very remoteness makes it secure territory and HavenCo is a real, serious business.

Ryan disappears down one of the steep narrow ladders into the windowless, humid Network Operations Centre located in one of Sealand's columns. We're not allowed to see customers' server boxes for security and privacy reasons. But we do discover that pure nitrogen was never pumped into the rooms to stave off rust, exploding another Sealand myth--there's no rust beyond the platform and helipad because the pillars are made of concrete.

We begin the interview in Sealand's living room, which is under the helipad.

livingroom.jpgThe room Looks like a student bedroom, full of mismatched third-hand furniture. But it's airy and bright, unlike the spooky, black depths of Sealand's columns, There's a disused jail in one, just below the dimly lit gym and Ryan's sparse bedroom.

Not sued

So, who on earth uses HavenCo? Is Sealand home to dodgy money-laundering schemes, defamatory content and vast amounts of online pornography?

"Fifty per cent are online gambling customers," Ryan reveals. "Maybe 20 per cent are Internet payment systems customers. The rest are miscellaneous, such as security infrastructure companies, or they're sold through resellers."

Because gambling is mostly illegal in the US, betting entrepreneurs have flocked to HavenCo. They choose it above other offshore havens, such as those in the Caribbean, to avoid costly licensing fees.

So why hasn't the US government taken any action against HavenCo's American customers, who are so blatantly avoiding tax?

"It's very complicated to tell where an Internet business is based," says Ryan, "but where the server is based is an easy way to check. People can also know where your staff is based, but that can be virtual. And a lot of online bank accounts like PayPal are pretty virtual. You're not going to be able to get away without having an Internet server for your business. You may be able to distribute them but then you'll be a victim of all the laws, rather than a single one."

Escaping the law

Ryan is a passionate advocate of free speech online. Business has improved as a result of increased surveillance following September 11. Many people feel new laws are threatening their civil liberties and have scrambled to HavenCo to preserve them. "It's been good for us because a lot of people are afraid of the very draconian laws being passed in the US, and they want to get out in advance of those," Ryan says. HavenCo claims it will destroy a customer's box if it's ever forced to hand over customer data to the authorities. Presumably it'll burn and dump them in the North Sea.

Physical security was also an issue. "Customers were worried that [their servers] could be damaged in an attack," Ryan says. "But we're pretty secure. We're not going to become collateral damage."

There is, of course, a limit to what HavenCo can host. "If we had Osama bin Laden hosting here, we wouldn't even be a smoking pile of ash--we'd be vanished completely."

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Ryan believes that if oppressive laws such as RIP start being enforced heavily, people will have more incentive to move offshore. But he doesn't want to spend the rest of his days on the fortress hosting sites that would be banned elsewhere. "If we go back to the US and the UK and they're wretched places to live, well, that's sort of annoying because I don't want to be on Sealand for the rest of my life."

On average, customers pay around $1,500 (around L960) for a box, $750 (around L480) for setup costs, and another $750 a month for colocation and 128k of bandwidth.

This means you won't usually see everyday folk posting dubious or copyright-protected content on HavenCo's servers. But companies hosted at HavenCo are beginning to resell shared hosting services. Ryan also has several side projects that test jurisdictional issues, such as the online publication of the controversial DeCSS source code--the computer code that reads decrypted DVDs. In addition, he's developed a voice encryption system using Bluetooth and an iPAQ PDA, an offshore stock market, a tamper-resistant, anonymous payment service, and he's working on a system to allow GSM text messaging from satellites.

He's also made an anonymous remailer available, which is used extensively on Usenet. He says the 10 complaints or so he's had about it in the last year were "silly".

In fact, Ryan doesn't get many complaints at all. "Anything that's likely to be a problem is either too high profile or too high bandwidth to host here. And if you're going to run a secret server where you don't need to get the benefit of jurisdiction, you might as well take a stolen credit card number and go buy a server at a company with thousands of servers. They're never going to look at yours, so as long as no one reports it, your server will continue operating. People who are going to do a kiddie porn ring are going to find other ways. Once you're willing to break the law there area lot of options for you."

Are HavenCo's customers law-abiding citizens, then? Ryan has a well-prepared answer. "Our customers don't want to break the law, they want a different set of laws they can comply with. It's similar to the way people avoid taxes rather than evade them, by moving assets offshore. These businesses comply with regulations, but accomplish the same purpose as not paying your taxes."

Porn to be wired

But where's the porn? Actually, nowhere--yet. Although HavenCo's prime source of revenue is currently online gambling, Ryan has big plans to host lots of pornography at Sealand in the future. "Hosting porn is something we're working on," he says. "We have porn payment systems, but not porn itself, as we don't have the bandwidth."

Infinite bandwidth will arrive on Sealand within the next 18 months. "At that point, I want to host a 40 gigabit per second porn server with payment systems integrated. It'll provide money and a huge amount of network traffic. And the more network traffic we push through, the easier it is to hide other customers' network traffic in that."

And this would make Ryan's hosting services even more attractive to his mysterious customers. "It also makes it cheaper for us to buy transit because of economies of scale. So porn, well, it's sort oficky, but it's a good industry for us to be in."

But buying transit from carriers is not a problem. HavenCo runs its own local Internet registry and pays its bills on time. Although Ryan won't get into specifics, it's clear HavenCo uses several suppliers and adopts what he calls "miscellaneous network connection" methods. A satellite dish is in plain view on Sealand, but there are other links, "Satellite is one component of our network, but you can't use that as your primary thing because there's latency and the gambling providers are all concerned about that," he says.

As for who the customers are exactly, Ryan is tight-lipped. In the past he's hosted Tibet Online, the website of the exiled Tibetan government. Some systems have also put their index servers there, but not their main conduit services.

Ryan clearly supports particular causes. "There's a certain religion that's really unpopular with Internet users--Scientology," he comments. "A customer should be online in a couple of months with all their secret documents. It'll be very interesting."

Plain brown wrapping

Customers usually choose to pay HavenCo discreetly. "Most pay by wire transfer, or some sort of Internet payment system like e-gold," he says. E-gold (www.e-gold.com) uses realgold to guarantee the value of its payment systems. The real gold stays in a vault, while the ownership changes hands.

The Internet payment systems HavenCo hosts provide similar types of services. "They're more privacy-oriented. They don't reveal information about their payments."

But what about money laundering? It's not an issue, Ryan claims. He's got it all worked out. "[Payment processing systems] are generally restricted to small transactions and maximum amounts. It's harder to launder money through them than in a suitcase. If you're laundering, you want it lobe under one per cent of the total volume of the system. Our customers doing payment processing have volumes of $ million a year, so you couldn't launder a worthwhile amount through the system.

"In theory, I have no problem with people anonymising their financial transactions. From a practical standpoint there's no way you can do that and still interface with existing banking systems."

Ryan's side projects and own personal interests suggest that he's moving away from his current hands-on role at HavenCo. A lot of his time is spent speaking at hacking and cryptography conferences, so he gets ample time away from the fortress, HavenCo may also set up data centres in other locations, although right now that would mean competing against itself.

His dream project is to raise $10 million so he can build a rocket launcher somewhere in a "nice remote location".

It's time to finish the interview as we have to get going to catch the day's only boat outta the place. This time I'm lucky enough to be able to sit in the vessel as it's lowered from the platform into the sea. Everyone else has to be winched down--with no harness--on a wooden swing. But we're old hands at this capernow. Our stomachs have settled enough for us enjoy the bumpy ride back to Harwich.

Reflecting on our little excursion, I decide that although HavenCo is a great idea and Ryan is really passionate about what it stands for, anyone who'd want to live on that place for more than a day must be crazy. Even if they are defending other people's precious content and defying the laws of other countries by creating their own jurisdiction, Sealand's a spartan place.

And the bottom line is, HavenCo is a business, not a non-profit organisation set up to let Web activists get their voices heard without fear of being taken offline. Ryan himself represents an exception to this, but if and when he leaves, who will go to Sealand to ensure HavenCo's philosophies remain? There may be people who would jump at the chance, but in reality it's not a very nice place to live, It'd have to be someone truly dedicated to the concept. (Post script: Ryan left HavenCo in mid 2003 to do other pursuits, putting HavenCo's future in doubt.)

Wanna work for HavenCo?

Ryan tries to spend half his time on Sealand. "I don't know how you'd describe the living conditions here," he says. "They'll be familiar to people who've squatted in buildings in Amsterdam, because of the industrial space. This room has been done up in the last two months, but the rest has been left over since WWII."

For this reason, HavenCo's finding it a bit hard to find interns and full-time staff. Around 5-10 employees do remote admin. "As you can see from the conditions here it's not quite five-star accommodation... or four-star... or even two-star."

Ryan suggests he's on the lookout for interns who might want to work on their own software projects while also doing technical work.

He gets a lot of interest, especially from recent college graduates and security experts. "We have hundreds of people send in resumes. But it's hard to get people to stay once they show up, because then they realise they're stuck here for a couple of weeks at a time. It's mostly the philosophy that attracts people here."

Ryan himself lives on the Internet, spending 18 hours a day online. Even if he's travelling, he still has to make sure there's a terminal nearby. "I'm always logged on," he says. Ryan spends his spare time on the Internet emailing, downloading MP3S and DivXs, playing computer games or using Internet Relay Chat.

COPYRIGHT Kim Gilmour and EMAP 2002.

Posted by kimgilmour at December 18, 2003 09:51 AM
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