How Did Blake Hall Get Between You And Your Identity?
Bloomberg Businessweek|January 24, 2022
During the pandemic his online-authentication company, ID.me, became the government’s digital gatekeeper. And its grip is only getting tighter
Shawn Donnan and Dina Bass

If you were writing a techno-thriller, you’d give your hero a backstory like Blake Hall’s. He’s a Harvard MBA, an alumnus of McKinsey & Co.’s ultra-competitive summer associate program, and comes from a family with a proud military tradition. He’s a decorated Army Ranger who saw action in Iraq; his dad was an Army brigade commander; his grandfather fought off a Nazi assault in World War II. Now he’s the co-founder of a cybersecurity company who peppers his conversations with battlefield jargon, offering his meaculpas with pledges to do pushups as self-inflicted punishment. “I feel a moral duty because I still have the DNA of a soldier,” Hall said in an October interview.

So this past June, when he very publicly claimed that his company, ID.me, a player in the booming online identity verification business, had uncovered one of the biggest heists in U.S. history—a $400 billion theft of pandemic unemployment payments perpetuated by cyber criminal gangs—it came with a certain veneer of credibility.

Within minutes of Axios publishing the interview with Hall, the $400 billion figure went viral. It generated news stories of a nefarious dark web inhabited by Nigerian criminal syndicates out to massively defraud the U.S. government. It was seized on by think tanks on both the left and right that are trying to reimagine the delivery of government benefits. It caused a nervous shifting in seats among officials at the U.S. Department of Labor and state agencies overwhelmed by an unprecedented volume of unemployment claims. Republicans latched onto it as an example of obscene government waste.

“The greatest theft of American tax dollars in history has risen unabated to $400 billion, with nearly half of all pandemic unemployment spending lost to fraud by criminals,” declared Kevin Brady, the top Republican on the House Ways and Means Committee. It was an almost unimaginable amount, a sum larger than the combined annual budgets of the U.S. Army and Navy and five times what the federal government collects annually in taxes to fund the unemployment system.

It’s also a number that, with the benefit of time, data, and a little interrogation, looks increasingly hyperbolic. Hall’s key allegation was that half of the money the government paid out—more than $800 billion by then—had been stolen by fraudsters. But the states’ own accounting doesn’t back that up. In December, California, by far the largest state payee of benefits, said it had identified $20 billion in fraudulent unemployment payments during the pandemic, 11% of what it paid out overall. California was responsible for a quarter of all pandemic unemployment payouts in the U.S.; if its fraud experience held nationally over the past two years it would translate into roughly $95 billion. That’s a big sum, but still only a quarter of what Hall was estimating. And other states like Ohio and Texas have reported lower levels of fraudulent payments than California.

But Hall’s $400 billion figure set two things in motion: It fed a fear of criminal activity—some of it legitimate—that caused states to impose new checks and flag often innocent claims as fraudulent, freezing payments for weeks and sometimes months to legions of people in dire need of help in the middle of an epochal crisis. It also helped solidify ID.me’s move from a little-known, decade-old company with a few niche government contracts into a swaggering industry leader now valued at $1.5 billion with ambitions to be America’s digital gatekeeper.

Hall is emphatic to this day that the $400 billion estimate is accurate. It is, he says, confirmed in patterns in the data the company has gathered through its work for the labor departments of California, Florida, New York, Pennsylvania, Texas, and 22 other states. If state agencies are reporting far lower levels of fraud publicly, well, they’re wrong. “The data we have is very clear—this is the largest cyberattack in terms of fraud in American history,” Hall wrote in an October email to Bloomberg Businessweek, one in a series that he and spokespeople for ID.me sent over weeks offering circumstantial evidence to back up their math. “Just like a recon platoon leader on the battlefield, our duty is to report truthfully what we see. If people react negatively to the truth, then that’s on them.”

For Hall, the number has to be accurate, because his company’s ambitions are riding on it. He wants ID.me to control what he calls the identity layer of the internet, which would make it the equivalent of a digital bouncer, albeit one whose software doesn’t always work. “Our goal is to be everywhere you want to be in the future,” he says.

For most people, creating an ID.me account is a hassle-free process. ID.me combines data from the phone you’re using, selfies you’re asked to send, and scans of government documents to verify you are who you say you are. Once you’ve done that, goes Hall’s pitch, you’ll be able to do everything online from banking and filing your taxes to accessing your health records and checking into a hotel room, without constantly being asked for credentials and passwords. Eventually, every U.S. citizen could be armed with an ID.me digital passport.

Hall’s vision has attracted $275.5 million in investments from the likes of Alphabet Inc., Morgan Stanley, and former U.S. Secretary of Commerce Penny Pritzker. It’s won votes of confidence not only from the 27 states that have hired ID.me during the pandemic but also from the U.S. Department of Labor, which last year awarded it $1 billion to modernize state computer systems. The IRS, too, used ID.me to help people register for monthly child tax credit payments introduced last July.

But the company’s tightening national grip also raises no shortage of troubling questions, starting with: Should we be entrusting private companies with a responsibility that would naturally fall on governments—such as verifying the identities of their own citizens? Just as we probably don’t want Amazon or Facebook controlling access to our tax records or a government lifeline when things go wrong, it isn’t clear we should want ID.me to be everywhere we want to be.

ID.me began 12 years ago as TroopSwap, a Craigslist knockoff for the military community. Hall and his business partner, a fellow soldier turned MBA student named Matt Thompson, later turned it into more of a Groupon-style discount service. Then they realized the real asset of TroopSwap was the software, which allowed veterans to prove their eligibility without presenting documents bearing Social Security numbers or other sensitive personal information. Hall says that ex-military people often had to show those papers not only to get access to Department of Veterans Affairs-backed mortgages or healthcare benefits but also “to get a free Bloomin’ Onion at Outback Steakhouse on Veterans Day. It is not a good trade to show your Social to a stranger to get a free fried onion.”

In 2012, Hall and Thompson, neither of whom had a tech background, saw an opportunity. The Obama administration had announced the National Strategy for Trusted Identities in Cyberspace, a push to get private-sector companies to develop ID-verification technologies. The TroopSwap team bought the ID.me domain, rebranded, and won a $2.6 million grant from the Commerce Department’s National Institute of Standards and Technology.

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