Lavabit shutdown marks another costly blemish for U.S. tech companies

Email provider's move will further fuel concerns that American companies can't be trusted to keep customer data private

Lavabit, the purported email provider to NSA leaker Edward Snowden, abruptly suspended its operations yesterday under mysterious circumstances. Lavabit founder and operator Ladar Levison said that after much soul searching , he'd decided to shut down the U.S.-based service -- but couldn't legally reveal his reasons.

"I wish that I could legally share with you the events that led to my decision. I cannot," wrote Levison. "I feel you deserve to know what's going on -- the First Amendment is supposed to guarantee me the freedom to speak out in situations like this. Unfortunately, Congress has passed laws that say otherwise."

Founded 10 years ago, the Lavabit email service is geared toward privacy-conscious users. The company has claimed it encrypts all emails, does not store users' passwords, and -- per its mission statement -- would "only release private information if legally compelled by the courts in accordance with the United States Constitution."

Lavabit's move represents another black eye for the U.S.-based tech companies, many of which have struggled to protect their reputations in the wake of the revelations about the federal government's far-reaching surveillance programs. Foreign leaders have seized the opportunity to steer their citizens away from America-based services. Meanwhile, a recent report from the Information Technology and Innovation Foundation predicted that U.S.-based cloud companies stand to lose as much as $35 billion over the next three years, due to customer wariness of Prism and other spying programs.

Levison himself wrote that he would "strongly recommend against anyone trusting their private data to a company with physical ties to the United States."

Indeed, email provider Silent Circle announced that it was shutting down its services and credited Lavabit's move with driving the decision. "Today Lavabit shut down their system lest they 'be complicit in crimes against the American people,'" wrote Silent Circle co-founder Jon Callas. "We see the writing [on] the wall, and we have decided that it is best for us to shut down Silent Mail now. We have not received subpoenas, warrants, security letters, or anything else by any government, and this is why we are acting now."

Levison said that he is going to take his case to court and is seeking donations for a Lavabit Legal Defense Fund. "We've already started preparing the paperwork needed to continue to fight for the Constitution in the Fourth Circuit Court of Appeals," he wrote. "A favorable decision would allow me [to] resurrect Lavabit as an American company."

The Electronic Frontier Foundation (EFF), meanwhile, called on the feds to provide greater transparency to the public, in part to help observers "understand what led to a ten-year-old business closing its doors and a new start-up abandoning a business opportunity."

"We call on the government and the courts to unseal enough of the docket to allow, at a minimum, the public to know the legal authority asserted, both for the gag and the substance, and give Lavabit the breathing room to participate in the vibrant and critical public debates on the extent of email privacy in an age of warrantless bulk surveillance by the NSA," wrote EFF senior staff attorney Kurt Opsahl.

This story, "Lavabit shutdown marks another costly blemish for U.S. tech companies," was originally published at Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow on Twitter.

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