James Kosta woke up at 5 a.m. to the sound of someone pounding on his door. Groggy and naked, he opened the door and was tackled by members of an FBI tactical team, armed with MP5 submachine guns, who started securing all his computers. Kosta was 14 years old.
Kosta's life has often played out like some surreal video game. At 13 years old, he emancipated himself from his parents, only to be busted by the feds one year later for illegal hacking. After his release, Kosta worked for the CIA, and by 24, he was a tech entrepreneur making millions. Today, Kosta, 37, runs 3G Studios Inc., a video game business that's set to pull in $10.5 million in revenue this year.
But startup success wasn't what Kosta expected for himself as a teenager facing 45 years of jail time for 45 counts of technical burglary, including hacking into the systems of major banks, GE and IBM. When a judge gave him a break, Kosta seized the opportunity to turn his life around. HuffPost Small Business found out how Kosta's intense reality eventually led to virtual success.
Why did you seek emancipation from your parents?
I was making money from consulting work, so I approached the school with the idea of formalizing the high school computer club I had started into a business. By my 13th birthday, I was earning about $1,500 a month ... and spending money with friends, coming home late, skipping school. When I had an 18-year-old girlfriend, my parents said if I lived under their roof, I'd have to concentrate on school, give up my girlfriend and shut down my business. I went to court and proved to a judge I was responsible enough to be on my own.
How did you turn your computer skills to hacking?
I fell in with a bad crowd focused on what networks we could get into, both military and commercial. Just like gangs and the mob have initiations, if you want to be part of the most high-profile, advanced hacking groups, you have to cut your teeth. It was nothing destructive. A lot of it was for bragging rights, to say you pulled something off.
You might have been a global hacker when you were arrested, but you were still a kid. Were you scared?
I was terrified. When you're that young, because your parents always give you warnings, you expect someone to say, hey, knock it off. I never expected any action like that. Also, what came to light very quickly was that I wasn't technically a kid. When you're emancipated, they have the right to charge you as an adult.
How were you able to get out of the 45-year sentence?
After being in for almost a year, the judge agreed to suspend my sentence if I didn't commit another crime and I agreed to join the military when I was eligible. I think what he saw was an intelligent kid who needed discipline. For me, it was a no-brainer. I knew if I went to maximum security for youth, a guy like me probably woudn't have a good experience.
In between, they stuck me in a boys camp in Santa Barbara. We were on the second line of fighting forest fires. To see those firefighters in action and have them respect me meant a lot, and shaped me as a man. That's when I first realized I could be helpful to people instead of being nefarious.
At 18, you started serving in the Navy. How did you end up in the analyst division of the CIA by age 20?
I was working on a Naval Intelligence project that got transferred to the CIA. I was responsible for tracking the money going to various warlords and radical sheiks in North Africa and the Middle East. Then I was doing penetration testing on military installations, working with IT groups to see if I could steal data from outside. It was the beginning preparation for technological warfare.
How did you transition from the military to making millions?
I got recruited as a Microsoft contractor straight out of CIA. I was consulting with multiple companies, then my brother and I started one of the first commercial websites focused on financial markets. In 1999, we sold our dotcoms for tens of millions of dollars.
After 9/11, how did you start working for the CIA again?
I offered to simulate Las Vegas getting hit with a dirty bomb and how rescuers could lock down the city. We were using a game engine by the company that did Tom Clancy's Ghost Recon, where we dropped these bad guys into Las Vegas and started [pursuing] them. We thought that was more fun than the simulation business, and our heart was aching to move toward commercial video game development, so we steered the company in that direction.
Your reality has been so intense, what drew you to virtual world?
I fell in love with the concept of interactive entertainment, allowing people to make their own story. The analyst side of me loves that it's like watching ants from above. You get to see how people are experiencing a story, reacting to stimuli you put in place. In intelligence, looking at human patterns, I was fascinated by social hacking, using a person's belief systems to get what you want. The real question with video games is that suspension of disbelief -- can I fool an audience that thinks they're in control when they're really not?
Do you see any way the story of your own life has come full circle?
I was an intelligent, rebellious youth, but my grades and attendance records weren't the sole indicators for my potential contribution to society. Ultimately, society suffers when we're that myopic. When you look a little deeper, as people did with me, you're able to get kids focused on their potential. A huge part of my company is focusing on teen mentoring for troubled youth. That's something I owe to the people who helped me.
Entrepreneur Spotlight
Name: James Kosta
Company: 3G Studios Inc.
Age: 37
Location: Reno, Nev.
Founded: 2006
Employees: 47
2012 Projected Revenue: $10.5 million
Website: http://www.3gstudios.com/pages/home/