On September 6, the Fresno Division of the Eastern District Court of California concluded a 14-month-long civil forfeiture case to seize assets and property belonging to Alexandre Cazes, the Canadian national who committed suicide by hanging in Thai prison last summer days after being arrested on suspicion of operating the darknet marketplace AlphaBay.
Cazes, whose death prevented him from standing trial, allegedly facilitated and profited from sales of illegal goods and services to United States and overseas customers on AlphaBay until law enforcement shut down the website in a dramatic confrontation outside of his primary residence, where he was led off in handcuffs on conspiracy charges related to identity theft, fraud, racketeering, trafficking and money laundering on July 7, 2017.
According to an arrest video investigating special agent Nicholas Phirippidis played at the International Conference on Cyber Security in January, officials from the Federal Bureau of Investigation, Drug Enforcement Administration and Royal Thai Police crashed a squad car into the front gate of Cazes’ Bangkok mansion to lure him into reach before he could encrypt or wipe digital evidence connected to the crimes.
That evidence – administrative accounts logged into AlphaBay forums and servers along with text files identifying password credentials for AlphaBay website and hosting services – was located on an open laptop police found in Cazes’ bedroom while conducting a search and entry raid of his home.
A separate document breaking down Cazes’ net worth, assessed at $23 million, recorded enormous sums of money, lavish real estate holdings and expensive cars that played up a life of luxury to match the black market fortune the 26-year-old is said to have amassed from commissions levied on AlphaBay transactions.
Because the website did not accept traditional payment methods, Cazes possessed more than $8.8 million in cryptocurrencies pooled across 1,605.05 bitcoins, 8,309.27 ether, 3,691.98 zcash and an unknown amount of monero, the financial statement indicated.
Customer funds were moved into multiple shell companies and cryptocurrency exchanges undetected this way. Federal complaints say Cazes used “mixers” and “tumblers” to programmatically split and combine the cryptocurrencies between several wallets, obscuring transaction histories.
The business fronts and the exchange wallets were linked to bank accounts Cazes and his wife Sunisa Thapsuwan, a native Thai citizen, registered in Thailand, Switzerland and the Caribbean to liquidate the funds into fiat money, including $770,000 in cash he saved on hand. The document marked the private keys and addresses for the wallets next to the cryptocurrency amounts.
Once the funds were converted, the couple splurged on four luxury vehicles – a $900,000 2013 Lamborghini Aventador LP700-4 with a vanity license plate that read “TOR” (a reference to the privacy-enhancing Internet browser), an $81,000 Mini Cooper, a $21,000 BMW motorcycle and a $292,957 Porsche Panamera – and 6 beachfront vacation resorts overlooking the coasts of Thailand, Cyprus, St. Phillips South and Antigua and Barbuda.
The cars and the real estate properties, collectively valued at $12 million, were entered as claimants in the forfeiture motion, as were Cazes, Thapsuwan and his parents Martin Cazes and Danielle Heroux, who may have received money and gifts from their son that were purchased with proceeds collected from AlphaBay.
Silk Road parallels and differences
A notoriously lucrative enterprise from its inception in September 2014, AlphaBay was the busiest commercial venue on the dark web until Cazes’ incarceration, peaking at over 400,000 lifetime users, 370,000 cumulative listings and $800,000 worth of daily transactions at the time of its collapse.
In 2015, AlphaBay made headlines when vendors sold user account data stolen from U.S. ridesharing app Uber and British telecommunications and broadcasting giant TalkTalk in company-wide data breaches. The following year, and the year after, AlphaBay’s own website was compromised by hackers, who exposed upwards of 213,000 private user messages.
By then AlphaBay was 10 times the size of Silk Road, an earlier darknet marketplace that reigned as an one-stop shop for drugs, weapons, chemicals, malicious software and pirated and counterfeit information. Silk Road launched in February 2011 but closed in October 2013 when U.S. federal authorities apprehended Ross Ulbricht, its founder, in San Francisco.
Ulbricht, a 34-year-old Texan libertarian and University of Texas and Penn State graduate, has been serving a double-life sentence and 40 years in federal prison out of Colorado without the possibility of parole for similar charges the Southern District Court of New York pressed against him in February 2015.
However, Ulbricht’s judgment factored in considerably more serious allegations of murder-for-hire. They were permanently dropped in July for lack of evidence, but his sentencing term remained unchanged with the decision.
The court’s refusal to reconsider the conviction dealt another blow to defense efforts to reduce his sentence. Two appeals filed with the U.S. Supreme Court in December 2017 arguing Ulbricht’s Fourth and Sixth Amendment rights had been violated were denied in the month prior to the dismissal of the pending murder-for-hire indictments.
Amicus curiae briefs drafted by an independent legal coalition in February defending the petition for a writ of certiorari suggested his Internet traffic data was seized without a warrant for probable cause and the judge presiding over his case failed to find the necessary facts to support the sentencing term.
A first appeal filed with the U.S. Court of Appeals for the Second Circuit in January 2016 was previously rejected in May 2017. The appeal contested evidence of investigative malfeasance was illegally withheld during trial that, if aired, would have exposed inconsistencies in the prosecution’s line of reasoning and a cover-up incriminating law enforcement in corruption scandals. Two D.E.A. agents were arrested for misusing and pocketing evidence during the course of the Silk Road investigation.
The appeals judge dissented and upheld the jury trial conviction. Ever since, Ulbricht’s family and friends have been campaigning congressional leaders and political allies to commute his sentence under the Twitter handle “@Free_Ross.” In July, the account tweeted a Change.org petition that has garnered over 80,000 signatures asking President Donald J. Trump to grant Ulbricht clemency. Supporters of the clemency claim the justice system mistreated Ulbricht.
Like the legal fallout, drama marred the pursuit to unmask his identity. While investigators also went undercover with AlphaBay purchases to dig up clues on Cazes, they implemented decidedly more aggressive means to monitor and bait Ulbricht from behind the screen. Trial testimony revealed intelligence authorities planted local and remote wiretaps on Ulbricht’s computer devices and Internet service providers without court orders at the same time plainclothes police officers interacted with Ulbricht up close in his everyday life to befriend him and earn his trust.
As a result, Ulbricht’s defense maintained their client was framed and, in agreement with U.S. Department of Homeland Security special agent Jared Der-Yeghiayan, accused Mark Karpeles, the CEO of the washed-up cryptocurrency exchange Mt. Gox, and Ashley Barr, Karpeles’s colleague, of being the real “Dread Pirate Roberts,” or the handler for the Silk Road administrator account whose ownership has come under dispute for these shared associations.
The D.P.R. pseudonym was handed down from user to user, and the National Security Agency possibly acted as an undisclosed force undermining the Silk Road investigation, Ulbricht’s attorneys contended.
On the other hand, the government appears to have settled with following Cazes’ paper trail from afar using groundwork investigative tactics, and Cazes’ immediate circle and law enforcement officials have not challenged his leadership over AlphaBay or denounced the U.S. government for misconduct.
The federal government tracked Cazes down from his online aliases, as it initially did to Ulbricht before surveilling his Internet traffic with a pen/trap register. Welcome and password recovery emails listed the alleged AlphaBay mastermind’s email address “Pimp_Alex_91@hotmail.com” as a contact source, analogous to the personal email addresses Ulbricht posted in forum boards that discussed Silk Road.
Case climate and contribution to crypto
Had he stayed alive, Cazes would have been extradited to the U.S. and faced an extensive conviction judgment as Ulbricht had, cyber-security experts and government watchdog groups have hypothesized. Both Silk Road and AlphaBay were situated on the dark web, an underground network of hidden Internet communities accessible only via encrypted software programs and anonymizing routing protocols like Tor and I2P.
By 2014, nearly half of the world populated the Internet, prompting government agencies to take notice of the dark web, where the full gamut of cyber-crimes ranging from gambling to child pornography flourished. The ease with which controlled substances could be bought and sold on there quickly evolved into an investigative nexus for the U.S. Department of Justice, which did not respond to requests for comments, to prosecute the war on drugs.
Today, the government’s search for accomplices in both the Silk Road and AlphaBay cases has been actively ongoing, supported by a federal cyber-crime division that coordinates with the Internet Crime Complaint Center to tackle computer crimes. In March, the Northern District Court of Georgia arrested Illinois resident Ronald L. Wheeler, also known as “Trappy,” for marketing and promoting AlphaBay.
Gray and black market narratives have also persisted. Among notable figures who have double downed on old criticisms of cryptocurrencies, Microsoft co-founder Bill Gates, JPMorgan Chase CEO Jamie Dimon and financial economist Paul Krugman once again recently minimized the technology’s pervasive money laundering and tax evasion use cases. Critics, who responded saying the industry titans had rehashed tired points, waged on the contrary that cash and other variations of physical money have been used for these express purposes for centuries, often with greater degrees of secrecy.
Bitcoin, the first cryptocurrency, was stigmatized early on as the preferred financial reserve for delinquent lawbreakers. The once-leading darknet websites mandated that users pay strictly in cryptocurrencies, which sometimes accounted for the bulk of trading volumes on most major exchanges when Silk Road and AlphaBay were online.
For the time being, AlphaBay and Silk Road clones have sprung up in the background and moved immense hauls of illicit goods and services in cryptocurrencies, although none have quite lived up to their predecessors’ legacies. In 2014, the F.B.I. and Interpol took down Diabolus Market, a Silk Road 2.0 former administrators ran upon the downfall of the original Silk Road. Silk Road 3.0, or Silk Road 3 Reloaded, went financially under of its own accord in 2017 after having gone live in 2016.
AlphaBay’s successor, Empire Market, surfaced in March and is still very much up and running, according to the website’s search engine indexed results.
Lamborghini image via Shutterstock