The US DoJ has taken down what it calls the world’s largest criminal marketplace on the Internet called AlphaBay yesterday, which operated for over two years on the dark net. AlphaBay was over ten times larger than Silk Road when Silk Road was taken down in 2013.
Like Silk Road, AlphaBay was used for trading of illegal drugs including fentanyl, to traffic in fake ID and to sell and buy guns and buy services such as hacking services. Over 6 countries helped with the take down including the US, Canada Lithuania, France, the UK and Thailand. The online marketplace accepted only digital currencies for payment – mostly Bitcoin.
AlphaBay was started by a Canadian from Quebec named Alexandre Cazes, who amassed a fortune of over US$23 million in Canada and Thailand. He was arrested in Thailand on July 5, 2017, by Thai authorities on behalf of the FBI and charged with inter alia, money laundering, drug trafficking, trafficking in illegal fire arms.
He committed suicide in prison a few days later rather than face justice in the US. The assets of him and his wife, and his family in Canada are already frozen in Greece, Canada, Thailand and Antigua. The FBI has also already seized the digital currencies he held at various exchanges around the world. Cazes had US$3.6 million worth of Bitcoin, US$1.6 million worth of Ether and US$708,000 worth of ZCash. AlphaBay had over 240,000 different Bitcoin wallets.
Cazes applied for immigration in Antigua and Cyprus and set up bank accounts using private companies to obfuscate ownership. Unfortunately for Cazes, he seemed to be unaware that buying citizenship in certain countries, such as Antigua, is a red flag for suspected money laundering to law enforcement.
AlphaBay operated on TOR and had over 200,000 users and 40,000 vendors. At the time of its takedown, there were over 250,000 listings for illegal drugs and controlled chemicals on AlphaBay for sale, and over 100,000 listings for stolen and fraudulent identification documents and access devices, counterfeit goods, malware and other computer hacking tools, firearms and fraudulent services.
The US Attorney General said in a news conference that the US government will hunt down such people no matter where they are hiding (including obviously in Canada as this case shows), particularly because of the sale of fentanyl that is “sending Americans to an early grave” and will be going after transnational criminal organizations that move drugs – whether they are on the dark net or in broad daylight. The US government said that several American teenagers died using fentanyl that had been sold by Cazes on AlphaBay.
The reference to transnational criminal organizations is interesting – usually law enforcement means the Mafia but in this case, there is no obvious connection to the Mafia that has been disclosed yet. However, the last such take down – Silk Road – which was also an online Bitcoin marketplace, was used by the Mafia in the EU and the Hells Angels in Vancouver, where the latter were known to have offered hitman services online for payments in Bitcoin. How the Hells Angels in Canada or members of the Mafia in the EU obtained Bitcoin wallets and were able to buy and sell digital currency using traditional banks to wire funds on exchanges remains a mystery.
Silk Road led to the subsequent arrests of hundreds of people around the world who were vendors on that site and of people who purchased illegal items. It is expected that the same will happen with AlphaBay and banks can expect to be under pressure to the extent they banked digital currency millionaires who are engaged in criminal activities. Already, the US DOJ has disclosed the conviction of two people who sold drugs on AlphaBay who have already agreed to sentences of over six years each in prison. They were located from details of their Instagram and Facebook accounts. Interestingly, in our experience it tends to be iTunes information that reveals a person and his / her location to law enforcement, not Instagram. The two convicted dealers were both foreign nationals living in New York who sold heroin and cocaine online and shipped it across the US.
With respect to AlphaBay’s owner, the following banks banked Cazes and were the subject of seizure orders: Loyal Bank in St. Vincent and Grenadines; the Bangkok Bank, the Siam Commercial Bank and the Kasikorn Bank (all in Thailand), Bank Alpinum and Bank of Ayudhya. He also had a PayPal account and several Canadian bank accounts that were still open at the time of the take down. Bitcoin Suisse AG acted as his Bitcoin exchange, as did the Bitcoin Company Ltd.
Cazes led a lavish lifestyle, buying numerous luxurious items from cars to condos to watches despite having no gainful employment or legitimate business that he could show AML officers to justify the vast amount of funds flowing through his bank accounts.
The indictment is here.