On Thursday, September 6, the Fresno Division of the U.S. District Court for the Eastern District of California concluded a 14-month-long civil forfeiture case to seize assets and property that belonged 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, is alleged to have facilitated and profited from sales of illegal goods and services to U.S. and overseas customers on AlphaBay until it was shut down by law enforcement 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 that investigating F.B.I. special agent Nicholas Phirippidis played at the International Conference on Cyber Security in January, officials from the F.B.I., D.E.A. 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 that 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 that 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, as 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 – which had their private keys and addresses marked next to the cryptocurrency amounts — were linked to bank accounts that Cazes and his wife, Sunisa Thapsuwan, a native Thai citizen, had registered in Thailand, Switzerland and the Caribbean to liquidate the funds into fiat money, including $770,000 in cash he had been saving on hand.
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 six 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 besides Cazes, his wife and his parents, Martin Cazes and Danielle Heroux, who may have received money and gifts from their son purchased with proceeds from AlphaBay.
Silk Road parallels and differences
A notoriously lucrative enterprise from its inception in September 2014, AlphaBay, up to Cazes’ incarceration, had been the busiest commercial venue on the dark web, 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 ten 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. It launched in February 2011 but closed in October 2013when 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 that the U.S. District Court for the Southern District of New York pressed against him in February 2015.
On top of narcotics, money laundering, trafficking, computer hacking, identity theft and fraud conspiracy charges, however, Ulbricht’s judgment had factored in considerably more serious allegations of murder-for-hire. Although they were permanently dropped in July for lack of evidence, his sentencing term has remained unchanged.
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 arguing that 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 that his Internet traffic data had been seized without a warrant for probable cause and that the judge presiding over his case had failed to find the necessary facts to support the sentencing term, making it unreasonable.
A first appeal filed with the U.S. Court of Appeals for the Second Circuit in January 2016 was previously rejected in May 2017. This one contested that evidence of investigative malfeasance was illegally withheld during trial.
The evidence, if aired, would have exposed inconsistencies in the prosecution’s line of reasoning and a cover-up wrongly entangling their client in corruption scandals that two law enforcement agents who were arrested for misusing and pocketing evidence had committed in the course of the Silk Road investigation, Ulbricht’s lawyers have claimed.
The appeals judge dissented and upheld the jury trial conviction, and Ulbricht’s family and friends have been campaigning congressional leaders and political allies to commute his sentence ever since under the Twitter handle “@Free_Ross.” In July, the account tweeted a Change.org petition that has garnered over 80,000 signatures in favor of the president of the United States granting Ulbricht clemency.
As with Ulbricht, whose Silk Road pseudonym “Dread Pirate Roberts” ownership has come under dispute for shared associations with other individuals, the federal government tracked down Cazes from his online aliases. The alleged AlphaBay mastermind’s email address, “[email protected],” was listed as a contact source in the website’s welcome and password recovery emails.
But unlike Silk Road, the pursuit to unmask the AlphaBay founder was marred in less drama. Ulbricht’s defense has maintained that 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, a colleague of Karpeles, of being the real Dread Pirate Roberts.
And while investigators also went undercover with AlphaBay purchases to dig up clues on Cazes, they implemented decidedly more aggressive means to monitor and wean out Ulbricht from behind the screen. Trial testimony revealed that local and remote wiretaps were planted on Ulbricht’s computer devices and Internet service providers without court orders, and plainclothes police officers engaged with Ulbricht up close in his everyday life, befriending him to earn his trust.
The D.P.R. pseudonym was handed down from user to user, Ulbricht’s attorney has contended, and the N.S.A. may have acted as an undisclosed force underpinning the Silk Road investigation.
On the other hand, the government seems to have settled with following Cazes’ paper trail from afar using groundwork investigative tactics, and Cazes’ immediate circle and law enforcement officials have yet to challenge his leadership over AlphaBay or denounce the U.S. government for misconduct.
Case climate and contribution to crypto
Had he stayed alive, Cazes would have been extradited to the U.S. and faced an extensive judgment from a conviction as Ulbricht had, cyber-security experts and government watchdog groups have predicted. Both Silk Road and AlphaBay were situated on the dark web, an underground network of hidden Internet communities accessible only by encrypted software programs and anonymizing routing protocols such as Tor and I2P.
By 2014, nearly half of the world had 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 became a political talking point for political administrations and an investigative nexus – and by some measures, a prosecutorial scorecard – for the U.S. Department of Justice, which did not respond to requests for comments, and its war on drugs.
That battle has lasted until now, with the government’s search for accomplices in both cases having been actively ongoing, and the U.S. Department of Justice having carved out a cyber-crime division that coordinates with the Internet Crime Complaint Center to tackle computer crimes. In March, the U.S. District Court for the Northern District of Georgia arrested Illinois resident Ronald L. Wheeler, also known as “Trappy,” for marketing and promoting AlphaBay…