Feds just took down a massive dark web marketplace

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Photo Source: FBI

WASHINGTON – After a two-year investigation into one of the world’s largest dark web marketplaces, the DEA and other law enforcement partners announced the arrests of three German nationals who operated the site, which sold illegal drugs and other goods to over a million customers. The three defendants were arrested in the United States and Germany on April 23rd and 24th and now face charges in both countries for their roles as administrators of the Wall Street Marketplace (WSM). (German charges)

A fourth defendant linked to WSM was charged yesterday in a criminal complaint filed in U.S. District Court in Sacramento, California.  Marcos Paulo De Oliveira-Annibale, 29, of Sao Paulo, Brazil, also faces federal drug distribution and money laundering charges for allegedly acting as a moderator who, among other things, mediated disputes between vendors and their customers.  Annibale, who used the online monikers “MED3LIN,” also acted as a public relations representative for WSM by, among others things, promoting WSM on websites such as Reddit, according to the complaint.  The case naming Annibale was unsealed today when Brazilian authorities executed a search warrant at his residence.

“The dark web marketplace, Wall Street Market, was one of the largest operating hosts for vendors peddling illegal wares,” said DEA San Francisco Special Agent in-Charge Chris Nielsen.  “Law enforcement is always adapting to changes in technology and this case sends a clear message to those breaking the law and attempting to hide behind the illusion of anonymity – we will identify and find you.  The success of this case is due to the excellent cooperation between law enforcement agencies from around the globe who delivered another blow to criminal networks operating in the underground cyberspace.”

DEA’s Special Operations Division coordinated this investigation and enforcement operation, which also included the FBI, IRS Criminal Investigations, HSI, and the U.S. Postal Inspection Service. Global partners include German Federal Criminal Police (the Bundeskriminalamt), the German Public Prosecutor’s Office in Frankfurt, the Dutch National Police (Politie), the Netherlands National Prosecutor’s Office, Federal Police of Brazil (Policia Federal), Europol and Eurojust.  Significant assistance was provided by the Criminal Division’s Office of International Affairs and Organized Crime and Drug Enforcement Task Force Program.

A criminal complaint filed Wednesday in U.S. District Court in Los Angeles alleges that the three defendants, who currently are in custody in Germany, were the administrators of WSM, a sophisticated online marketplace available in six languages that allowed approximately 5,400 vendors to sell illegal goods to about 1.15 million customers around the world.  Like other dark web marketplaces previously shut down by authorities – Silk Road and AlphaBay, for example – WSM functioned like a conventional e-commerce website, but it was a hidden service located beyond the reach of traditional internet browsers on the Tor network, a service designed to conceal user identities.

For nearly three years, WSM allegedly was operated on the dark web by the three defendants.  An “exit scam” was allegedly conducted last month when the WSM administrators took all of the virtual currency held in marketplace escrow and user accounts – believed by investigators to be approximately $11 million – and then diverted the money to their own accounts.  Exit scams are common among large darknet marketplaces, which typically hold money in escrow while a vendor delivers illicit goods.

“Just as international law-enforcement partners began dismantling Wall Street Market and taking action against its members, as alleged in the complaint, the site’s administrators decided to steal their customers’ money via an exit scam,” said Assistant Attorney General Brian Benczkowski.  “This operation sends a crystal-clear message: dark markets offer no safe haven.  The arrest and prosecution of the criminals who allegedly ran this darknet marketplace is a great example of our partnership with law enforcement authorities in Europe, with the support of Europol, and demonstrates what we can do when we stand together.”

“Investigators from many countries overcame the national, legal and diplomatic challenges to hold accountable sophisticated actors who operated one of the largest known encrypted marketplaces in the shadowy environment of the Darknet,” said Assistant Director Paul Delacourt of the FBI’s Los Angeles Field Office.  “This case is an example of successful global collaboration among law enforcement entities who share the many challenges of prosecuting transnational criminal activity conducted by individuals who operate anonymously across borders.”

The affidavit in support of the criminal complaint filed in Los Angeles outlines how the defendants operated a sophisticated online marketplace that offered encrypted communications between buyers and sellers, as well as an online forum to discuss vendors and the quality of their wares.  The affidavit also describes an international investigation that was able to identify the three administrators of WSM, show how they previously operated another German-based darknet marketplace that shut down in 2016, and link them to computer servers in Germany and the Netherlands that were used to operate WSM and process virtual currency transactions.

The three defendants allegedly created WSM, maintained the website, and operated the marketplace to ensure that buyers could access vendor pages and that financial transactions were properly processed.  The investigation outlined in the complaint affidavit linked the three defendants to WSM in a number of ways, including their access to the WSM computer infrastructure.  One defendant, for example, used virtual private networks to access WSM computers, but when a VPN connection would fail, his IP was revealed and authorities were able to identify his specific location.

The three defendants charged in the Central District of California were arrested in Germany after the WSM administrators conducted an exit scam in the wake of WSM recently becoming regarded as the world’s pre-eminent dark web marketplace and gaining a significant influx of new vendors and users, according to the affidavit.  On April 16, vendors realized they could not collect the virtual funds that had been placed in escrow by their customers, which prompted German authorities to execute a series of arrest and search warrants.

The complaint affidavit identifies several cases that have been filed in the United States against WSM vendors.One darknet vendor who advertised on WSM is currently serving a 12-year federal prison sentence after being convicted in the Western District of Wisconsin for distributing a fentanyl analogue resulting in the overdose death of a Florida resident who ordered a nasal spray laced with the powerful opioid from the vendor.

Two of the “top vendors” on WSM – identified by the online monikers Platinum45 and Ladyskywalker – were based in the Los Angeles area and were major drug distributors.  One vendor, “Ladyskywalker,” operated on several darknet marketplaces, where the individual advertised and sold opioids such as fentanyl, oxycodone and hydrocodone.

The second top vendor – who used the moniker “Platinum45” and operated on at least two darknet marketplaces, including WSM – advertised and sold drugs such as methamphetamine, Adderall and oxycodone to customers in the United States and around the world, including in Germany and Australia.  “Platinum45” also manufactured Adderall tablets and advertised the sale of up to 1 kilogram quantities of methamphetamine on WSM.

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