SAN DIEGO–The chief executive of Canada-based Phantom Secure, and four of his associates were indicted by a federal grand jury on charges that they knowingly and intentionally participated in a criminal enterprise that facilitated the transnational importation and distribution of narcotics through the sale and service of encrypted communications.
Victor Ramos was taken into custody in Bellingham, Washington, on March 7. He made his first appearance in the Western District of Washington and will face charges in San Diego. The remaining four defendants are fugitives.
This is the first time the U.S. government has targeted a company and its principals for knowingly and intentionally conspiring with criminal organizations by providing them with the technological tools to evade law enforcement and obstruct justice while committing transnational drug trafficking.
According to court documents, Phantom Secure advertised its products as impervious to decryption, wiretapping or legal third-party records requests. Phantom Secure also guaranteed the destruction of evidence contained within a device if it was compromised, either by an informant or because it fell into the hands of law enforcement. According to court documents, Phantom Secure’s clients used email handles like the following to conduct criminal activities:
“With one American dying of a drug overdose every nine minutes, our great nation is suffering the deadliest drug epidemic in our history,” Attorney General Jeff Sessions said. “Incredibly, some have sought to profit off of this crisis, including by specifically taking advantage of encryption technologies to further criminal activity, and to obstruct, impede, and evade law enforcement, as this case illustrates.”
Sessions said the Department of Justice will aggressively prosecute not just drug traffickers, but those who help them “spread addiction and death in our communities.”
“When criminals go dark, and law enforcement cannot monitor their phones or access evidence, crimes cannot be solved, criminals cannot be stopped and lives can be lost,” said U.S. Attorney Adam Braverman.
The indictment alleges that as a result of its efforts to facilitate international crime, Phantom Secure has generated approximately $80 million in annual revenue since 2008 and facilitated drug trafficking, obstruction of justice, and violent crime around the world.
The international operation to arrest the company’s chief executive and seize Phantom Secure’s infrastructure involved cooperation and efforts by law enforcement authorities in the United States, Australia, Canada, with additional assistance from U.S. and foreign law enforcement in Panama, Hong Kong, and Thailand.
Over the past two weeks, in cooperation with Australian Federal Police and Royal Canadian Mounted Police, more than 250 agents around the globe conducted approximately 25 searches of houses and offices of Phantom Secure associates in Los Angeles, Las Vegas, Miami, and in Australia and Canada, seizing Phantom Secure devices, assets, and evidence of the charged crimes. The coordinated effort led to the seizure of servers, computers, cell phones, and Phantom Secure devices used to operate the Phantom Secure network, as well as drugs and weapons.
Ramos and the others – Kim Augustus Rodd, Younes Nasri, Michael Gamboa and Christopher Poquiz – are charged with participating in and aiding and abetting a racketeering enterprise and conspiring to import and distribute controlled substances around the world. The defendants have been charged with Conspiracy to Commit RICO in violation of 18 U.S.C. § 1962 and Conspiracy to Aid and Abet the Distribution of Controlled Substances in violation of 21 U.S.C. § 841 and 846.
Authorities have seized Phantom Secure’s property, including more than 150 domains and licenses which were being used by transnational criminal organizations to send and receive encrypted messages. Authorities also seized bank accounts and property in Los Angeles, California and Las Vegas, Nevada.
This case stems from an investigation in the Southern District of California of a Phantom Secure client who used Phantom devices to coordinate shipments of thousands of kilograms of cocaine and other drugs throughout the globe. According to court documents, there were an estimated 10,000 to 20,000 Phantom devices in use worldwide before the authorities dismantled the company. This coordinated action means Phantom Secure’s clients can no longer use these devices to commit crimes.
According to Timothy O’Connor, Executive Director of the Criminal Investigations Division New South Wales Crime Commission, “The disruption of the Phantom Secure platform has been one of the most significant blows to organized crime in Australia.”
Australian authorities executed 19 search warrants across four states last week as part of the international action, where more than 1,000 encrypted mobile devices were seized.
“The action taken in the U.S. directly impacts the upper echelons of organized crime both here in Australia and offshore, who until now have been able to confidently control and direct illicit activity like drug importations, money laundering and associated serious criminal offending,” said Assistant Commissioner Gaughan.
Australian agencies involved in this investigation include the Australian Criminal Intelligence Commission, the New South Wales Crime Commission, state police from New South Wales, Victoria, Queensland, South Australia and Western Australia, the Australian Tax Office and financial intelligence agency AUSTRAC.
“This investigation is a prime example of law enforcement agencies from around the world working together to identify, investigate and charge people involved in transnational criminal activity,” says Assistant Commissioner Jim Gresham, RCMP Criminal Operations Officer, Investigative Services and Organized Crime. “We remain committed to investigating and disrupting these illegal activities that adversely affect each of our communities.”
