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Pittsburgh grand jury indicts 2 Israelis in alleged Darknet conspiracy | TribLIVE.com
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Pittsburgh grand jury indicts 2 Israelis in alleged Darknet conspiracy

Natasha Lindstrom
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NATASHA LINDSTROM | TRIBUNE-REVIEW
U.S. Attorney Scott W. Brady announces the indictment of two Israeli men who are accused of helping customers buy illicit drugs and guns through the so-called “dark web” or “Darknet” alongside officials from the FBI, Israel and Brazil during a news conference at the federal court building in Downtown Pittsburgh on Wednesday, May 8, 2019.

Two Israeli citizens are accused of facilitating online sales of illicit drugs and guns in exchange for nearly $15.5 million worth of Bitcoin kickbacks.

U.S. Attorney Scott W. Brady described the case Wednesday as “the single most significant law enforcement disruption of the Darknet to date.”

“This case represents the first takedown of the very infrastructure that supports and promotes illegal marketplaces where fentanyl and other illegal drugs are sold on the dark web,” Brady said at the federal court building in Downtown Pittsburgh. “The significance of this takedown and this prosecution cannot be overstated.”

Tal Prihar, 37, who resides in Brazil, and Michael Phan, 34, who resides in Israel, have been indicted by a federal grand jury in Pittsburgh on charges of money laundering and conspiracy in connection to a website they owned and operated for years, called DeepDotWeb (www.DeepDotWeb.com), a one-count April 24 indictment unsealed on Wednesday shows.

Both men were arrested overseas on Monday — Prihar by local police in Paris and Phan in Israel.

Their website was seized by the U.S. Court of Western District of Pennsylvania via a judicial order.

Federal prosecutors are seeking the immediate seizure of close to $15.5 million worth of U.S. currency from the defendants, whose website facilitated tens of thousands of illegal transactions on the so-called “dark web” or “Darknet.” That’s where online marketplaces not accessible by typical search engines make it relatively easy for people around the world to purchase illegal goods and services.

A multi-country takedown

Brady was joined by the FBI and federal police officials from Israel and Brazil in announcing the charges stemming from the years-long, multi-country investigation.

Tens of thousands of transactions on the dark web connected to the defendants’ website spanned a wide range of illicit drugs, including fentanyl, heroin and cocaine, along with assault rifles, “malicious software, hacking tools, stolen financial information and weapons of mass destruction,” said FBI Pittsburgh Field Office Special Agent in Charge Robert Allan Jones.

“The availability of these illegal substances, items and services, facilitated by the subjects in this investigation, harmed not only the citizens of the United States in Western Pennsylvania, but also the citizens of Brazil, Israel, Germany, France, the Netherlands, the U.K. and many other countries whose law enforcement assist us regularly in shutting down these illicit marketplaces.”

The far-reaching investigation involved the work of more than a dozen law enforcement agencies from the U.S. and several countries.

“We believe this is one of the most significant dark web prosecutions to date because we are taking apart the ability for users to even access those (marketplaces),” Brady said. “We decided that we needed to attack the very infrastructure that supports the illegal sale of deadly drugs on the Darknet, and we also knew that we had to reach overseas to get to these sources.”

Gabriel Bitton, Israel National Police Attache for North America, said that the case demonstrates how effective law enforcement can be when they collaborate across borders to prosecute international crimes, and also sends cyber criminals using the dark web the message: “Beware, we are also there.”

Eugenio Ricas of the Brazilian Federal Police Attache said that dark web marketplaces are “a huge problem in our modern society” and a top priority for Brazilian federal authorities.

“We really believe in the international cooperation,” Ricas said. “This is the way to fight against international crime.

“It doesn’t matter how sophisticated the crime or the nationality of the bad guy, if the law enforcement agents around the world work together, we’re going to win.”

How the scheme worked

Between October 2013 and this week, the two defendants owned and operated DeepDotWeb as a 50-50 partnership, Brady said.

The website itself was not an illicit marketplace — but it was critical in enabling customers to find and purchase the constantly changing links, websites and guidance necessary for accessing the so-called “dark web,” Brady said.

The marketplaces served as “a centralized, trusted website” for users of the dark web, including by providing tutorials on how to buy drugs online and alerts about dark web-related law enforcement actions.

“They also provided a place for dark marketplaces to be reviewed and compared, and most importantly, they provided links to these dark web marketplaces that provided easy access,” Brady said.

Two of the largest marketplaces — both which were seized by the Department of Justice and FBI — were AlphaBay and Hansa.

Of all AlphaBay’s transactions, 23.6% were associated with a Deep Dot Web referral, and 40% of all users who accessed Hansa came through Deep Dot Web, Brady said.

Deep Dot Web’s owners not only assisted users, but monetized the process, Brady said. All of Deep Dot Web’s users transactions were tracked, and the co-owners shared in a 50/50 split of kickbacks for each transaction made facilitated by their website.

Deep Dot Web received kickbacks in Bitcoin valued at $1.57 million in U.S. currency from AlphaBay for 6,147 transactions, and $14,800 from Hansa for 1,124 transactions, plus hundreds of thousands of more dollars from other various dark web marketplaces, the indictment said.

Prihar and Phan tried to conceal their illegal kickback payments by transferring them to other Bitcoin accounts and to bank accounts controlled in the names of shell companies, the indictment said.

The case cited transactions dating to January 2016 in which at least four dozen people — as well as undercover FBI agents from Western Pennsylvania — bought illegal drugs, stolen credit cards, hacking software and other illicit goods via various dark web marketplaces.

As the Department of Justice, FBI and U.S. Attorney’s Office continue to prosecute such cases, more “dark web marketplaces will be shut down, and unfortunately they may reappear in another form after a certain period of disruption,” Brady said.

“But if we can attack the infrastructure — people’s ability to not only access the marketplaces but then for the criminals to take the money out — then we think that’s a significant achievement,” Brady said. Brady would not yet discuss specifics regarding possible extradition of the suspects nor the type of sentences their charges could bring.

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, [email protected] or via Twitter .

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