LOS ANGELES (CN) – Three German nationals face federal money laundering and drug distribution charges for allegedly operating a black market online store that allowed more than 1 million users to traffic illegal drugs, hacking software and counterfeit goods, the U.S. Attorney’s Office in California announced Friday.
Authorities have shut down similar darknet sites in recent years, including Silk Road and AlphaBay, which appear to function like any online bazaar but operate outside the reach of traditional internet browsers.
Savvy web surfers looking to buy illegal goods can find them on darknet sites by using networks designed to conceal their identities, such as the Tor network, and by paying for items with virtual currencies.
Federal prosecutors allege in a criminal complaint filed Wednesday in Los Angeles that the three men, who currently are in custody in Germany, ran the Wall Street Market, an online store that allowed more than 5,400 vendors to sell illegal goods to more than 1 million customers around the world.
Michael Schoenmann, a vendor on the site, is currently serving a 12-year federal prison sentence for distributing a fentanyl derivative that caused the overdose death of a Florida resident who ordered a nasal spray laced with the powerful opioid.
The site administrators operated the store for nearly three years before deciding last month to execute an “exit scam” that involved diverting approximately $11 million in virtual currency held in escrow and user accounts to their own accounts, according to federal investigators.
The operators supposedly launched the exit scheme once their site gained a significant influx of users after becoming regarded as “the world’s pre-eminent dark web marketplace,” prosecutors said in a statement Friday.
On April 16, after vendors realized they could not access virtual funds placed in escrow by their customers, German authorities began executing a series of arrest and search warrants, the U.S attorney’s office said Friday.
The three administrators – who were arrested in Germany last week, where they also face charges – are each charged in the U.S. with two felony counts of conspiracy to launder money and conspiracy to distribute illegal drugs.
The defendants are Tibo Lousee, Klaus-Martin Frost and Jonathan Kalla, who are between the ages of 23 and 31 and are all residents of Germany.
A fourth defendant linked to the Wall Street Market scheme – 29-year-old Brazilian national Paulo De Oliveira-Annibale – was charged in a criminal complaint Thursday in Sacramento, California.
Prosecutors allege De Oliveira-Annibale acted as a moderator on the site, mediating disputes between vendors and customers, and performing public relations tasks such as the promotion of the online market on websites, including Reddit.
De Oliveira-Annibale, who used the online nickname “MED3LIN,” was arrested at his home Friday after Brazilian authorities executed a search warrant.
McGregor W. Scott, the U.S. attorney for the Eastern District of California, said in a statement Friday that the defendants made mistakes that allowed authorities to uncover their true identities and locations.
De Oliveira-Annibale’s posts on the site’s forum and pictures of him elsewhere on the web allowed authorities to connect him with his online “MED3LIN” persona, Scott added.
“We are on the hunt for even the tiniest of breadcrumbs to identify criminals on the dark web,” Scott said in the statement. “No matter where they live, we will investigate and prosecute criminals who create, maintain, and promote dark web marketplaces to sell illegal drugs and other contraband.”
The two-year international investigation that led to the arrests this month involved U.S. law enforcement agencies as well as authorities in Germany, Brazil and the Netherlands.
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