The U.S. Department of Justice’s Criminal Division has charged a U.S. citizen with dual citizenship in Costa Rica, and a Costa Rican citizen, with illegal sales of opioids and money laundering on the darknet.
David Brian Pate, 44, a U.S.-Costa Rican citizen, and Jose Luis Fung Hou, 38, of Costa Rica, were charged with conspiring with persons to distributing controlled substances, distribution of controlled substances, conspiring with persons to import controlled substances, conspiring to launder money, and laundering of monetary instruments.
“As alleged in the indictment, the defendants helped fuel our deadly opioid drug epidemic by hiding behind the darknet and cryptocurrency to profit from the sale of illicit opioids into the United States,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Fortunately, by working with our law enforcement partners across the United States and overseas, we were able to uncover this darknet opioid market and bring to justice those responsible.”
According to the indictment, Pate illegally purchased narcotics like OxyContin and morphine pills, primarily from Fun, a pharmacist in Costa Rica. Pate would launder payments to Fung to purchase the narcotics, and then sell the pills on a variety of darknet markets, including Silk Road and AlphaBay, in exchange for bitcoin. Using various online names, Pate advertised his product as the “old formula” of OxyContin, which does not contain the crush-proof feature, which prevents a user from inhaling or injecting the pills after crushing them.
Pate would then send bulk shipments of the narcotics to the U.S. from Costa Rica, sometimes concealed in tourist souvenirs such as maracas, the indictment alleges. From there, Pate would send re-shippers of his product a list of customer orders, including the customer’s names, shipping address, and the quantity of pills they purchased. Once customers received their products, bitcoins were released to Pate’s darknet account.
Agents estimate customers paid Pate nearly 24,000 bitcoin for these darknet sales. As of August 10, one bitcoin was worth $11,897 U.S. dollars.
“These charges are a warning to drug traffickers worldwide that neither the shroud of the darknet or of virtual currency can hide their illegal activities from the vigilance of U.S. law enforcement,” said Acting U.S. Attorney Michael Sherwin for the District of Columbia. “We are firmly committed to combatting the problem of opioid abuse and breaking through sophisticated cyber-enabled barriers employed by criminals to hide their activities.”
“The opioid epidemic is a crisis crippling many families in this country,” said Special Agent in Charge Kelly R. Jackson of the IRS Criminal Investigation (CI) Washington D.C. Field Office. “This international group profited off of people’s addictions, revictimizing them when they were already vulnerable. This group purposely distributed opioids that did not contain a safety additive and prevented inhalation of the drug. Years ago, when drug dealers and traffickers moved to the darknet and started using virtual currency to conceal and expand their network, CI also moved our playing field to the darknet to bring groups like this to justice.”
IRS-CI Cyber Crimes Unit, DEA, and the U.S. Postal Inspection Service investigated this case. The Justice Department’s Office of International Affairs and Costa Rican authorities provided assistance.