Coinbase aids darknet drug bust
Bitcoin

DoJ: Coinbase aids darknet drug bust

The Department of Justice alleges William Burgamy is a highly effective drug dealer who isn’t very good at concealing his identity

Alleged darknet drug dealer William Burgamy may have had plenty of good reviews of his underground pharmacy, but it seems he was sorely lacking in cryptocurrency experience.

Burgamy was allegedly running a sophisticated opiate-dealing operation under the name NeverPressedRX across two covert markets—boasting his pills came from U.S. pharmacies and that his shop was “running at full speed” despite the coronavirus. According to court documents, he had 99.95% positive reviews on one darknet site.

However, busting him did not take the kind of sophisticated blockchain tracking techniques that recently led feds to the operator of a major child pornography ring.

Coinbase aids darknet drug bust
Burgamy was allegedly proud of his reputation for providing pharmacy-sourced oxycodone and Xanax (Photo: Department of Justice).

An undercover FBI agent managed to expose Burgamy’s true identity thanks to a series of crypto-rookie errors. To start with, in the first of six undercover buys by an FBI agent, Burgamy allegedly provided a Bitcoin address for payment. He promptly sent the bitcoins from that address to an account he had opened with Coinbase. 

The San Francisco-based cryptocurrency exchange is known for robust Know Your Customer checks and adherence to regulations. Coinbase promptly handed over Burgamy’s personal email address, phone number, billing address, and a photo of his Maryland drivers license.

A second avenue investigators were able to follow was when Burgamy allegedly sent a mass email about price increases to his clients, including an undercover FBI agent. In it, he promised:  “We don’t f–k fuck around or play games, this is a business for us and we run it as a five-star business should be run.” 

While it came from an encrypted email account, Burgamy apparently used the marketing platform Mailchimp to send it—a fact that was visible in the email’s header.

Records obtained from Mailchimp indicated that it had an account belonging to “NPRX”—his company’s initials. To make matters worse, he failed to properly conceal his Comcast IP address when setting up the Mailchimp account. Comcast’s records matched Coinbase’s information.

Coinbase aids darknet drug bust
A mixer is not just the steel jar used to shake your martini (Photo: Department of Justice)

After finding Burgamy’s address in Baltimore, investigators tailed the 32-year-old and allegedly spotted him heading to local post offices in his black Lexus to mail prescription drugs to feds masquerading as customers. Thousands of opioid pills were discovered when his property was searched as well as eight firearms—including two loaded AR-15 assault rifles, according to the FBI.

Burgamy has been charged with distribution of controlled substances and money laundering, and he faces up to 40 years behind bars if convicted. 

The real goods

Even though he wasn’t a pharmacist, Burgamy seemed to have had access to high-quality stock, and provided excellent customer service.

The court documents contained photographs taken from his listings on the darknet, with large quantities of Xanax, Percocet and Vicodin laid out on pieces of paper bearing his username.

Several undercover purchases were made by the FBI back in January in exchange for Bitcoin. Although the pills delivered “were consistent in physical appearance with genuine prescription narcotics,” lab tests are pending to confirm their authenticity.

In one email to the feds, Burgamy allegedly confirmed that he had Valium available to purchase, telling the undercover agent they were “waiting for a lot of shit to arrive this coronavirus is f—ing up inventory.”

G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, said in an April 9 release: “I want to offer thanks and praise to our local law enforcement partners for moving forward with this public safety investigation amidst the COVID-19 pandemic.”

Crypto helps

Coinbase’s participation in this investigation shows that Bitcoin payments aren’t the safe haven of anonymity that many people believe, especially if they are performed through major, law-abiding exchanges.

That certainly describes Coinbase. 

Brian Brooks, who was serving as its chief legal officer, was recently head-hunted by the U.S. Treasury Department, becoming chief operating officer of the Office of the Comptroller of the Currency. In February, the exchange completed two major security audits, in a move to lure more institutional money into crypto. Coinbase has also been attempting to woo consumers, many of whom have been unwilling to try digital assets or are unaware of them.

In a development it described as a “significant milestone in the mainstream adoption of crypto as a genuine utility,” Coinbase on Feb. 19 announced plans to directly issue Visa debit cards to its users—bypassing expensive banks and payment processors. With Coinbase now a Visa principal member, the cards are set to launch later this year.

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Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.