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Date: 10-04-2018
Case Style:
United States of America v. Ryan Farace
Case Number: 1:18-cr-00018-CCB
Judge: Catherine C. Blake
Court: United States District Court for the District of Maryland (Baltimore County)
Plaintiff's Attorney: Dana J. Brusca and Zachary B. Stendig
Defendant's Attorney: Warren Brown
Description:
Baltimore, MD Maryland Men Plead Guilty to Charges Relating to Dark Web Drug Distribution and Money Laundering
Distributed More Than 920,000 Counterfeit Xanax Pills on the Dark Web in Exchange for Bitcoin Worth More Than $5 Million
Ryan Farace, age 34, of Reisterstown, Maryland, pleaded guilty on October 2, 2018 to drug distribution and money laundering conspiracies. The charges arose from a scheme to manufacture and distribute alprazolam tablets, which are typically sold under the brand name “Xanax,” through sales on the dark web in exchange for Bitcoin. Farace and his co-conspirator, Robert Swain, laundered the drug proceeds through financial transactions designed to conceal the source and ownership of the illegal funds. Robert Swain, age 34, of Freeland, Maryland, pleaded guilty today to the money laundering conspiracy.
The guilty pleas were announced by United States Attorney for the District of Maryland Robert K. Hur; Assistant Special Agent in Charge Don Hibbert of the Drug Enforcement Administration - Washington; Acting Special Agent in Charge Cardell T. Morant of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); Postal Inspector in Charge Peter R. Rendina of the U.S. Postal Inspection Service – Washington Division; Acting Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service (IRS) – Criminal Investigation; Maryland U.S. Marshal Johnny Hughes; and Chief Terrence B. Sheridan of the Baltimore County Police Department.
“Federal law enforcement and our international partners are working together to find and prosecute those who use the dark web to sell drugs and launder the proceeds of their drug dealing,” said U.S. Attorney Robert K. Hur. “This case is an excellent example of what can be accomplished through that cooperation.”
“The dark web is the new frontier for drug dealing,” stated Don Hibbert, Assistant Special Agent in Charge Drug Enforcement Administration Baltimore District Office. “DEA will find and arrest drug traffickers wherever they are, whether it be in the coca fields of Colombia, the alleys of Baltimore, or in the dark corners of the internet.”
According to their plea agreements, from November 2013 through June 2017, Farace purchased narcotics manufacturing equipment, including pill presses and counterfeit “Xanax” pill molds, which he used to press loose alprazolam powder into tablet or pill form, to resemble genuine Xanax pills. Farace solicited orders for the alprazolam pills on dark web marketplaces and sold alprazolam pills directly to buyers in exchange for Bitcoin.
The dark web is the part of the World Wide Web that requires specific software, configurations or authorization to access, allowing users and website operators to remain anonymous. Dark web marketplaces typically use Bitcoin or other digital currency as the means of payment for their transactions.
Bitcoin is a form of digital currency that does not exist in any physical form. It is not issued or controlled by any government, bank, or company, but is generated and controlled automatically through computer software operating on a decentralized peer-to-peer network. Bitcoin can be exchanged for conventional currency, with the exchange rate determined on the open market.
Farace admitted that he communicated with his customers through encrypted electronic messages and shipped the completed pill orders through the U.S. mail. Farace admitted that the postage for these packages was usually paid using pre-paid debit cards that Farace obtained in the names of, and with the personal identifying information of, other people. Law enforcement also recovered fake driver’s licenses in the names of those individuals but with Farace’s photograph when they executed a federal search warrant at Farace’s home on January 16, 2018. Based on data recovered from dark web marketplaces seized by law enforcement, between December 2013 and March 2017, Farace distributed more than 920,000 alprazolam pills.
From at least July 2015 until February 2017, Farace and Swain conspired with others to launder the proceeds of the illegal drug sales by conducting financial transactions designed to conceal and disguise the nature, source, ownership and control of the illegal drug proceeds. Specifically, Farace used pseudonyms to contact a co-conspirator through dark web marketplaces and encrypted messages in order to exchange Bitcoin he received from his drug trafficking for cash. The co-conspirator would then mail or ship packages of U.S. currency equivalent to the value of the Bitcoin received, less a fee, to mailing addresses provided by Farace. To conceal the fact that he was receiving cash, Farace, and later Swain, opened post office boxes at U.S. Post Offices and private rental mailboxes in fake names. Swain knew that Farace was receiving cash and drugs at these mailboxes and that the cash was the proceeds of Farace’s drug trafficking. During the course of the conspiracy, Farace received cash totaling more than $5 million, through the mails, which he had exchanged for Bitcoin earned from drug trafficking. In addition, Farace and Swain drove to New Jersey so that Swain could collect $200,000 in cash that Farace had exchanged for Bitcoin. During the in-person meeting on February 16, 2017, Swain provided a fictitious name to the individual he met and falsely stated that the Bitcoin and cash were his own. Farace and Swain later tried unsuccessfully to exchange Bitcoin for $400,000 in cash with the same individual.
As part of his plea agreement, Farace must forfeit assets traceable to the conspiracies, which Farace agrees is at least $5,665,000, as well as 4,000 Bitcoin. Farace must also forfeit his residence, cash, digital currency, bank accounts, vehicles, electronics, jewelry, and other items seized by law enforcement during the execution of search warrants on January 16, 2018, at locations associated with the conspiracies. Swain must also forfeit at least $30,000, including digital currency and cash held in his name
Farace faces a maximum sentence of five years in prison for conspiracy to manufacture, distribute, and possess with the intent to distribute alprazolam. Farace and Swain face a maximum of 20 years in prison for money laundering conspiracy. U.S. District Judge Catherine C. Blake has scheduled sentencing hearing for Farace and Swain on November 30, 2018, and January 25, 2019, respectively.
United States Attorney Robert K. Hur commended the DEA, HSI, the U.S. Postal Inspection Service, the IRS-Criminal Investigation; the U.S. Marshals Service, and the Baltimore County Police Department for their work in the investigation.
Charge:
21:846 CONSPIRACY TO MANUFACTURE, DISTRIBUTE, AND POSSESS WITH INTENT TO DISTRIBUTE ALPRAZOLAM
(1)
21:846 CONSPIRACY TO MANUFACTURE, DISTRIBUTE AND POSSESS WITH INTENT TO DISTRIBUTE ALPRAZOLAM
(1s)
21:841(a)(1)DISTRIBUTING AND POSSESSING WITH THE INTENT TO DISTRIBUTE ALPRAZOLAM
(2-4)
21:841(a)(1)DISTRIBUTING AND POSSESSING WITH INTENT TO DISTRIBUTE ALPRAZOLAM
(2s-4s)
21:856(a)(1) MAINTAINING DRUG-INVOLVED PREMISES; 18:2 AIDING AND ABETTING
(5)
21:856(a)(1)MAINTAINING DRUG INVOLVED PREMISES 18:2 AIDING AND ABETTING
(5s)
18:1956(h)CONSPIRACY TO COMMIT MONEY LAUNDERING
(6)
18:1956(h)CONSPIRACY TO COMMIT MONEY LAUNDERING
(6s)
Outcome: Guilty
Plaintiff's Experts:
Defendant's Experts:
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