The ringleaders behind the U.S. domestic underground lab have pleaded guilty in the first bitcoin money laundering case prosecuted by New York State.
Callaway Crain and Mark Sanchez, the two masterminds behind the U.S. domestic underground laboratory known as “Next Day Gear”, have pleaded guilty to “Money Laundering in the 2nd Degree and Criminal Sale of a Controlled Substance in the 5th Degree”.
As part of their guilty plea, Crain and Sanchez have been promised state prison sentences of between 2-1/2 to 7-1/2 years. The exact length of their prison sentences will be determined on the sentencing date of July 12, 2019.
Manhattan District Attorney boldly claims he will catch all online steroid dealers who do business in New York.
Manhattan District Attorney Cyrus Vance announced the guilty pleas in a statement published on April 23, 2019. Vance also took the opportunity to warn other dark web steroid and drug dealers that his office has the skills and resources to bust them.
“These defendants raked in crypto and cash worth millions on their full-service website that sold prescription-free counterfeit steroids and other controlled substances to customers in all fifty states,” said District Attorney Vance. “Online drug sellers who do business in New York should take note: whether you’re operating in plain sight or in hidden corners of the dark web, my Office has the skills and resources to follow the money, shut down your business, and hold you accountable.”
Next Day Gear reportedly generated over $2.87 million selling anabolic steroids between 2013 and 2018. Next Day Gear sold “anabolic steroids, such as testosterone, nandrolone, and stanozolol, as well as controlled substances and pharmaceuticals that can be used to counteract the negative effects of steroid use, including Xanax, Valium, and Viagra” according to the statement.
While the Next Day Gear guys were apparently very good at marketing and sales, they weren’t so good at hiding their tracks.
For five years, Next Day Gear used a single USPS account to ship over 10,000 steroid orders to its customers. And of course, the United States Postal Inspection Service provided all of that information, including customer names and addresses, to prosecutors. Incidentally, this is how prosecutors learned that several of Next Day Gear’s customers were NFL and NCAA football players.
Next Day Gear were “typically” paid in the form of Bitcoin. While many people mistakenly believe Bitcoin is anonymous, it is not. Next Day Gear failed to make any meaningful attempt to launder their Bitcoin proceeds.
Next Day Gear apparently just shuffled the Bitcoin transactions between “one or more intermediary cryptocurrency ‘wallets’” before converting it into U.S. currency and depositing it into their checking accounts using the Coinbase. Coinbase fully cooperated with Manhattan prosecutors in the Next Day Gear investigation.
It was only a matter of time before Next Day Gear would have been caught. But it certainly expedited things when Hulk Body Labs was busted during an unrelated DEA investigation a few months earlier. The owner of Hulk Body Labs provided extensive information about his business interactions with Next Day Gear.
For example, Next Day Gear ran and maintained the website for Hulk Body Labs on a server they maintained in The Netherlands. They were paid 5% of sales by Hulk Body Labs for this service. In addition, Next Day Gear reportedly created false identifications for Hulk Body Labs to help them pick up money. Hulk Body Labs paid Next Day Gear for these services in Bitcoin.
Given Next Day Gear’s failure to effectively obscure the source of their Bitcoin revenue, this must have made it quite easy for the Manhattan DA’s Office to track the transactions received by Hulk Body Labs (and all of its customers) via blockchain analysis along with the assistance of Coinbase.
It seems that many U.S. domestic underground labs are pretty good at sales and marketing but are not very good criminals. For most domestic UGLs, it is merely a matter of time before they are caught. It usually is within 2-3 years. Next Day Gear had a good run at over 5 years.
Manhattan District Attorney’s Office. (April 23, 2019). DA Vance Announces Guilty Pleas in $2.8 Million Internet Drug Ring. Retrieved from www.manhattanda.org/da-vance-announces-guilty-pleas-in-2-8-million-internet-drug-ring/