On Wednesday, January 17, 2018, United States Attorney Maria Chapa Lopez, along with U.S. Immigration and Homeland Security Investigations Special Agent in Charge James Spero, distributed more than $1.7 million in civilly forfeited funds to three law enforcement agencies at the Jacksonville Office of Homeland Security Investigations. These awards are the result of a federal civil forfeiture of more than $4.5 million in funds obtained fraudulently through the hacking of bitcoin accounts. The funds were distributed to the Nassau County Sheriff’s Office ($1,044,550.05); the Florida National Guard ($627,487.74); and the Jacksonville Sheriff’s Office ($209,162.58).
In November 2013, Homeland Security Investigations Special Agents learned of the theft of approximately 5,400 bitcoins from Sheep Marketplace, an illicit online marketplace that has since been shut down. Sheep Marketplace was used predominately for the illicit sale of narcotics. Jacksonville residents Sean Mackert and Nathan Gibson determined that the Sheep Marketplace had a single online “wallet” that contained the bitcoins earned by individuals using the marketplace. They devised a scheme that tricked Sheep Marketplace’s “wallet” into transferring the bitcoins of others into “wallets” they controlled. During the investigation, investigators determined that Mackert and Gipson had routed the bitcoins through multiple online “wallets,” then wired them to a licensed money service business. At their direction, the money service business exchanged the bitcoins for United States currency, then wired the funds to bank accounts in Jacksonville that were controlled by Mackert and Gipson. Mackert and Gipson both have plead guilty to conspiracy to commit wire fraud and are awaiting sentencing. Each faces up to 20 years in federal prison.
During the criminal investigation, Homeland Security agents, with the assistance of the Nassau County Sheriff’s Office, the Florida National Guard, the Jacksonville Sheriff’s Office, and the United States Attorney’s Office, seized the funds along with two vehicles. The United States commenced a civil forfeiture action against the funds, alleging that they were proceeds of fraud. The district court of Florida ultimately ordered the forfeiture of the funds and the two vehicles. The Nassau County Sheriff’s Office provided valuable investigative assistance to their Homeland Security partners by tracking the money trail and money laundering process.
“Taking the profit out of crime is important in disrupting and dismantling illegal enterprises, deterring crime, and restoring property to victims,” said Sheriff Bill Leeper. “It is also an effective way to have criminals help fund law enforcement efforts.” Through the Equitable Sharing Program, law enforcement agencies receive resources to supplement their law enforcement mission. Asset forfeiture and equitable sharing are valuable law enforcement tools that send a clear message that crime does not pay.
“The funds received will allow our agency to purchase or upgrade equipment necessary for our employees to do their job more efficiently and effectively and to keep our citizens as safe as possible,” Leeper said. “Items like computers, software, weapons, vehicles, radios, etc., which always need upgrading from time to time.”
Bitcoins are a digital currency created in 2008 specifically for peer-to-peer online transactions and are virtual currencies or money that exists mainly as computer code. It is currency not backed by any government, untraceable and unrecoverable if lost or destroyed.