Hugh Brian Haney, according to a criminal complaint unsealed on July 18, sold oxycodone and other substances on the Silk Road marketplace in 2011 and 2012. When Haney attempted to cash out $19 million in bitcoin through an exchange, the exchange froze his account. The Drug Enforcement Administration investigated and identified the Silk Road as the source of Haney’s bitcoin.
According to Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Hugh Haney used Silk Road as a means to sell drugs to people all over the world. Then he allegedly laundered his profits – more than $19 million – through bitcoin and bitcoin cash. The exchange of his ~$19 million in cryptocurrency ultimately led to the suspected darkweb vendor’s arrest.
Law enforcement arrested Haney in Columbus, Ohio, on July 18. He was presented before a magistrate judge in the Southern District of Ohio and charged with on count of concealment money laundering and one count of engaging in a financial transaction in criminally derived property.
Law enforcement–specifically agents of the Drug Enforcement Administration–had been investigating Pharmville since 2011 and 2012.
One prominent narcotics vendor on Silk Road was called “Pharmville.” The operators of Pharmville supplied a dedicated community of individuals who often traded illicit narcotics. According to Agent-1, he has reviewed multiple reports, drafted by agents and officers with the Drug Enforcement Administration (“DEA”) in 2011 and 2012, describing controlled purchases of narcotics from the Pharmville vendor: a DEA law enforcement agent ordered narcotics, specifically oxycontin, by contacting the Pharmville vendor on Silk Road and ordering those narcotics from Pharmville; the DEA employees would provide a mailing address to receive the narcotics, and later in fact received those narcotics via the mail at the address provided.
Law enforcement reportedly took no further action in the investigation into Pharmville until late 2018 when a massive transaction at a cryptocurrency exchange alerted exchange staff who alerted federal law enforcement.
The exchange, identified only as “Company-1,” required users to provide personal information upon registration of an account on the exchange platform. As one of the exchange’s customers, Haney had provided the company with his name, social security number, email address, residential address, and photo ID.
The exchange froze Haney’s account on May 30 after Haney had transferred approximately 1,571.5 Bitcoins and approximately 1,572.7 Bitcoin Cash to the exchange. He exchanged the cryptocurrency for a total of $19,147,057.3. Haney sent the bitcoin and bitcoin cash to the exchange between January 26 and February 1, 2018. The exchange asked where Haney had acquired such a tremendous number of bitcoins. Haney responded that he had earned the bitcoin through an initial investment of $10,000 and by mining bitcoin. They disagreed and froze the account. Law enforcement then learned of the suspicious transaction and launched an investigation into the source of the funds.
After a federal judge signed a search warrant that authorized federal agents to seize Haney’s account at the cryptocurrency exchange, an Internal Revenue Service, Criminal Investigation (IRS-CI) Special Agent and a Homeland Security Investigations (HSI) Special Agent used blockchain analysis software to determine the origin of the funds Haney had sent to the exchange account. The IRS-CI Special Agent wrote that “from in or about late November 2011 through early February 2012, Hugh Brian Haney, the defendant, received at least approximately 3,892.9 Bitcoins directly or indirectly from Silk Road, of which approximately 1,392.9 remained in the Haney Wallet at the end of January 2012.
The Search Warrant
In December 2018, a federal judge signed a warrant authorizing the search of Haney’s residence–the one on file with the exchange Haney had used to cash out his bitcoin from Silk Road. During the search, law enforcement found and imaged a laptop that contained, among other things, word documents, some of which referred to the Pharmville community from Silk Road.
From my discussions with Agent-1, I have learned, among other things, that among the files on Laptop-2 found by Agent-1 and the other members of the law enforcement team, was a file entitled “HBH Daily to Do List,” in which someone, apparently HUGH BRIAN HANEY, the defendant, (whose initials are “HBH”) wrote at length about his upcoming tasks; based on his training and experience, Agent-1 knows that some of the referenced tasks specifically relate to narcotics (for instance, “CP wants to trade Opana 40 mg ER for Fentanyl grams”; “Contin,” “oxys,” “ketamine,” “fent”).
An arrest warrant was filed on July 17, 2019 and law enforcement executed the warrant on July 18, 2019. Haney is in the custody of the United States Marshals Service while awaiting his next court appearance.
Concealment money laundering carries a statutory maximum prison sentence of 20 years and engaging in a financial transaction in criminally derived property carries a similar maximum sentence of 10 years in prison. Haney was also arrested in 2006 for possession with intent to distribute oxycodone and distribution of oxycodone.
H/t to several Twitter users for pointing this out.
Source: The Criminal Complaint (.pdf) | DOJ Announcement