US authorities have arrested the head of a Canadian company that allegedly made millions of dollars selling mobile phones optimized for concealing criminal activities, showcasing the growing importance of encrypted communications for crime groups.
Vincent Ramos, the founder of Phantom Security Communications, also known as Phantom Secure, was arrested on March 8 in the US state of Washington on charges that his company operated a secure telephone communications network that knowingly supplied encrypted phones to organized crime groups, including the Sinaloa Cartel.
In a complaint filed in a federal court, the Federal Bureau of Investigation (FBI) alleged that “Phantom Secure’s networks were specifically designed to prevent law enforcement from intercepting and monitoring communications on the network,” and that the company provided services intended to aid transnational drug trafficking organizations.
The company allegedly sold Blackberry phones that had their cameras, microphones, and standard internet and text messaging removed. Instead, the devices came pre-loaded with encrypted email platforms.
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Phatom used servers based in Panama and Hong Kong in the belief that those countries would be less likely to scrutinize the communications or cooperate with foreign law enforcement authorities. The company also used other techniques to mask their customers' digital footprints.
Phantom claimed to be able to remotely wipe any device that fell into the hands of authorities, according to the complaint.
The phones cost between $2,000 and $3,000 each for a six-month period. Many of Phantom’s clients also used encrypted email addresses associated with narco culture, like "[email protected]" and "[email protected]"
InSight Crime Analysis
Encrypted email platforms are not illegal, and there are many legitimate reasons people use encryption to protect their electronic messages. Similarly, it isn’t necessarily illegal to sell a phone installed with encryption technology. But in this case, authorities say Phantom's entire business model revolved around selling encrypted phones to crime groups.
“Authorities are alleging Ramos' business was part of a conspiracy to sell drugs, based on what he said to undercover agents,” journalist Joseph Cox told InSight Crime.
Previously, many criminals used “burner phones,” or cheap, pre-paid cell phones to limit authorities' ability to track their communications. However, crime groups appear to have kept abreast of advances in technology, and are willing to pay for top-of-the-line products like those offered by Phantom.
Indeed, Cox uncovered a number of similar operations distributing specialized phones through a network of resellers who advertise through social media accounts. Many of these accounts feature images associated with drug trafficking like guns, drugs and cash.
Criminals aren’t just buying an encrypted device, Cox said. “They’re buying into the network ... A Phantom Secure device can only communicate with another Phantom Secure device."
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This isn’t the first time an encrypted messaging service has come under fire in Latin America for making criminals' messages hard to trace, and other emerging technologies like the dark web have also been known to empower criminal groups operating in the region.
The use of legal technologies for illegal purposes raises tough questions for authorities, who have to balance customers' right to privacy with their mandate to prevent and prosecute illegal activities.
Going after crime groups is nothing new. But "what’s been missing from the debate is the companies that have been selling these devices to criminal groups,” Cox said.