China has a special passport for its elites—and Huawei’s detained executive had one

A recent finding about a detained Huawei executive’s passports is likely to raise more questions about the telecom giant’s relationship with the Chinese government.

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In early December, Huawei chief financial officer Meng Wanzhou was arrested in Canada at the request of US authorities on suspicion of violating US sanctions on Iran. Meng was granted bail after hearings that saw prosecutors point out that Meng had at least seven passports issued to her—including four from China and three from Hong Kong—that could allow her to “flee with greater ease,” according to documents filed with the court (pdf. p. 16). She faces the prospect of extradition to the US.

It now turns out Meng had another passport as well, Canadian newspaper the Star Vancouver reported Tuesday (Jan. 22). The newspaper said it had confirmation from the Hong Kong Companies Registry that Meng held a special public affairs passport issued by the Chinese government. Meng used the passport to register the Huawei Tech. Investment Co., Limited subsidiary in Hong Kong in 2004, according to an investigation by online news HK01 (link in Chinese). But the passport, whose number starts with the  letter “P,” is not mentioned in the December court document, which stated that it was possible Meng had other passports apart from those listed.

The public affairs passport is mainly issued to people closely related to the government, such as “officials below the level of deputy division-director, personnel of public institutions, state-owned enterprises or enterprises with the state having the controlling interest, and financial institutions where the state has controlling interest or is a shareholder,” according to China’s Ministry of Foreign Affairs (link in Chinese). It’s a distinct category from the diplomatic passports issued to official envoys. In some cases the passports were also issued to people from private firms.

Given that Huawei’s troubles stem from the fact that it’s seen as too close to China’s government, as well as concern the company would be unable to decline a request for data from Chinese authorities, the fact an executive at one time had an elite passport generally reserved for people close to the government could raise more questions.

In an emailed statement Huawei said that Meng’s public affairs passport is no longer valid. “We reject any suggestion that granting access to such passports means these executives were on Chinese government business. They were for commercial use and only when the applicant met the criteria,” the company added.

Huawei has previously disputed concerns raised about access to its data and says that it puts customer privacy first.

Earlier, Hong Kong’s immigration authorities said that a person can only have one valid passport at one time, and the South China Morning Post reported it was most likely Meng has a valid Hong Kong passport. Chinese rules hold that citizens who are issued a passport from another country or region need to give up their Chinese one.

Meng’s case has put the tech giant under an unwanted spotlight, adding to a slew of recent troubles for the company. Just weeks after her arrest, Huawei’s Poland sales director was arrested early this month on suspicion of spying for China.

Meng herself is due back in court in two weeks to set a date for her extradition hearing.

Surprise, surprise, Vancouver: Huawei CFO Sabrina Meng Wanzhou is a mansion-owning, satellite-parenting reverse immigrant

Title documents on two Vancouver homes, worth US$16.4 million, identify Meng Wanzhou’s husband as Liu Xiaozong. Meng’s current circumstances are remarkable, but her Canadian backstory is familiar – she is a reverse immigrant who left family members in Vancouver for year

Huawei CFO Sabrina Meng Wanzhou and her two Vancouver homes, which are in the name of husband Liu Xiaozong. The homes in the expensive neighbourhoods of Shaughnessy (top right) and Dunbar (bottom right) are worth C$16.3 million and C$5.6 million respectively. 

Huawei CFO Sabrina Meng Wanzhou and her two Vancouver homes, which are in the name of husband Liu Xiaozong. The homes in the expensive neighbourhoods of Shaughnessy (top right) and Dunbar (bottom right) are worth C$16.3 million and C$5.6 million respectively. 

With the arrest of Huawei CFO Sabrina Meng Wanzhou at the request of the United States, Vancouver has found itself at the epicentre of a ground-shaking, magnitude-nine, monster of a story.

A distillation of two superpowers’ current and future battle for primacy on the world’s economic stage, the case has roiled financial markets and provoked fury from Beijing, as the US-China trade war hangs in the balance. It is a tale of epic sweep.

In this courtroom sketch, Meng Wanzhou, right, the chief financial officer of Huawei Technologies, sits beside a translator during a bail hearing at British Columbia Supreme Court in Vancouver, on Friday. Graphic: Jane Wolsak / The Canadian Press via AP

In this courtroom sketch, Meng Wanzhou, right, the chief financial officer of Huawei Technologies, sits beside a translator during a bail hearing at British Columbia Supreme Court in Vancouver, on Friday. Graphic: Jane Wolsak / The Canadian Press via AP

And yet on another, granular, level, Vancouverites could be forgiven for thinking Meng’s backstory sounds, well, pretty ho-hum: that of a wealthy returnee immigrant and satellite parent, who abandoned Canadian permanent residency for more-lucrative opportunities back in China, while buying a couple of Westside Vancouver mansions for her family.

Meng was arrested at Vancouver’s airport as she changed planes in December 1, and is being detained in prison pending the outcome of a bail hearing and possible extradition to the United States to face fraud charges.

According to Meng’s lawyer, David J. Martin, his client and her husband – identified in the bail hearing on Friday only as “Mr Liu” – are the owners of two multimillion-dollar properties, in the tony neighbourhoods of Dunbar and Shaughnessy. Land-title documents show that the homes, on West 28th Avenue and Matthews Avenue, are in the name of Liu Xiaozong.

Sabrina Meng Wanzhou's home on West 28th Avenue, Vancouver, is worth C$5.6 million. 

Sabrina Meng Wanzhou's home on West 28th Avenue, Vancouver, is worth C$5.6 million. 

Meng’s husband is enigmatically described as a “marketing developer” in the October 2009 title registration of the 28th Avenue property, a three-level home currently worth C$5.6 million (US$4.2 million), according to BC Assessment.

By the time of the Matthews Avenue purchase in May 2016, Liu’s position had graduated to that of “investor”, befitting the heftier C$16.3 million (US$12.2 million) current valuation.

The homes apparently carry a combined equity value of C$14 million, with that amount being offered as non-cash bail surety by Martin; mortgages are indeed held on both homes by HSBC Canada, according to the titles (Ironically, HSBC is the institution that Washington accuses Meng of defrauding, by supposedly misrepresenting Huawei’s connection to a company doing business in Iran, in breach of US and EU sanctions).

The sprawling Matthews Avenue home is clearly unoccupied: the 8,047-square-foot mansion is undergoing extensive renovations, with a Portaloo on the front lawn and heavy building equipment and a garbage skip occupying the grand circular driveway. A security guard sitting on the doorstep said he did not know the owners but would try to pass on a message.

At the 3,735-square-foot 28th Avenue home, conveniently located between the senior and junior campuses of the elite St George’s private school, the lawn and garden were neatly tended, and an umbrella was on the doorstep. No one answered the front door. Open shutters on the front porch revealed a busy-looking home office inside.

There is a lot to unpack in the affidavits about Meng’s personal affairs and connections to Vancouver, as described by Martin (the actual affidavits had yet to be released by the courts)

Sabrina Meng Wanzhou's mansion on Matthews Avenue, Vancouver, is worth US$16.3 million. It is undergoing extensive renovations and appears to be vacant.

Sabrina Meng Wanzhou's mansion on Matthews Avenue, Vancouver, is worth US$16.3 million. It is undergoing extensive renovations and appears to be vacant.

They offer a trove of information for anyone interested in her personal affairs. But whatever privacy concerns the executive might once have harboured have clearly been trumped by the urgent necessity to prove the strength of her ongoing connection to Canada, to establish that she poses no flight risk if freed in Vancouver on bail.

For one thing, Meng says that she once immigrated to Canada, but relinquished permanent residency in 2009. Nevertheless, she and her husband went on to purchase the 28th Avenue home that year.

“She had a Care Card [medical services card]. She had a BC [British Columbia] identification card. She had a social insurance number … she has historically had links to Canada,” Martin told the BC Supreme Court hearing.

Meng technically returned to China as a resident nine years ago, but some of her family stayed behind in Canada for years. One of her sons from a previous marriage, now aged 16, attended school in Vancouver from 2009 to 2012, according to Meng’s deposition, while her and Liu’s daughter, now 10, attended kindergarten in Vancouver at some point.

Liu, meanwhile, was living in Vancouver at the time doing a master's degree.

“She acknowledges that after 2012, the children no longer resided here, however even after the children stopped attending school [in Vancouver] ‘my children spend many weeks, even months here during the summer’,” Martin said, quoting his client’s affidavit.

Meng has two more sons from her previous marriage; a 14-year-old who lives with his father in Hong Kong, and a 20-year-old computer engineer whose location wasn’t described. The middle son attends school in Andover, Massachusetts. Liu and the couple’s daughter now live in Shenzhen. On paper, it looks like a complicated arrangement, but it is by no means unusual for well-off Chinese families to have children schooled and raised around the world, often separated from their parents for lengthy periods.

And according to Martin, Vancouver remained a big part of their story. The lawyer tendered family photos that he described as showing Meng, Liu, their children and Liu’s elderly parents together in Vancouver as recently as August 2018. “There is a consistent involvement of this family in Vancouver life,” Martin said.

It’s not clear exactly when Meng immigrated to Canada, but it does not seem to have impeded her rise in China – Huawei lists career accomplishments spanning 2003 to 2007, before she is identified as CFO in 2011. She is now also deputy chairwoman of Huawei, founded by her father, Ren Zhengfei in 1987.

In many respects, and despite the lamentable newsworthiness of her current circumstances, Meng’s relationship with Vancouver and Canada is a cookie-cutter tale for a rich Chinese immigrant.

Although the programme under which Meng immigrated is not known, fellow millionaire migrants tend to exit Canada with alarming readiness. More than 40 per cent of breadwinners in Chinese-dominated millionaire migrant households have left Canada, according to the most recent Census.

That, in turn, leads to a preponderance of satellite-family arrangements, in which the children or spouse of a returnee breadwinner remain in Canada.

And the eye-popping proportion of house buyers on Vancouver’s Westside who happen to be of Chinese origin, is well documented. In 2015, academic Andy Yan looked at every sale in three of the city’s expensive Westside neighbourhoods (including Dunbar) for a six-month period, and found that 66 per cent of buyers, like Liu, had non-Anglicised Chinese names. Among sales worth C$3 million or more, the proportion of buyers with such names rose to a whopping 85 per cent. His data is in line with other industry statistics.

There are some unanswered questions about Meng’s situation. While she was a permanent resident in Canada pre-2009, was she also paying income tax here as her star rose in Huawei? It’s not clear we’ll find out any time soon – and, frankly, Meng has a lot more to worry about than a potential CRA audit. She faces up to 30 years’ jail in the US on each of multiple fraud charges.

Meng holds both Hong Kong and mainland passports, but is she also a Canadian citizen? That too is unclear, but under Article 9 of China’s Nationality Law, foreign naturalisation amounts to the renunciation of Chinese citizenship – a potentially perilous situation for someone doing business in the mainland should it be revealed. Without making assumptions about Meng’s family, it is more typical among wealthy reverse immigrants for their spouse or children to attain Canadian citizenship.

According to her defenders, Meng is an extraordinary woman. Her current conditions certainly are. But her waxing and waning connections to Canada and Vancouver? They are all too commonplace.

Attorney for Huawei's Meng Wants US Case Against Her Stopped

The attorney for a top executive of Chinese tech giant Huawei says he will ask the court to stop the case against her because of comments from U.S. President Donald Trump. 

FILE - Huawei Technologies Chief Financial Officer Meng Wanzhou arrives at her home after her court appearance in Vancouver, British Columbia, March 6, 2019.

FILE - Huawei Technologies Chief Financial Officer Meng Wanzhou arrives at her home after her court appearance in Vancouver, British Columbia, March 6, 2019.

The attorney for a top executive of Chinese tech giant Huawei says he will ask the court to stop the case against her because of comments from U.S. President Donald Trump. 

Huawei Chief Financial Officer Meng Wanzhou is under house arrest in Canada awaiting possible extradition to the United States, where she is wanted on fraud charges. 
Meng and her attorney, Scott Fenton, appeared in a Vancouver courtroom Wednesday.

Fenton said previous comments by Trump that he would intervene in Meng's case if it would help U.S.-China trade negotiations showed the case against her might be politically motivated. 
Fenton called Trump's comments "intimidating and corrosive of the rule of law." 

Canadian police arrested Meng on a U.S. warrant in December. She is accused of violating U.S. sanctions against Iran and defrauding banks by hiding such activities through a Huawei subsidiary. 
A Huawai official said Wednesday that Meng's financial activities were done openly and with the full knowledge of the banks.

Meng is the daughter of Huawei founder Ren Zhangfe. She has denied the charges. 
Canada has refused China's demand to free Meng. 

China arrested two Canadians in December for alleged spying in apparent retaliation for Meng's arrest. Another Canadian citizen sentenced to 15 years in prison on drug charges in China now faces the death penalty. 

China is also blocking imports of Canadian canola seed.

Feds Bust CEO Of Company Providing Ultra-Secure BlackBerries To Sinaloa Drug Cartel

The owner of a business providing ultra-secure BlackBerries to the Sinaloa drug cartel and other organizations has been arrested following a multi-agency law enforcement operation, according to an Affidavit filed in the Southern District of California located in San Diego. 

During the sting operation, undercover Canada's Royal Canadian Mounted Police (RCMP) posed as drug traffickers, where they asked Phantom Secure to delete the contents of an associate's device after "learning" he was arrested:

During the sting operation, undercover Canada's Royal Canadian Mounted Police (RCMP) posed as drug traffickers, where they asked Phantom Secure to delete the contents of an associate's device after "learning" he was arrested:

Working in conjunction with Canadian and Australian authorities on an operation dating back to at least 2015, authorities raided the business and home of Vincent Ramos, 41 - founder and CEO of Canada-based Phantom Secure, who is charged with racketeering conspiracy to conduct enterprise affairs, conspiracy to distribute narcotics, and aiding and abetting the cartel. Ramos sold over 20,000 phones worldwide, mostly to "the upper echelon members of various transnational criminal organizations." In fact, investigators were unable to identify "even a single legitimate Phantom Secure user." 

A second source also familiar with the secure phone industry told Motherboard that the devices have been sold in Mexico, Cuba, and Venezuela, as well as to the Hells Angels gang. -Motherboard.com

Ramos appeared in a Seattle Federal Court on Thursday and was ordered detailed pending his transfer to San Diego where he will stand trial. 

According to the heavily redacted filing written by FBI Special Agent Nicholas Cheviron, the encrypted phones "were specifically designed to prevent law enforcement from intercepting and monitoring communication on the network," by disabling key functionalities which can be used for tracking and surveillance. Phantom Secure - founded over a decade ago, guaranteed clients that if their BlackBerry is captured by law enforcement or otherwise compromised, they will remotely wipe its memory.

 

"when Phantom Secure receives the Blackberry handsets, its technical team removes the hardware and software responsible for all external architecture, including voice communication, microphone, GPS navigation, camera, Internet, and Messenger service," reads the Affidavit.  

"Phantom Secure then installs "Pretty Good Privacy" (PGP) encryption software and "Advanced Encryption Standard" (AES) on top of an email program, which it routes through encrypted servers located in countries, such as Panama and Hong Kong, believed by Phantom Secure to be uncooperative with law enforcement.

The company then masked the location of its servers containing the encryption keys and email through "multiple layers of virtual proxy networks." 

Saudi Arabia notably banned the use of BlackBerry phones in 2010 due to their already robust encryption due to the fact that they couldn't perform surveillance thanks to the phone's encryption capabilities. 

Because the phone encrypts email and BBM messages and sends them through RIM's own servers in Canada, rather than the network operator's own servers, there's no way for the government to force the operator to hand over some kinds of conversations made using the phone. -CNET

Similarly, Phantom Secure used their own encryption software routed through servers under their control.

In order to do business with Ramos, a new customer would require an existing customer to refer and vouch for them. Each phone also requires a $4,000 - $6,000 per year subscription to communicate through Phantom Secure's encrypted network. Ramos funneled profits from device and service sales through various shell companies, and used cryptocurrency such as Bitcoin to "launder its ill-gotten gains and maintain its members' anonymity." 

“We made it—we made it specifically for this [drug trafficking] too,” Ramos told undercover agents, according to a transcript included in the court filing.

User names of cartel members obtained by investigators included the phrases "Leadslinger," "the.cartel," "trigger-happy," and "knee_capper9." 

At one point, the Australian Federal Police began surreptitiously using a Phantom Secure BlackBerry seized from an Australian national arrested for drug smuggling. Authorities communicated with an unknown individual with Los Angeles, where they set up a deal for 16 kilograms of cocaine. 

As part of its investigation into Ramos and Phantom Secure, the FBI has at least one cooperating witnessa convicted transnational drug trafficker from the Sinaloa cartel—according to the complaint. This unnamed witness, along with someone named Marc Emerson who was alleged to be involved in the drug trafficking before dying due to an overdose in June 2017, were customers of Phantom Secure, and used the company’s devices to conduct their transnational drug trafficking activity, the complaint adds. This is where the aiding and abetting charge comes in—the cooperating witness allegedly used a Phantom device while organizing the transit of five kilograms of cocaine. -Motherboard.com

'Snitches Get Stitches': How Secure Phones for Criminals Are Sold on Instagram

For years, the oft-overlooked secure phone industry, sometimes linked to organized crime, has been pushing its wares on Instagram, with one account linked to Phantom Secure posting images of weapons, drugs, and bundles of cash.

Caption: A selection of posts on Phantom PGP's Instagram account. Image: Instagram

Caption: A selection of posts on Phantom PGP's Instagram account. Image: Instagram

Phantom and a number of other companies in this space sell customized BlackBerry or Android devices, typically with the camera and microphone removed, as well as, in Phantom’s case, the GPS-tracking and ordinary internet browsing functionality. In place of texts or phone calls, Phantom’s phones route encrypted messages through the company’s own infrastructure.

“Proven. Reliable. Uncrackable. Benchmarked. Simply Secure,” another of Phantom PGP’s Instagram posts reads, along with one of the phones and the interior of a Bentley car in the background. Phantom PGP tries to push an image of luxury and exuberance, judging by other posts—attractive, scantily-clad models, landscape-shots from scenic hotels, and exotic pets all pepper the account. Although many of the photos appear to be lifted from other sources, with Phantom PGP just re-uploading the pictures for their own use, others do include original marketing material and images of the phones themselves.

But it’s the Instagram account’s crime-related images which are most audacious. A bizarre mix of assault rifles, bundles of cash, drugs, and inspirational memes.

“Don’t take it personally, it’s just business,” another of Phantom PGP’s posts reads.

Update: After the publication of this piece, the Phantom PGP Instagram account closed down.

“Two can keep a secret, if one of them is dead,” one reads.

The account even includes images of iconic crime figures in film and TV, such as Scarface, Walter White from Breaking Bad, and Tony Soprano. All of this would probably be just slightly over-the-top and traditional marketing, if Phantom’s CEO wasn’t facing charges of racketeering conspiracy, conspiracy to distribute narcotics, and aiding and abetting. According to the complaint, Vincent Ramos, Phantom’s owner, told undercover investigators “We made it—we made it specifically for this [drug trafficking] too,” referring to his company’s phones.

Phantom PGP did not respond to an emailed request for comment.

Two other Instagram accounts online at the time of writing also share Phantom marketing material, but don’t push the high-end lifestyle image quite so explicitly. Another Instagram, this time advertising a custom BlackBerry device from a company called Sky ECC, shows a man holding a bundle of cash in a sports car along with his phone.

Other firms in the secure phone space, including Sky ECC and MPC, have advertised their products on crime news websites (Sky previously said that advert was not their own). A Twitter account tweeted photos of a similar device from EncroChat along with a spread of cash.  

To be clear, there may be legitimate customers of some secure phone firms or resellers. But in Phantom’s case, the complaint claims law enforcement agents were not able to identify one.

Although it’s difficult to determine whether any of the Instagram posts directly led to any sales, Phantom has allegedly been successful at specifically providing its wares to the criminal underground. According to the criminal complaint, written by FBI Special Agent Nicholas Cheviron, the “upper echelon members” of transnational criminal groups have bought Phantom phones, and a source familiar with the industry previously told Motherboard the devices have been sold in Mexico, Cuba, and Venezuela, as well as the Hells Angels biker gang.

International Criminal Communication Service Dismantled

Phantom Secure Helped Drug Traffickers, Organized Crime Worldwide

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International organized crime and drug trafficking groups were dealt a blow by the takedown of an encrypted communication service they used to plan and commit their crimes, the FBI and its international partners announced yesterday.

Canada-based Phantom Secure was a criminal enterprise that provided secure communications to high-level drug traffickers and other criminal organization leaders. The group purchased smartphones, removed all of the typical functionality—calling, texting, Internet, and GPS—and installed an encrypted e-mail system, so the phones could only communicate with each other. If a customer was arrested, Phantom Secure destroyed the data on that phone, which is obstruction of justice under U.S. law. In an attempt to thwart law enforcement efforts, the company required new customers to have a reference from an existing user.

Given the limited functionality of the phones and the fact that they only operate within a closed network of criminals, all of Phantom Secure’s customers are believed to be involved in serious criminal activity. Most of Phantom Secure’s 10,000 to 20,000 users are the top-level leaders of nefarious transnational criminal organizations in the U.S. and several other countries, and the products were marketed as impervious to decryption or wiretapping.

“Working with our international partners in Australia and Canada, we learned that these phones have been used to coordinate drug trafficking, murders, assaults, money laundering, and all sorts of other crimes,” said Special Agent Nicholas Cheviron of the FBI’s San Diego Division, who investigated the case along with U.S. and international counterparts. “By shutting down Phantom Secure, criminals worldwide no longer have that platform to conduct their dangerous criminal activities.”

In collaboration with the Australian Federal Police, Royal Canadian Mounted Police, and law enforcement agencies in Panama, Hong Kong, and Thailand, Phantom Secure’s founder and chief executive Vincent Ramos was arrested in Bellingham, Washington, on March 7. Four of Ramos’ associates are fugitives. They are charged with conspiracy to distribute narcotics and Racketeer Influenced and Corrupt Organizations (RICO) Act violations.

This case is the first time the U.S. government has targeted a company and its leaders for assisting a criminal organization by providing them with technology to “go dark,” or evade law enforcement’s detection of their crimes.

“By shutting down Phantom Secure, criminals worldwide no longer have that platform to conduct their dangerous criminal activities.”

Nicholas Cheviron, special agent, FBI San Diego

“The indictment of Vincent Ramos and his associates is a milestone against transnational crime,” said FBI Director Christopher Wray. “Phantom Secure allegedly provided a service designed to allow criminals the world over to evade law enforcement to traffic drugs and commit acts of violent crime without detection. Ramos and his company made millions off this criminal activity, and our takedown sends a serious message to those who exploit encryption to go dark on law enforcement. I want to thank our partners at the Department of Justice, as well as our Australian and Canadian law enforcement partners, for their incredible work on this case.”

The FBI takes an enterprise approach to transnational organized crime, taking down criminal organizations from the top using the RICO Act. The sweeping investigation allowed the entire illicit operation—and its technological infrastructure—to be taken down at one time.

“We had to investigate the entire company and its leaders, both from a personnel and technology perspective,” Cheviron said. “Without arresting the principals and seizing the technology, including more than 150 domain names, you wouldn’t be able to disrupt the communication.”

Phantom Secure boss arrested in US for allegedly supplying encrypted phones to criminal organisations

THE head of a US firm is believed to have supplied phones to criminal organisations which could have links to at least two Aussie underworld murders.

The murder of bikie Tyrone Slemnik was organised through the use of phone encryption, detectives believe.

The murder of bikie Tyrone Slemnik was organised through the use of phone encryption, detectives believe.

THE boss of a company that allegedly supplied encrypted phones to criminal organisations with possible links to at least two Australian underworld murders has been arrested in the United States.

Chief executive of Phantom Secure, Vincent Ramos, was charged by the FBI for racketeering activity involving gambling, money laundering and drug trafficking after a joint operation between law enforcement agencies in the US, Australia and other countries.

The company allegedly installed encryption software and removed the camera, microphone, GPS navigation and other features from BlackBerry devices to help organised crime groups avoid detection from law enforcement.

Phantom’s international client base reached Australia, with the encrypted devices believed to have been used in planning the murders of Sydney Hells Angels member Tyrone Slemnik in 2013, and drug cook and Hells Angels associate Roy Yaghi in 2012.

No allegations of wrongdoing have been made against the manufacturers of BlackBerries.

Allegations regarding the inner workings of Phantom and its links to transnational organised crime were revealed to the FBI when it managed to turn a drug trafficker into a “co-operating witness” after he was arrested in September 2015.

An affidavit by an FBI investigator, which was attached to the arrest warrant for Mr Ramos, revealed witness CW-1 confessed his drug trafficking organisation moved hundreds of kilograms of cocaine from Mexico through the US, with Canada and Australia the intended final destinations.

The affidavit explained encrypted devices were used in 2015 by CW-1 and his “Australian conspirators” to co-ordinate a shipment of 10kg of cocaine from the US, which was later seized by Australian Border Force.

On another occasion, CW-1 had arranged 5kg of methamphetamine to be delivered to Australia, not knowing the person he was dealing with was actually an undercover agent.

A year later, Australian Federal Police communicated with an unknown person in Los Angeles using a Phantom Secure device they had seized from a local resident who was arrested for drug smuggling. The LA contact successfully packaged and shipped 16kg of cocaine to Australia which was intercepted in September 2016.

Special Agent Nicholas Cheviron — the FBI employee who wrote the affidavit — believes there are approximately 10,000 Phantom Secure devices in Australia. A surprisingly high number given his estimates of only 20,000 existing worldwide.

The affidavit reveals that Phantom Secure ran its services through encrypted servers in Panama as it “does not co-operate with any other country’s inquiries”.

To further improve the security, Special Agent Cheviron said existing customer were forced to vouch for any clients, who were also forced to undergo background checks.

n its annual general report two years ago, the NSW Crime Commission said criminal gangs had been using encrypted BlackBerries, supplied by companies such as Phantom Secure.

The NSW Crime Commission added encrypted phones were a fundamental tool for contract killings.

“The ability to raise vast amounts of cash enables organised crime groups to source weapons and employ persons prepared to undertake murder for profit,” the commission’s 2015-16 annual report said.

A NSW police officer said the recent bust would slow down organised crime, but wouldn’t fix the problem for good.

“Murders, bashings and drug importations are all organised on these BlackBerries. This will hurt them for a while. Then they will find another source,” the officer said, reported the Daily Telegraph.

Owner of Vancouver encryption company trafficked drugs, aided cartel, U.S. says

The owner of a Vancouver company that sells encrypted BlackBerrys popular with B.C. gangsters is facing charges in the U.S. of racketeering, conspiracy and drug trafficking.

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Vincent Ramos, who started Phantom Secure in 2008, is even alleged in U.S. court documents to have sold his specialized devices to “some members of the (Mexican) Sinaloa (drug) cartel.”

Ramos, 41, was arrested in the U.S. on Wednesday, as police in Metro Vancouver raided his business and home.

U.S. court documents obtained by Postmedia allege he set up his company a decade ago specifically to help international drug trafficking organizations evade police and now has more than 20,000 of his encrypted devices circulating around the world.

“According to law enforcement sources in Australia, Canada and the United States, Phantom Secure devices are used by the upper echelon of various transnational criminal organizations to communicate with their criminal compatriots and conduct the illegal activities of the organization,” FBI special agent Nicholas Cheviron says in the court documents.

“These law enforcement sources all report that they are unaware of any law enforcement partner that has identified even a single legitimate Phantom Secure user.”

The documents said: “Phantom Secure’s devices and service were specifically designed to prevent law enforcement from intercepting and monitoring communication on the network, and every facet of Phantom Secure’s corporate structure was set up specifically to facilitate criminal activity and to impede, obstruct and evade law enforcement.”

B.C. corporate documents list Ramos as president and sole director of Phantom Secure.

The U.S. alleges Ramos, Phantom Secure and others whose names are blacked out engaged in “a pattern of racketeering activity involving gambling, money laundering and drug trafficking.”

And Ramos is also alleged to have “knowingly and intentionally conspired with other persons to distribute more than five kilograms of cocaine.”

The investigation into the Vancouver company appears to date back to at least 2015 and has involved the RCMP, police in Australia, and the FBI.

That year, the RCMP had undercover officers pose as drug traffickers to purchase devices from Phantom Secure, Cheviron said in his court affidavit.

“During the vetting process, an undercover agent asked the Phantom Secure representative if it is safe to send messages that explicitly discussed drug trafficking, using the following examples ‘cocaine coming up,’ ‘sending MDMA to Montreal,’” Cheviron said.

“Phantom Secure’s employee replied that speaking explicitly was ‘totally fine’ because the servers were ‘based in Panama’ and ‘no one has access to our servers.’”

The RCMP undercover officers later pretended an associate had been arrested and asked Phantom Secure to delete his BlackBerry remotely.

“So he picked up the load (of drugs) and I think he’s been arrested. There is a lot of f–kin’ sh-t on my BlackBerry,” the purported trafficker said.

The employee confirmed with the undercover officer: “You wanna wipe both of them?”

“Yes,” he replied, calling the worker a “lifesaver.”

Ramos has not faced any charges in B.C. 

Undercover officers also met Ramos in Las Vegas a year ago and “posed as high-ranking members of a transnational drug trafficking organization seeking secure communications and data deletion services to facilitate an expansion of their drug trafficking activities in South America and Europe.”

“Ramos explained that Phantom Secure  was built specifically for the purpose of facilitated drug trafficking,” the documents said.

When the officers said they might need the GPS function on the phones if they had to kill an associate believed to be cooperating with police, Ramos responded: “Right, right, right, right.”

Phantom Secure boasts in its advertising that “the advantages of having our server and a portion of our business located in Panama” is that “Panama does not cooperate with any other countries’ inquiries.”

“Panama does not consider tax evasion a crime and as such does not help other countries in their investigations.”

The U.S. documents also said “to further conceal the location of its key and mail servers, Phantom Secure cloaks them in multiple layers of virtual proxy networks.”

Phantom Secure doesn’t allow just anyone to become a client. New customers have to get a “vouch” from an existing client, the documents say.

“I believe the purpose of the vouch requirement is to prevent law enforcement from penetrating Phantom Secure’s network,” Cheviron said.

The Vancouver company charges between $2,000 and $3,000 US for a six-month subscription.

“Phantom Secure guarantees that messages stored on its devices can be and will be remotely deleted by Phantom Secure if the device is seized by law enforcement or otherwise compromised.”

The documents indicate American authorities have several cooperating witnesses or “CWs” in the case against Ramos.

The first, CW-1, was arrested in September 2015 as he coordinated a shipment of more than 135 kilograms of cocaine from Los Angeles to Canada.

He told police his criminal organization worked with the Sinaloa cartel to get cocaine for Canada.

“CW-1 stated that over the course of several years, his drug trafficking organization moved hundreds of kilos of cocaine per month from Mexico through to the United States, ultimately destined for Canada and Australia. CW-1 used a Phantom Secure device to facilitate each of these transactions,” the documents said.

After his arrest, Phantom Secure tried to wipe his BlackBerry, but failed.

RCMP Staff Sgt. Annie Linteau refused to comment on the RCMP’s role in the investigation, except to confirm officers had been involved in executing search warrants in Metro Vancouver.

“All I can say at this point is that the RCMP is working as an assist to another police department. The B.C. warrants are currently sealed so we don’t have any information to share with you at this time,” she said.

Ramos appeared in Federal Court in Seattle on Thursday and was ordered detained pending his transfer to San Diego, where he will stand trial.

His last taste of freedom before the FBI arrested him was chicken and waffles

To owner Jamie Bohnett, it was just like any other day in early March at the Over Easy restaurant on James Street.

Over Easy cafe,Bellingham ,Washington.

Over Easy cafe,Bellingham ,Washington.

Staff were on the last hour of the workday, a mother, her son and a few other customers were finishing their meals at nearby tables and Bohnett was doing some paperwork for the following day.

There was only one other man sitting by himself at a table — eating chicken and waffles.

What Bohnett didn’t know was that a few minutes later, the man sitting alone eating his chicken and waffles would be arrested by the FBI for allegedly providing encrypted BlackBerrys to transnational drug traffickers, including the deadly Sinaloa Cartel in Mexico, headed by Joaquin (El Chapo) Guzman.

“He seemed like a mellow guy. There were no guns involved. … It was very professional,” Bohnett said. “He didn’t seem like a bad guy. He was real nice, gentle guy and quiet.”

Phantom Secure

Vincent Gabriel Ramos, 40, of Vancouver, B.C. was arrested March 7 by the FBI on suspicion of racketeering, drug-trafficking, conspiracy and money-laundering charges out of San Diego.

Ramos and four of his associates who remain fugitives were indicted by a federal grand juryMarch 15, according to the U.S. Attorney’s Office.

A global effort attempting to cut off drug organizations from their secure communication networks spanning the U.S., Canada and Australia is laid out in a heavily redacted complaint unsealed in federal court. Authorities in Panama, Hong Kong and Thailand also aided in investigation efforts, officials said.

The FBI believes Ramos, founder and CEO of Phantom Secure, sold approximately 20,000 encrypted BlackBerrys to customers, generating about $80 million in revenue since 2008, according to federal documents.

Half of those devices are said to be used by criminal organizations in Australia, as well as members of the Sinaloa cartel.

Those who used the phones would remain anonymous to one another, and instead use usernames, handles or nicknames, such as “leadslinger, The.cartel, narco, Knee-capper, Elchapo66, The.killa,” and so on.

The FBI alleges the phones shielded transnational drug traffickers in North America, Australia, Asia, Europe and Central America from the eyes of law enforcement.
If convicted, Ramos could face life in prison.

The Arrest

Bohnett said he remembered two men in plain clothes who looked like businessmen walked in, sat at the bar and grabbed menus. He recalled talking with them to see if they wanted to order, but was told they weren’t ready yet.

He said from where they were sitting, they were able to observe most of the people in the restaurant, including Ramos.

One of the men got up and went outside for a phone call. Minutes later, Bohnett said five or six men walked in, went over to Ramos sitting at the table by himself and arrested him.

“Before we knew it, we had six guys walk in really fast and I thought ‘Oh we should serve them. They’re big guys, I bet they’re hungry,’” Bohnett said. “It happened so fast, there was no resistance. … They basically outnumbered him 6 to 1 big guys.”

Bohnett said one of the women who was in the restaurant at the time of Ramos’ arrest came back in and told Bohnett they had discretely asked her to move away from Ramos before they sat at the bar.

“The FBI guy asked if he paid for his meal, but I was in shock and didn’t even hear what he said. Later a police officer came in and told me to talk to the FBI about him not paying for his meal. I think we lost that one,” Bohnett added with a chuckle.

Bellingham police investigations Lt. Mike Johnston said it was strictly an FBI operation, but Bellingham police were asked to help assist with locating and arresting Ramos.

Johnston said he and several other officers were sent to Bellis Fair Mall in plain clothes to look for Ramos, but it was later discovered he was at Over Easy. By the time Johnston got there, Ramos had been arrested, he said.

Johnston said Bellingham police assist other agencies when asked, such as the local FBI field office, the DEA or the U.S. Marshals, because they have more resources.

“We do our thing and they do ours and when they need help, they call us and we can rally 11 to 14 detectives,” Johnston said.

Johnston said this was the first time he had heard of Ramos or his charges, but was happy Bellingham police could help. It's believed that Ramos was only passing through.

“I’m glad we were able to assist the FBI with their investigation. … We’re pleased any time we can help take a potential bad guy off the street.”