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Contraband
03/29/2016

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Northern California man arrested for distributing narcotics through Darknet marketplace websites

FRESNO, Calif. – A northern California man was arrested Monday for distributing marijuana and cocaine nationwide through marketplace sites on the Darknet following an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Internal Revenue Service-Criminal Investigation, the U.S. Postal Inspection Service, and the Fresno Police Department.

David Ryan Burchard, 38, of Merced, is charged in a criminal complaint with distribution of marijuana and cocaine on Darknet marketplaces, including the Silk Road. Burchard made his initial appearance in federal court Tuesday before U.S. Magistrate Judge Erica P. Grosjean in Fresno.

According to the criminal complaint, Burchard, using the moniker “Caliconnect,” was a major narcotics vendor on the Silk Road and other Darknet marketplaces, such as Agora, Abraxas, and AlphaBay. Darknet marketplaces operate on computer networks designed to conceal the true Internet Protocol (IP) address of the computers accessing them. In addition, Darknet marketplaces only allow payments to be made in the form of digital currency, most commonly in Bitcoin. While not inherently illegal, digital currency is used by Darknet marketplaces because online transactions in digital currency can be completed without a third-party payment processor and are therefore perceived to be more anonymous and less vulnerable to law enforcement scrutiny.

“The Department of Justice and our federal law enforcement partners will continue to investigate and prosecute major interstate narcotics traffickers,” said U.S. Attorney Benjamin B. Wagner. “Those traffickers who believe they can escape the scrutiny of law enforcement by conducting their business on the dark web and receiving payments in digital currency are mistaken.”

According to the complaint, Burchard accepted orders for marijuana and cocaine on Darknet marketplaces and then mailed the narcotics from post offices in Merced and Fresno counties to customers throughout the U.S. Burchard was paid primarily in Bitcoin. The federal government estimates Burchard, whose sales through the Silk Road exceeded $1.4 million before that website was closed, was one of the largest vendors on that site. The complaint alleges that after federal law enforcement shut down the Silk Road website and arrested its founder in October 2013, Burchard transferred his narcotics business to Agora, and then to AlphaBay.

“HSI and our partners are at the forefront of combating illicit activities and financial crimes now seen in virtual currency systems,” said Ryan L. Spradlin, special agent in charge of HSI San Francisco. “Criminals continue to spread their businesses through online black markets using digital currency like Bitcoin, however they do not escape the reach of law enforcement. We continue to investigate, disrupt, and dismantle hidden illegal networks that pose a threat in cyberspace.”

“The combined efforts of law enforcement agencies in this type of investigation produce a formidable force against narcotics trafficking,” said Michael T. Batdorf, special agent in charge of IRS-Criminal Investigation. “With the increase use of the dark web to facilitate the drug trade and other illicit activities, IRS-CI will continue to trace the complex financial transactions that identify where the money comes from and where it goes.”

“Postal Inspectors worked closely with the U.S. Attorney’s Office and our partners in law enforcement on this investigation and will continue to vigorously protect the U.S. Mail against all forms of criminal misuse,” said Rafael Nunez, inspector in charge of the U.S. Postal Inspection Service’s San Francisco Division.

Trial Attorney Anitha Ibrahim with the U.S. Department of Justice’s Computer Crimes and Intellectual Property Section aided with the investigation. Assistant U.S. Attorney Grant Rabenn is prosecuting the case.

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Last Reviewed/Updated: 03/08/2017