CEO Pleads Guilty To Selling Encrypted Phones To Organized Crime

In March, Motherboard reported that the FBI had arrested the CEO of Phantom Secure, a company selling custom, encrypted phones, and which allegedly provided them to high end organized criminal groups including the Sinaloa drug cartel. On Tuesday, Vincent Ramos, the CEO, pleaded guilty to running a criminal enterprise that facilitated drug trafficking, specifically through the sale of these encrypted phones.

The news is the latest legal skirmish in the so-called ‘going dark’ debate, where law enforcement say they are hampered from viewing criminals’ communications due to encryption and other security protections. The plea is also a blow to an industry that has operated with relative openness for years.

“In his plea agreement, Ramos admitted that he and his co-conspirators facilitated the distribution of cocaine, heroin, and methamphetamine to locations around the world including in the United States, Australia, Mexico, Canada, Thailand and Europe by supplying narcotics traffickers with Phantom Secure encrypted communications devices designed to thwart law enforcement,” a press release from the United States Attorney’s Office in the Southern District of California, published Tuesday, reads.

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Ramos has agreed to an $80 million forfeiture money judgment, as well as giving up tens of millions of dollars of other assets, including cryptocurrency and bank accounts, a Lamborghini, multiple properties, and gold coins, the press release adds.

Phantom would take BlackBerry devices and load them with Pretty Good Privacy (PGP) software for sending encrypted messages, and also had the capability to remotely wipe phones seized by law enforcement. The company also removed the microphone, camera and GPS functionality from the phones, and routed the messages through overseas servers, according to the criminal complaint against Ramos and his co-conspirators. Those defendants, Kim Augustus Rodd, Younes Nasri, Michael Gamboa, and Christopher Poquiz, are still on the run.

As Motherboard previously reported, Phantom Secure had customers across the world. One source familiar with the secure phone industry said Phantom sold devices in Mexico, Cuba, and Venezuela, as well as to the Hell Angels gang.

Crucially, in the complaint against Ramos and his co-conspirators, prosecutors alleged Phantom was not simply incidental to a crime, in the same way Apple or Google may be when providing encryption for their own phones or communication services, but that Phantom deliberately and explicitly facilitated criminal activity. As part of the investigation into Ramos, Royal Canadian Mounted Police (RCMP)—which worked in collaboration with the FBI and Australian authorities—went undercover posing as drug traffickers and recorded Ramos saying “We made it—we made it specifically for this [drug trafficking] too.”

One source inside industry, and who provided Motherboard with details of Ramos’ arrest before they were public, previously said “FBI are flexing their muscle.”

US Attorney Adam Braverman said in the press release that “The Phantom Secure encrypted communication service was designed with one purpose—to provide drug traffickers and other violent criminals with a secure means by which to communicate openly about criminal activity without fear of detection by law enforcement.”

“As a result of this investigation, Phantom Secure has been dismantled and its CEO Vincent Ramos now faces a significant prison sentence. The United States will investigate and prosecute anyone who provides support, in any form, to criminal organizations, including those who try to help criminal organizations ‘go dark’ on law enforcement,” he added.

In the aftermath of the Phantom bust, other companies in the secure phone space have tried to legitimize their own operations, and separate themselves from any criminal activity.

“All phone companies I know have all tightened up,” a source familiar with the industry told Motherboard on Wednesday. Motherboard granted the source anonymity to speak candidly about internal industry developments. As Motherboard reported in March, this included the companies providing SIM cards to the phone firms checking who their own customers were, as well as Copperhead OS, a security-focused Android operating system, telling its resellers to resist use by criminal groups.

A lawyer representing Ramos did not immediately respond to a request for comment.