US Charges CEO of Company Selling Encrypted Devices to Drug Traffickers The custom handsets included iPhones that were allegedly used to evade police surveillance.

By S. Shah

entrepreneur daily

This story originally appeared on Engadget

The US Department of Justice (DoJ) has announced an indictment against the head and associate of a Canada-based company that allegedly supplied custom encrypted phones to international drug traffickers. In just the second case of its kind, CEO Jean-Francois Eap and former distributor Thomas Herdman of Sky Global were charged with conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO). Warrants have been issued for their arrests.

The RICO law is typically used to combat organized crime and was previously used against another encrypted phone company called Phantom Secure.Motherboard reports that the DoJ's announcement follows a crackdown in Europe that saw local law enforcement obtain and decrypt almost a billion messages sent between Sky Global's customers.

The indictment, returned by a federal grand jury on Friday, alleges that Sky Global installed sophisticated encryption software on devices designed to help drug traffickers to evade police surveillance. The custom phones — which included iPhone, Google Pixel, Blackberry, and Nokia handsets — allowed their users to communicate with each other in a closed network, with Sky Global routing their activity through encrypted servers located in Canada and France.

Related: Bitcoin Exchange Founder Sentenced to Prison for Money Laundering

Sky Global's alleged purpose was to facilitate an international drug trafficking operation that included the import and export of heroin, cocaine and methamphetamine. The narcotics were distributed in the US and Canada, Australia, Asia and Europe. While the encrypted communications system was also allegedly used to mask money laundering activities that included Bitcoin transactions on Sky Global's website.

In order to hide their illicit enterprise, Sky Global's employees apparently set up shell companies to cloak the proceeds from sales of their encrypted software. In total, some 70,000 of the custom devices are in use worldwide, according to the DoJ.

"The indictment alleges that Sky Global generated hundreds of millions of dollars providing a service that allowed criminal networks around the world to hide their international drug trafficking activity from law enforcement," Acting US Attorney Randy Grossman said in a statement. "This groundbreaking investigation should send a serious message to companies who think they can aid criminals in their unlawful activities."

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