Disgraced NCA officer Paul Chowles. (Image: -)
A former National Crime Agency officer has been jailed for stealing and hiding a cryptocurrency hoard worth £4.4m, which had been seized as criminal property during an investigation into online crime on the dark web. Paul Chowles, 42, was part of an investigation team that targeted organised criminal networks selling illegal goods on the dark website Silk Road 1 in 2013.
The operation, which was conducted jointly with the Federal Bureau of Investigation (FBI) in the USA, led to the convictions of several individuals living in the UK for drug offences. A second phase of the operation was launched in 2014, which led to the identification and arrest of a man named Thomas White, who had launched Silk Road 2.0 less than a month after the FBI had shut down the original site in 2013. White was jailed for 64 months in April 2019. As part of the investigation team working on the case, Chowles took the lead in the analysis and extraction of relevant data and cryptocurrency from the devices seized from White.
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But between 6 and 7 May 2017, 50 of the 97 Bitcoin seized by the NCA was transferred from a “retirement wallet” owned by White to a public address in two transactions.
The Bitcoin was then broken down into smaller amounts and transferred through the “Bitcoin Fog”, before being moved to other public addresses in an attempt to hide the trail of the money.
The Bitcoin Fog was a cryptocurrency “mixer,” which gained notoriety as a money laundering service for criminals seeking to hide their illicit proceeds from law enforcement.
Chowles then either converted the Bitcoin to pound sterling and withdrew the funds from his account or used both a Cryptopay debit card and a Wirex debit card provided with accounts he set up.
In total, he made 279 transactions using the Cryptopay debit card, spending the sum of £23,309 between August 26, 2021 and May 20, 2022. Chowles also converted and made five withdrawals totalling £6,232 between August 30, 2021 and February 22, 2022.
In total, he used the Wirex account and debit card, to spend the sum of £79,884.77 between August 27, 2021 and July 14, 2021.
It is calculated that Chowles, who has since been dismissed from the NCA, benefited financially to the value of £613,147.29 through his criminality.
The value of the 50 Bitcoin at the time was £59,409 and is now estimated to be worth more than £4.4million.
At Liverpool Crown Court on May 23, Chowles pleaded guilty to theft, transferring criminal property, and concealing criminal property.
He has now been jailed for a total of five-and-a-half years following an investigation by Merseyside Police.
Alex Johnson, Specialist Prosecutor with the Crown Prosecution Service’s Special Crime Division, said: “Within the NCA, Paul Chowles was regarded as someone who was competent, technically minded and very aware of the dark web and cryptocurrencies.
“He took advantage of his position working on this investigation by lining his own pockets while devising a plan that he believed would ensure that suspicion would never fall upon him.
“Once he had stolen the cryptocurrency, Paul Chowles sought to muddy the waters and cover his tracks by transferring the Bitcoin into mixing services to help hide the trail of money.
“He made a large amount of money through his criminality, and it is only right that he is punished for his corrupt actions.
“The CPS will not hesitate to bring charges against those who abuse their position in power for financial gain.”
Det Ch Insp John Black, from Merseyside Police’s Force Intelligence Bureau, said: “We know criminals have sought to use cryptocurrency as a way to launder money from illegal activities, including drug dealing and fraud.
“It will be extremely disappointing to everyone that someone involved in law enforcement could involve themselves in the very criminality they are tasked with investigating and preventing.
“This case should illustrate in the starkest terms that nobody is above the law. When it became clear that one of the NCA’s own officers had stolen Bitcoin, our officers conducted extensive enquiries to unearth a trail of evidence that Chowles had attempted to hide. This was supported fully by the NCA.
“He took advantage of his position on this investigation to line his own pockets while devising a plan that he believed would cover his tracks. He was wrong.
“I want to reassure the public that Merseyside Police have specialist officers with the experience and expertise to track the movement of funds designed to avoid detection.
“Above all, our officers have the determination to make sure criminals do not profit in any way from breaking the law while other honest and hard-working members of the public work to provide for their families.”
Building the case: How Paul Chowles was brought to justice
Following the seizure of the 97 Bitcoin from Thomas White, it was noticed that 50 Bitcoin had been taken from the digital wallet between 6 and 7 May 2017.
The NCA investigation team initially assumed that White had accessed the wallet and removed the Bitcoin, as he had the skills and knowledge to do that. By late 2021, the lost Bitcoin had been written off as it was deemed untraceable.
After White was convicted, Proceeds of Crime Act (POCA) proceedings were brought against him, and a confiscation order of £1,560,506 was made. The NCA sold the remaining 47 Bitcoins to fulfil part of the order, leaving £1,066,956.
While under investigation, White noticed that someone had removed 50 Bitcoin and stated that he knew that it had to be someone within the NCA because they had the private keys for his cryptocurrency wallet.
Merseyside Police had responsibility for managing White in the local area following his release on licence in early 2022 after he completed his custodial sentence.
Officers from Merseyside Police then agreed to meet with counterparts from the NCA to gain a fuller understanding of the investigation into White, and at the subsequent meeting, which Paul Chowles attended, Merseyside officers learned of the stolen 50 Bitcoins.
An investigation was launched by Merseyside Police into the stolen Bitcoin and Paul Chowles was arrested in May 2022. Police recovered an iPhone which linked Chowles to an account used to transfer Bitcoin as well as relevant browser search history relating to a cryptocurrency exchange service.
Several notebooks were also discovered in Chowles’ office, which contained usernames, passwords, and statements relating to White’s cryptocurrency accounts.