RECEIVED
UNITED STATES DISTRICT COURT
AUG
0 4 2020
FOR THE DISTRICT OF COLUMBIA
Clerk, U.S. District and
Holding a Criminal Term
Bankruptcy Courts
Grand Jury Sworn in May 7, 2019
UNITED STATES OF AMERICA
CRIMINAL NO.
•
v.
GRAND JURY ORIGINAL
DAVID BRIAN PATE, and
••
VIOLATIONS:
JOSE LUIS FUNG HOU,
21 U.S.C. § 846
(Conspiracy to Distribute Controlled
Defendants.
Substances)
21 U.S.C. § 841(a)(1) and 841(b)(1)(C)
(Unlawful Distribution of Controlled
Substances)
21 U.S.C. §§ 959 and 963
(Conspiracy to Import Controlled
Substances from a Foreign Country)
18 U.S.C. § 1956(h)
(Conspiracy to Commit Money
Laundering)
18 U.S.C. § 1956(a)(2)(A)
(Laundering of Monetary
Instruments)
FORFEITURE:
21 U.S.C. § 853 and 18 U.S.C. § 982
INDICTMENT
The Grand Jury charges that:
At times material to this Indictment:
1.
DAVID BRIAN PATE was a United States citizen, who subsequently acquired
dual Costa Rican citizenship, and was a resident of Costa Rica.
2.
JOSE LUIS FUNG HOU was a Costa Rican citizen and a resident of Costa Rica.
3.
Co-Conspirator A, whose identity is known to the Grand Jury, was a United States
citizen, who resided in the United States, and acted as a re-shipper of narcotics.
4.
Co-Conspirator B, whose identity is known to the Grand Jury, was a United States
citizen, who resided in the United States. and acted as a re-shipper of narcotics.
5.
Co-Conspirator C, whose identity is known to the Grand Jury, was a United States
citizen, who resided in the United States, and acted as a re-shipper of narcotics.
DEFINITION OF TERMS
Narcotics
6.
OxyContin was a specific brand name for the Schedule II controlled substance
oxycodone, an opioid.
7.
Morphine was a Schedule II controlled substance.
8.
Xanax was a specific brand name for the Schedule IV controlled substance
alprazolam.
Bitcoin
9.
Bitcoin ("BTC") was one type of virtual currency that was circulated over the
Internet. BTC was not issued by any government, bank, or company, but rather was controlled
through computer software. Generally, BTC was sent and received using a BTC "address," which
was like a bank account number and was represented by a case-sensitive string of numbers and
letters. Each BTC address was controlled through the use of a unique private key, a cryptographic
equivalent of a password. Users could operate multiple BTC addresses at any given time, with the
possibility of using a unique BTC address for every transaction. A typical user purchased BTC
from a virtual currency exchange, which was a business that allowed customers to trade virtual
currencies for conventional money (e.g., U.S. dollars, euros). Little to no personally identifiable
information about the sender or recipient was transmitted in a BTC transaction itself. However,
2
virtual currency exchanges were required by U.S. law to collect identifying information of their
customers and verify their clients' identities.
10.
To send BTC to another address, the sender transmitted a transaction
announcement, cryptographically signed with the sender's private key, across the BTC network.
Once the sender's transaction announcement was verified, the transaction was added to the
blockchain. The blockchain was a decentralized, public ledger that logged every BTC transaction.
In some instances, blockchain analysis could reveal whether multiple BTC addresses were
controlled by the same individual or entity.
The Tor Network
11.
Tor was a computer network which anonymized Internet activity by routing a user's
communications through a global network of relay computers
(or proxies), thus effectively
masking the Internet Protocol ("IP") address of the user. An IP address was a unique numeric
address (used by computers on the Internet) that is assigned to properly direct internet traffic. A
publicly-visible IP address could allow for the identification of the user and his or her location.
To access the Tor network, a user had to install freely-available Tor software. Use of the Tor
software routed a user's communications around a distributed network of relay computers run by
volunteers all around the world, thereby masking the user's actual IP address (traditionally used to
identify a user).
12.
Within the Tor network, entire websites could be set up as "hidden services," which
masked the IP address for the site's web server. Hidden services were accessed at Tor-based web
addresses comprised of a series of algorithm-generated characters, such as "asdlk8fs9dflku7f,"
3
followed by the suffix ".onion." A user could only reach these "hidden services" if the user was
using the Tor software and operating in the Tor network.
Darknet Markets
13.
Darknet markets were commercial websites located within Tor's hidden services
that could only be accessed using Tor. Darknet markets functioned primarily as black markets,
selling or brokering transactions involving drugs, unlicensed pharmaceuticals, cybercriminal tools,
weapons, counterfeit currency, stolen credit card details, forged documents, and other illicit goods.
BTC was the most common method of payment for products or services within darknet markets.
14.
Silk Road Market ("Silk Road") and AlphaBay Market ("AlphaBay") were, at
various times, popular darknet markets widely used by individuals in the United States and
elsewhere to buy and sell illegal narcotics.
COUNT ONE
(Drug Distribution Conspiracy)
21 U.S.C. § 846
15.
Paragraphs 1 through 14 are incorporated herein.
16.
Beginning on or about February 27, 2013, and continuing through on or about
May 6, 2018, within the District of Columbia and elsewhere, the defendants, DAVID BRIAN
PATE and JOSE LUIS FUNG HOU, did knowingly conspire, with others known and unknown
to the Grand Jury, including Co-Conspirators A, B, and C, to knowingly and intentionally
distribute a mixture and substance containing a detectable amount of oxycodone, a Schedule II
controlled substance, morphine, a Schedule II controlled substance, and alprazolam, a Schedule
IV controlled substance.
4
OBJECTS OF THE CONSPIRACY
17.
The objects of the conspiracy were, in substance, as follows:
a.
to traffic narcotics;
b.
to use cryptocurrency and the darknet to conceal the co-conspirators' illicit
activities; and
c.
to enrich the co-conspirators from the trafficking of narcotics.
MANNER AND MEANS
18.
DAVID BRIAN PATE acquired OxyContin (oxycodone) and other narcotics from
suppliers in Costa Rica, including primarily from pharmacists such as JOSE LUIS FUNG HOU.
19.
DAVID BRIAN PATE sold narcotics, including OxyContin, Morphine, and
Xanex (alprazolam), on numerous darknet markets, including Silk Road and AlphaBay, in
exchange for BTC.
20.
DAVID BRIAN PATE utilized the online monikers "buyersclub," "senorpate,"
"davidpate," and "expurdue" on darknet markets, online forums, and BTC exchanges.
21.
For example, between in or about December 2012 and in or about October 2013,
DAVID BRIAN PATE advertised and sold 20 milligram (mg) and 40 mg pills of OxyContin on
Silk Road using the moniker "expurdue." DAVID BRIAN PATE advertised the pills as
originating from a pharmacy in Costa Rica.
22.
DAVID BRIAN PATE' s darknet sales were conducted as follows:
a.
DAVID BRIAN PATE sent bulk shipments of narcotics in pill form, often
concealed in tourist souvenirs such as maracas, to co-conspirator re-shippers (such as Co-
Conspirators A, B, and C) in the United States;
5
b.
DAVID BRIAN PATE would send the co-conspirator re-shippers a list of
customer orders in the United States, which included the customer's name, the customer's
shipping address, and the quantity of pills they purchased;
c.
The co-conspirator re-shippers then created smaller packages of pills;
d.
The co-conspirator re-shippers mailed the pills to the customer; and
e.
Once the shipments were received by the customer, the darknet market
would release funds in BTC, which were held in escrow until the transaction was
completed, into DAVID BRIAN PATE's account on the darknet market.
23.
The co-conspirators would launder payments in the form of BTC and international
wire transfers.
24.
Ultimately, between in or about December 2012 and in or about July
2020,
following payments from darknet markets were received at BTC addresses controlled by DAVID
BRIAN PATE:
Darknet
BTC
Market
Received
Agora
62.251352
Middle Earth
191.675684
Silk Road
22,368.679000
AlphaBay
1,077.176277
Nucleus
26.692179
Abrams
173.020268
Dream
3.787112
Total
23,903.281872
25.
DAVID BRIAN PATE used encrypted messaging services to communicate with
co-conspirator re-shippers regarding the identities, location information, and order details of
customers.
6
OVERT ACTS
26.
The defendants and co-conspirators, known and unknown to the Grand Jury,
committed, and caused to be committed, the following overt acts, amongst others, in furtherance
of the conspiracy.
2015 Bulk Purchases and Wires
27.
On or about September 9, 2015, DAVID BRIAN PATE caused a wire transfer
from inside the United States to JOSE LUIS FUNG HOU outside of the United States totaling
$9,000.
28.
On or about September 16, 2015, DAVID BRIAN PATE caused a wire transfer
from inside the United States to JOSE LUIS FUNG HOU outside of the United States totaling
$9,000.
29.
On or about October 30, 2015, DAVID BRIAN PATE wrote to JOSE LUIS
FUNG HOU in an email, "i [sic] know that you are leaving soon to go on vacation and was
wanting to see what you could do before leaving. let me know and i will see what kind of money
that i can come up with and have wired to you. thanks, dave."
30.
On or about October 30, 2015, JOSE LUIS FUNG HOU replied in an email, "Hey
David. I can get you the same amount ready for next friday before I leave. Just like last time: 48
of the 40s and 20 of the 20s," a reference to doses of OxyContin in milligrams.
31.
On or about October 30, 2015, DAVID BRIAN PATE responded in an email, "will
you get the prescriptions?? also the 270 30mg morphine for the 3 prescriptions that i had? if so let
me know total price, i am trying to make plan to limon [Costa Rica] this coming week to pick up
my lexus. thanks, dave."
7
32.
On or about October 30, 2015, JOSE LUIS FUNG HOU replied in an email,
"Right!! the morphines too! I will take care of the papelwork [sic] this weekend for the 40s and
20s."
33.
On or about October 30, 2015, DAVID BRIAN PATE replied in an email, "try to
let me asap the total price, so that i have time to get the wire out to yoou [sic]."
34.
On or about October 30, 2015, JOSE LUIS FUNG HOU asked in an email, "You
think you can wire [$118,000 or so?"
35.
On or about November 1, 2015, DAVID BRIAN PATE replied in an email, "FOR
SURE.. WILL SEND IN WIRE INFO IN A BIT."
36.
On or about November 28, 2015, JOSE LUIS FUNG HOU sent an email to
DAVID BRIAN PATE with the subject line of "This is my new email, [redacted] from the Oxys,"
in which JOSE LUIS FUNG HOU stated, "I've got the 2 transfers... I'm getting recetas right
now, but I may need 6 from you dr. Please tell him to do 60 of the 40s for each one."
37.
On or about November 28, 2015, DAVID BRIAN PATE responded to JOSE
LUIS FUNG HOU in an email asking if the "meds" could be ready by Sunday.
38.
On or about November 28, 2015, JOSE LUIS FUNG HOU responded to DAVID
BRIAN PATE in an email to make sure that DAVID BRIAN PATE had six more "recetas," each
for 60 tablets of "40s."
39.
On or about November 28, 2015, JOSE LUIS FUNG HOU emailed PATE,
"Great! I've got 44 of the 40mg and 26 of the 20mg."
40.
On or about November 28, 2015, DAVID BRIAN PATE told JOSE LUIS FUNG
HOU in an email, "Can you please send me a break down of the cost? Already picked up
8
prescriptions.. Do you know of a good place to buy more while I am up here. I have 5 40mg and
4 20mg that I need to fill".
Sales via Co-Conspirator A
41.
In or about early June
2015, DAVID BRIAN PATE sent a package of
approximately 400 pills of OxyContin to Co-Conspirator A.
42.
In or about early June
2015, per DAVID BRIAN PATE's instructions, Co-
Conspirator A caused a wire from inside the United States to DAVID BRIAN PATE outside of
the United States totaling $6,700, with said funds derived from the sale of the approximately 400
pills of OxyContin.
43.
In or about February 2016, DAVID BRIAN PATE caused two packages to be sent
to Co-Conspirator A in the United States, which contained in total approximately
10,000
OxyContin and Xanax pills, which were concealed inside maracas.
44.
In or about March 2016, DAVID BRIAN PATE caused a package to be sent to
Co-Conspirator A in the United States, which package contained approximately 8.52 pounds of 2
mg pills of Xanax — and which package was seized by law enforcement.
45.
In or about March 2016, DAVID BRIAN PATE caused a package to be sent to
Co-Conspirator A in the United States, which package was seized by law enforcement and
contained the following approximate amounts of pills, hidden within maracas:
a.
69.8 grams of purple 30 mg morphine pills;
b.
123.9 grams of pink 20 mg OxyContin pills;
c.
105.6 grams of yellow 40 mg OxyContin pills; and
d.
109.5 grams of yellow 40 mg OxyContin pills.
9
Sales via Co-Conspirator B
46.
In or about September
2016, DAVID BRIAN PATE, using the moniker
"buyersclub," advertised on AlphaBay the sale of 20mg and 40mg OxyContin pills, which he
described as "old formula"—referring to the original OxyContin formula that did not contain
tamper-resistant features such as a crush-proof feature that prevented a user from inhaling or
injecting the pills after pulverizing them.
47.
On or about November 2, 2016, DAVID BRIAN PATE, using the moniker
"buyersclub," accepted an order on AlphaBay for ten 40 mg OxyContin tablets, sold at $22.00
worth of BTC per tablet, which order was placed from the District of Columbia by an undercover
Drug Enforcement Administration ("DEA") task-force officer ("UC").
48.
On or about November 2, 2016, DAVID BRIAN PATE received a private
AlphaBay message from the DEA UC, which included the receipt address in Washington, D.C.
for the narcotics.
49.
On or about November 8, 2016, DAVID BRIAN PATE sent the DEA UC a private
AlphaBay message containing a tracking number for the package.
50.
On or about November 8, 2016, Co-Conspirator B, acting as DAVID BRIAN
PATE's re-shipper, caused the DEA UC to receive an envelope in Washington, D.C., containing
a small plastic bag with 10 pills stamped with "EX" and "40," which laboratory analysis confirmed
tested positive for the presence of oxycodone.
51.
On or about December 12, 2016, Co-Conspirator B, using the moniker "BC_USA,"
accepted an order on AlphaBay for ten 40 mg OxyContin tablets, sold at $32.00 worth of BTC per
tablet, which order was placed by the same DEA UC.
10
52.
On or about December 19, 2016, Co-Conspirator B, acting as DAVID BRIAN
PATE's re-shipper, caused the DEA UC to receive a plastic bag with 10 pills stamped with "EX"
and "40," which laboratory analysis confirmed tested positive for the presence of oxycodone.
53.
On or about January
19, 2017, DAVID BRIAN PATE accepted an order on
AlphaBay for ten 40 mg OxyContin tablets, sold at $32.00 worth of BTC per tablet, which order
was placed from the District of Columbia by another DEA UC.
54.
On or about January 30, 2017, Co-Conspirator B, acting as DAVID BRIAN
PATE's re-shipper, caused the DEA UC to receive in Washington, D.C. a plastic bag with 11 pills
stamped with "EX" and "40," which laboratory analysis confirmed tested positive for the presence
of oxycodone.
Seized August 2017 Shipment
55.
On or about August 21, 2017, DAVID BRIAN PATE caused a package of
narcotics to be shipped to the United States, which package contained approximately 2,214
oxycodone pills and approximately 358 morphine pills hidden inside maracas — and which package
was seized by Costa Rican law enforcement.
Seized February 2018 Shipment
56.
On or about February 14, 2018, DAVID BRIAN PATE caused a package of
narcotics to be shipped to Co-Conspirator C in the United States, which package contained
approximately 717 pills, primarily OxyContin and morphine, hidden inside maracas — and which
package was seized by Costa Rican law enforcement.
11
Seized May 2020 Drug Shipment
57.
In or about May 2020, DAVID BRIAN PATE caused a shipment of narcotics to
be shipped to the United States, which package was seized by Costa Rican law enforcement
containing 40 mg OxyContin pills packaged hidden inside maracas.
(Conspiracy to Distribute Controlled Substances, in violation of Title 21, United States
Code, Section 846)
COUNT TWO
(Distribution of a Controlled Substance)
21 U.S.C. § 841(a)(1)
58.
Paragraphs 1 through 14 and 18 through 57 are incorporated here.
59.
On or about November 8, 2016, within the District of Columbia and elsewhere, the
defendant, DAVID BRIAN PATE, did knowingly and intentionally distribute a mixture and
substance containing a detectable amount of oxycodone, a Schedule II controlled substance.
(Unlawful Distribution of Controlled Substances, in violation of Title 21, United States
Code, Section 841(a)(1) and 841(b)(1)(C))
COUNT THREE
(Distribution of a Controlled Substance)
21 U.S.C. § 841(a)(1)
60.
Paragraphs 1 through 14 and 18 through 57 are incorporated here.
61.
On or about January 30, 2017, within the District of Columbia and elsewhere, the
defendant, DAVID BRIAN PATE, did knowingly and intentionally distribute a mixture and
substance containing a detectable amount of oxycodone, a Schedule II controlled substance.
(Unlawful Distribution of Controlled Substances, in violation of Title 21, United States
Code, Section 841(a)(1) and 841(b)(1)(C))
12
COUNT FOUR
(Conspiracy to Import Controlled Substances)
21 U.S.C. § 963
62.
Paragraphs 1 through 14 and 18 through 57 are incorporated here.
63.
Beginning in or about March 2016, continuing through in or about May 2020,
within the District of Columbia and elsewhere, the defendants, DAVID BRIAN PATE and JOSE
LUIS FUNG HOU, did knowingly conspire with individuals known and unknown to the Grand
Jury to import into the United States from any place outside thereof, that is Costa Rica, a mixture
and substance containing a detectable amount of oxycodone, a Schedule II controlled substance,
morphine, a Schedule II controlled substance, and alprazolam, a Schedule IV controlled substance.
(Conspiracy to Import Controlled Substances from a Foreign Country, in violation of
Title 21, United States Code, Sections 959 and 963)
COUNT FIVE
(Money Laundering Conspiracy)
18 U.S.C. § 1956(h)
64.
Paragraphs 1 through 14 and 18 through 57 are incorporated here.
65.
Beginning on or about February 27, 2013, and continuing through in or about May
2020, within the District of Columbia and elsewhere, the defendants, DAVID BRIAN PATE and
JOSE LUIS FUNG HOU, did knowingly conspire with others known and unknown to the Grand
Jury to transport, transmit, and transfer, and knowingly cause the transport, transmission, and
transfer, of monetary instruments and funds from a place in the United States to a place outside
13
the United States, that is Costa Rica, and from a place outside the United States, that is Costa Rica,
to a place in the United States:
a.
with the intent to promote the carrying on of a specified unlawful activity,
that is, buying, selling, and otherwise dealing in a controlled substance;
b.
knowing that the monetary instrument and funds involved in the
transportation, transmission, and transfer represented the proceeds of a specified unlawful
activity, that is, buying, selling, and otherwise dealing in a controlled substance, and
knowing such transportation, transmission, and transfer was designed in whole and in part
to conceal and disguise the nature, the location, the source, the ownership, and the control
of the proceeds of said specified unlawful activity.
(Conspiracy to Launder Monetary Instruments, in violation of Title 18, United States
Code, Section 1956(h))
COUNTS SIX AND SEVEN
(Laundering of Monetary Instruments)
18 U.S.C. § 1956(a)(2)(A)
66.
Paragraphs 1 through 14 and 18 through 57 are incorporated here.
67.
On or about the dates described, within the District of Columbia and elsewhere, the
defendant, DAVID BRIAN PATE, caused the transmission and transfer of a monetary instrument
and funds, in the amounts described below, from a place in the United States, that is, Washington,
D.C., to a place outside the United States, with the intent to promote the carrying on of a specified
unlawful activity, that is, buying, selling, and otherwise dealing in a controlled substance.
14
Count
On or about Date of
Amount
Transfer
SIX
November 2, 2016
$220 worth of BTC
at time of transaction
SEVEN
January 19, 2017
$320 worth of BTC
at time of transaction
(Laundering of Monetary Instruments, in violation of Title 18, United States Code,
Section 1956(a)(2)(A))
FORFEITURE ALLEGATION
1.
Upon conviction of the offenses alleged in Counts One through Four of this
Indictment, the defendants shall forfeit to the United States pursuant to 21 U.S.C. § 853, any
property constituting, or derived from, proceeds obtained, directly or indirectly, as a result of the
said violations and any property used, or intended to be used, in any manner or part, to commit, or
to facilitate the commission of the said violations.
2.
Upon conviction of the offenses alleged in Counts Five through Seven of this
Indictment, the defendants shall forfeit to the United States any property, real or personal, involved
in these offenses, or any property traceable to such property pursuant to 18 U.S.C. § 982(a)(1).
The United States will also seek a forfeiture money judgment for a sum of money equal to the
value of any property, real or personal, involved in these offenses, and any property traceable to
such property.
3.
If any of the above-described forfeitable property, as a result of any act or omission
of the defendant(s):
a. cannot be located upon the exercise of due diligence;
b. has been transferred or sold to, or deposited with, a third party;
15
c. has been placed beyond the jurisdiction of the court;
d. has been substantially diminished in value; or
e. has been com
ingled with other property which cannot be divided without
difficulty;
the defndants shall frfit to the United States any other property of the defndant, up to the value
of the propery described above, pursuant to 21 U.S.C. § 853(p).
(Criminal Forfeiture, pursuant to Title 18, United States Code, Section 982(a)(l), Title
21, United States Code, Section 853(a) and (p))
A TRUE BILL:
FOREPERSON.
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1,ttomey of the United States in
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16
