The FBI Secretly Ran a Massive Money Laundering Ring

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1:17Hello, and welcome to the 404 Media Podcast, where we bring you unparalleled access in worlds, both online and IRL. 404 Media is a journalist founded company and needs your support to subscribe go to 404media.co as well as bonus content every single week subscribers also get access to additional episodes where we respond to the best comments gain access to that content at 404media.co i'm your host joseph and with me are two of the other 404 media co-founders the first being emmanuel mayberg hello and jason kebler hey good to be here yeah good to not be hosting Oh, is that what you did last time?

1:59No, when you're out here, we just don't do it at all. We have a robot ask us questions. I mean, yeah, I go on holiday, you outsource me to a robot. That sounds fine to me. I'm back. Jason, what is this first story we're going to talk about? So this is your story. It's called Elon Musk. And Elon Musk is in quotes here because it's a username, which we'll get into. Elon Musk was a prolific money launderer for hackers and drug traffickers. It was secretly the FBI. Joseph, this is a really great story based on a lot of court documents and just sourcing and reporting that you did over the course of a few weeks.

2:41So this person was named Elon Musk, WHM. So who was he? And I guess, what is WHM? Yeah, look, straight up. I'm not going to say Elon Musk WHM for the entire podcast. I'm just going to say Elon Musk. You all know we're not talking about the actual Musk. It's a username that this person took. But the WHM refers to White House Market, which is one of these dark web marketplaces like Silk Road, like AlphaBay. And to be honest, I covered those places a lot back in 2013, 14, 15. but they're still going. I just don't think people pay that much attention to them anymore. I'm not sure about the size of these ones but some of them got pretty substantial after Silk Road and actually a lot, lot bigger.

3:35But that was just one of these marketplaces where Elon Musk advertised his services and what he offered was something which I think is really overlooked by a lot of the technology press which is this crucial cog in the underground economy So let's say you're a drug trafficker or a hacker, and you have all of this Bitcoin that you've got from selling your drugs or hacking to companies. That's all well and good, but you can't really do anything with it. You can't go up to every Lamborghini dealership or whatever and try to buy it with Bitcoin or Monero. They're not going to accept it, and that looks pretty weird anyway, right?

4:13So you need to convert that crypto into cash. that presents a real problem for criminals because if they just go do it at coinbase or something they're going to ask for id and then you know maybe get a fake id whatever but there's a lot of friction there and coinbase or binance are going to give information to the authorities so what elon musk offers is you send me your bitcoin and i will just send you cash physically in the mail, know your customer KYC, know ID, and you can anonymously cash out your crypto. So one thing, one detail in this story that I thought was really good is that a lot of the times the cash was sent within the pages of children's books.

4:58Is that right? Yeah. So what happened at the start of the investigation is the FBI start doing all of these undercover buys because, you know, Elon Musk is advertising this stuff on the dark web, but we have no idea where he is. So they do a bunch of buys for$1 ,000 here,$2 ,000 there. It all goes to this post box somewhere in Kentucky. And they open it up and it just looks like children's books, or in some cases, the pages of children's books sort of taped together, sort of, you know, relatively innocuous, looks somewhat normal. You then open those up and there are envelopes inside, two envelopes, one inside the other.

5:38You get through those, and then that's where the cash is. Now, obviously, whoever's shipping this money has done that to try to mask it so it doesn't get caught in transit, that sort of thing. But it is pretty funny that, yeah, they were shipped in children's books. I really tried to do that with this article, because as you say, the vast majority is based on court documents. And it wasn't like I just went to PACER, the US Court Records website, and just downloaded a bunch of records and wrote it, this was spread across dozens and dozens of dockets that weren't immediately obviously connected.

6:13I had to figure out, oh, this case is actually part of this case. And there's sort of a spider web of all of these different dockets going on. And you get lots of details like that, like the children's books, some of the money mills we'll talk about, the guy buying Mercedes, all of that sort of thing. Right. So the FBI wasn't just investigating Elon Musk, WHM, or, I mean, maybe that was their ultimate target, but they, like, they, in the start, they identified a single person. How did they do that? And then what happened after they sort of identified this one, I guess you'd call him a money launderer or an accused money launderer, but how, uh, How did they identify him?

6:55Yeah. So with all of these undercover buys, where all of this cash is arriving at the postbox, they find that it keeps being shipped from different places in New York, like these villages and towns sort of in upstate New York. And they kind of gloss over this in the court records. I'm not 100 % sure. But what seems to have happened is that they zeroed in on that area because all of these packages keep coming from there. And then eventually they managed to perform physical surveillance on this person who they believe is shipping the packages. This person, they arrest him a little while later. They burst into his apartment.

7:34They shout his name. He then comes out from the bedroom. He's living with a parent or his parents, it seems. We don't actually name him in the article because it turns out later that he actually flips and becomes a confidential human source for the FBI and for the authorities. and you know it just didn't seem right naming that person even though you can figure it out if you piece all of the different documents together but what they do there is almost like a very old school investigation right you think about the dark web and all this technical stuff and actually there is a real world component because there are real people moving physical cash around and they've identified someone shipping this cash they then flip him and then that's a way to investigate the rest of the money laundering ring.

8:22And this person who we call Eric puts on a camera, I think a microphone as well, and they go and continue basically laundering money while the FBI is monitoring them. And that would often involve going to a grocery store car park or something like that and picking up or moving$100 ,000 to$300 ,000 at once. So while the FBI is buying a grand or two here or there, it's obvious that the money laundering ring is actually much, much bigger and moving much, much more money. And there's that physical part. And then also in these conversations with Elon Musk, because of course with the undercover buys, the FBI is posing as a drug trafficker online.

9:08They follow the blockchain, which shows all of the Bitcoin transactions, and they're able to figure out or estimate, I guess, that something like 90 million dollars is moving through this guy's cryptocurrency account so it's a huge um money laundering ring um and well this was actually a long time ago now i think in 2013 but long time readers and listeners may remember an article we wrote way back then about a money laundering ring in new york and oh that was really interesting because they were exchanging cryptocurrency for cash and all that sort of thing it turns out it was this one we didn't know that at the time, but now I've pieced together all of these other court documents and it's, oh, this is an even bigger case than that somehow.

9:55Right. And so they eventually identify who they believe to be Elon Musk and they essentially trick him into flying to the United States. Is that right? Yeah. And I was kind of blown away by this, but through the confidential human source, in the money laundering organization. They get a WhatsApp number, and they actually get a lot of phone numbers and all that sort of thing, which is one of the main numbers he communicates with. They then do all of these different search warrants and court orders. They do one with Uber, I think PayPal, Binance for sure as well. And they eventually identify this 30-year-old or late 20s Indian national with the surname Muraka.

10:46I hope I'm pronouncing that correctly. Apologies if I'm not. But they figure out it's him, and he's off in India. And they're figuring out, well, how do we get him here? And it turns out he'd made a ton of applications to visit the US over the years. And they always denied. We don't really know why they were denied, but they always were. And now this time, when he makes another application, the FBI clearly communicates with the State Department and says, hey, approve it. and you go through the court documents and it says the only reason the State Department approved this travel authorization was because the agency knew that this person was going to be arrested.

11:25Now, I'm sure that happens. I'm sure there are cases if you just look around. But that was the first time I'd seen that in the court record where it's like, well, we're just going to approve him so he comes to the country, and then we're going to arrest him. But they lure him over. And of course, it's after they arrest him, the story actually gets really, really interesting. Yeah, I mean, that was a lot of lead up, but basically they arrest this person who is supposedly Elon Musk, WHM, and then they basically take over his persona. Yeah. And they run his money laundering business for a year. Yeah, so I guess to back up briefly, I came across this case because somebody sent me a court record that we'll talk about in a second.

12:15And then I worked it backwards. I was trying to figure out, huh, who is this money launderer that the FBI took over? And that led me to the Elon Musk case. It was announced in January, but it didn't really get much coverage at all. So I went back from that and then brought all the court records together and figured it out. And what happened is that the FBI takes it over and I managed to actually have the prosecutor's office confirm to me that they ran it for 11 months, nearly a year. And honestly, I was pretty surprised by that. From reading the court records, I was estimating with the timeline I had in front of me, well, it looks like they ran it for at least three, four, maybe six months, something like that.

13:03But it really blew me away that they said that they ran it for 11. And during that time, they investigated Elon Musk's customers, or I guess the FBI's customers now. And the FBI didn't get back to me. I did speak to the prosecutor's office, as I said, and they were quite hazy on the details, but they did say the investigation looked into drug traffickers in Miami, a robbery at Knife Point in San Francisco, and then lots of hacking investigations as well. The prosecutors wouldn't say whether those investigations were specifically before they took over the account or after they took over the account.

13:43They just said there were investigations both before and after. Right. I mean, there's shades here of Darkwire, the incredible true story of the largest sting operation ever, a book by Joseph Cox, where the FBI, we've talked about it a lot, but the FBI took over an encrypted cell phone company. And this is just the latest of the FBI secretly running criminal organizations for sometimes months or years at a time. And in the meantime, it's like crimes are being committed. It sometimes takes them quite a while to start arresting people. Can you talk about some of the other ones that you've covered?

14:22Yeah. So yes, there is the Anom case, N-A-N-O-M, where, as you say, they took over an embryonic encrypted phone company, put a backdoor in, and then used that to wiretap the world. That was thousands of devices, something like 9 ,000 to 12 ,000, depending at the point in time. You have that. You have when the FBI launched its own cryptocurrency secretly. They didn't come out and say, this is the FBI coin. It was a covert operation to catch people doing pump and dump schemes. I didn't cover that at the time, but I definitely took notice when it came out and there was a press release about it. And the other one is one I got obsessed with years ago, back when we were at Motherboard writing there, when the FBI took over a child abuse website on the dark web and they ran it for two weeks in order to deliver malware to visitors of that website.

15:18All of these cases are shades of gray. You know, it's not black and white. you can on one side see, oh, well, you'd see why the FBI would do that. They want to flip criminal infrastructure against criminals and then use that as an avenue to target them. On the other side, they are arguably facilitating criminal activity, at least for a period of time. So with the Dark Web Child Abuse Site, they were serving child abuse material to child abusers and allowing them to access that. With Anom, they were facilitating drug trafficking and assassinations and in my book that you mentioned you know at least one person was killed through an assassination planned on that app um i guess the pump and dump one is a little bit uh sort of not as extreme as those although i need to look into it but here if all of the cases we've connected are accurate i mean the fbi is running the money laundering operation and in order to do that you have to send criminals money so you obviously so they don't suspect it but also you get their physical address.

16:21And there's one case in there which it at least lines up on the timeline. And they say that this alleged hacker from Scattered Spider, the prolific hacking collective, communicated with a money laundering service on Telegram that they didn't realize was an undercover FBI operation. And this alleged hacker originally asked for$50 ,000 and they to$75 ,000 and the FBI mailed the cash to them, got their physical address and whatever, and this person went on to flash a bunch of cash on Snapchat. And these are violent criminals. They do very high-profile hacking operations, they steal a lot of money, and they also conduct physical violence against one another and members of the public.

17:10And yes, of course, this operation was done in order to investigate these people. But you can't dance around the fact that it facilitated them in some way as well. And there's a tension there. And, you know, some people will fall on one side, some people will fall on the other, maybe some in the middle. But you have to, like, address that tension. Because this is wild. You know, it's really, really crazy. Yeah. So, I mean, in this case, there's drug trafficking prosecutions in Miami, a robbery in San Francisco. and then a lot of hacking. And then some pretty high-profile hackers were wrapped up in this, right?

17:53Yeah, I mean, the main one that we point to is the Scattered Spider investigation. But the authorities are remaining very, very tight-lipped on this. And of course, originally, when they started to figure out the contours of this operation, I would love to speak to the agents even if it's the agents at the US Postal Inspection Service who were part of the undercover buys or of course the FBI or the prosecutors and I would love to talk to the money mules as well it's been a while since I covered a case where everybody basically doesn't talk except the prosecutors very very briefly in a few emails with me defense lawyers won't get back to me the people who actually did some of the crimes didn't get back to me FBI didn't US PIS didn't either and I figured out why that is because when you go through the court transcripts the prosecutors explicitly say we haven't done a press release about this because there's ongoing investigations and now the Elon Musk persona has retired I sent a DM on telegram and it doesn't it like it delivered so whoever is in control of that fbi hasn't responded um to my request for comment but that so this is gonna maybe not snowball but more will come out about this you know give it i don't know a couple of months something like that i'm sure there'll be a big splashy press release saying how the fbi did this but they really don't want to talk about it for the moment and i guess just the last thing i'll say before we go to the next segment is that another reason they may not want to talk about it is because authorities did some pretty controversial stuff here beyond running the money laundering operation.

19:45While conversing with Elon Musk in an undercover capacity, they sent the person some YouTube links in an attempt to, you know, build rapport, that sort of thing. The authorities then demanded that Google turn over the IP addresses and identifying information of everybody who watched those YouTube videos over like an eight-day period, something like that. And Forbes actually covered that demand a while ago because they found an unsealed court record, but they didn't have all of the context, which now we've built upon after Forbes reporting as well. And experts that Forbes spoke to at the time, it's like, well, that's unconstitutional because you may have just done basically some search warrant or court order that implicates a bunch of people because they happen to watch a YouTube video, which thousands of people have already watched.

20:34So there's a ton of stuff in this story. I definitely recommend people go read the full thing because we're almost just scratching the surface. It's a 3 ,500-word piece. But yeah, it was a fun one. I'm glad we could get that out. Yeah, I mean, the last thing I'll say is just like, as you mentioned, you've covered the FBI doing, the kind of secretly running these criminal organizations or posing as criminals or running criminal infrastructure over the years. and every time you do it, I'm like, oh, well, they've done everything now. And it was funny when you wrote this piece, I was like, oh, I guess I hadn't thought about them running a dark web money laundering operation.

21:15And surely the next time this happens, I will be surprised again. But I mean, I have to say, I'm running out of ideas for things that the FBI can run secretly without people knowing in order to interrupt criminals. Yeah, I guess a VPN or something would be a good one. I feel like that must have happened and we just don't know about it. But you're right, they will leverage any criminal infrastructure they can to flip it against them. And that brings up all sorts of questions. Haven't they tried to run Tor exit nodes before, possibly? Yeah, well... Or the Carnegie Mellon thing. Maybe we shouldn't get into it, but years ago, they tried to unmask Tor traffic by doing something with Carnegie Mellon, which had control of some tour exit nodes, I believe.

22:02Yeah, back in around 2014, and that's how they unmasked Silk Road 2. I was actually looking back into that case because I feel like it's been long enough. If you're listening, you know more about that, please let me know. It's 10 years at this point, so I think we should go back and try and get the full story on that. Let's leave that there because we have a jam-packed segment about tariffs and Trump. Deliberately didn't put it at the front of the show because people will be like, oh good, we're going to have a podcast not about politics. Well, now you're here, we're going to bait and switch you because we actually have a ton of stuff left that other people aren't really covering or at least from our perspective.

22:40We'll be right back after this.

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27:32All right, and we are back. Let's keep these stories short because there's a lot to get through from a lot of different angles. The first one is written by both Emmanuel and Jason, I think. Big tech backed Trump for acceleration. they got a decel president instead um emmanuel i guess you can start us off here who backed trump in big tech and why did they do that and then we'll get to the decel part like what who did it and what were they after initially obviously elon musk who is in the administration uh at doge doing all the slashing of government agencies but also andreessen horowitz uh the venture capital firm backing some of the biggest tech companies in the world.

28:20Mark Andreessen specifically is very vocal and is advising the administration.

28:27David Sachs, who is one of the PayPal mafia people and has a podcast about tech and is also in the administration now as the cryptocurrency and AIs are. And as you can tell by me saying they all have some kind of role in the administration and what they do there, the reason they back Trump is well their stated reason is that they are for technological progress they're for innovation they are very focused on AI right now both in terms of their ideals and their their politics but their business as well and they thought that the Biden administration lena khan's ftc uh various laws that they tried to pass and executive orders that the biden administration tried to pass on uh regulating ai all of that was not helping ai develop wasn't making america very competitive globally and ai and trump who is anti-regulation anti-big government anti-welfare, is not very concerned about the energy and carbon costs of training huge AI models.