A former National Crime Agency detective who stole bitcoin worth millions whilst investigating a major dark web drug marketplace was today sentenced to five and a half years in prison at Liverpool Crown Court.
Paul Chowles, 42, secretly took 50 bitcoin from the operator of the underground internet marketplace Silk Road 2.0 following his arrest in May 2017. Using sophisticated techniques learned on the job, the “extremely calculating” officer laundered and concealed the cryptocurrency, then worth around £60,000.
Liverpool Crown Court heard that over the following years, the value of the stolen bitcoin increased enormously to £4.3 million. However, Chowles was relatively frugal with his spending, using the cash to make routine day-to-day purchases at supermarkets and shops such as Screw Fix and Asda, paying for meals in restaurants and pubs, and covering his children’s nursery fees to avoid arousing suspicion.
Judge David Aubrey KC told Chowles he had abused his “privileged” position at the NCA, which demanded “utter trust, integrity and honesty. The judge said: “You had knowledge of cryptocurrency, which was a great asset to your agency, provided you used it in the pursuit of justice. Alas you did not.”
“Instead you weaved a sophisticated, intricate and dishonest web, a web of deceit and guile,” Judge Aubrey continued. “You were in a position of power and you abused that privilege. You were there to serve the public but you did not. You were serving yourself for your own ends.”
The prison sentence marks a dramatic fall from grace for Chowles, a divorced father of three young children with no previous convictions, who has lost his £33,000-a-year job and his liberty. He was formally dismissed from the NCA on 11 July.
Craig Hassall KC, prosecuting, told the court that in 2017, Chowles was a senior officer with the NCA – Britain’s equivalent of the FBI – in charge of investigating Thomas White. White, a university dropout, was described as the “guiding mind” behind the clandestine website known as Silk Road 2.0.
The marketplace allowed users to buy and sell drugs and other illegal items on the dark web, using bitcoin for their transactions. White had taken on the moniker of “Dread Pirate Roberts 2”, a reference to characters in the novel and film The Princess Bride, after the FBI shut down the original Silk Road in October 2013.
After White was arrested, Chowles led the analysis and extraction of relevant data and cryptocurrency from his computers and other electronic devices. Over two days in May 2017, he stole and moved 50 bitcoin from one of White’s online wallets, specifically from a wallet White had named the “Dread Pirate Roberts Retirement Fund”.
Chowles then used his expertise to break down the bitcoin into smaller amounts and move it through a system on the dark web known as the bitcoin “fog”, which effectively “washed” or laundered the dirty cash. He transferred it into different legitimate private accounts in an attempt to hide the money trail.
The bitcoin fog was eventually shut down by the FBI, but this is believed to be the first prosecution linked to it in the UK. Although financial investigators at the NCA looked into White’s claims that money had disappeared at the time, the NCA team – which included Chowles – concluded that White must have found a way to move it himself before he was jailed.
It was only when Merseyside Police became involved after White’s release, and attempts were launched to recover his assets via proceeds of crime investigations, that White continued to insist the money was still missing. Officers began to suspect foul play when White insisted someone from within the NCA had to have stolen the bitcoin because they were the only ones with the private keys to his cryptocurrency wallet.
Chowles, of Bristol, was arrested in May 2022 and his devices seized. Police recovered an iPhone which linked to an account he had used to transfer the bitcoin. It also revealed he had searched online for a cryptocurrency exchange service.
Several notebooks were discovered in his office containing usernames, passwords, and statements relating to White’s cryptocurrency accounts. Overall, Chowles spent around 20 bitcoin, the equivalent of around £110,000, via hundreds of debit card payments and transactions.
Prosecutors believe he benefited financially to the value of more than £600,000 from his criminality and was saving millions as a “nest egg” for his retirement. Bitcoin worth nearly £470,000 was seized from Chowles upon his arrest.
Will Parkhill, defending Chowles, said: “He did not do the right thing. It was dishonest and dishonest not once, but on a number of occasions. It seems at the time he was suffering from anxiety and depression. It seems at the time he was dealing with undiagnosed autism.
“He feels shame and remorse. Mr Chowles destroyed his life and it had serious impact on other people,” Parkhill added.
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,” Johnson continued. “The CPS will not hesitate to bring charges against those who abuse their position in power for financial gain.”
Detective Chief Inspector John Black, from Merseyside Police’s Force Intelligence Bureau, said: “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,” Black added. 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.”
White, who ran Silk Road 2.0 from his student accommodation in Liverpool, was jailed for five years and four months in April 2019. He had collaborated with another American to set up the new version of the marketplace after the FBI shut down the original Silk Road and arrested its founder Ross Ulbricht.
The case highlights the challenges law enforcement faces in policing cryptocurrency crime, whilst also demonstrating that those tasked with investigating such crimes are not immune from prosecution themselves. The CPS has confirmed it will now pursue confiscation proceedings to recover the proceeds of Chowles’ crime.
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