A National Crime Agency officer has been jailed for stealing and hiding 50 Bitcoin which are now worth £4.4m.
Paul Chowles, 42, has been sentenced to five-and-a-half years in prison after being found guilty of stealing Bitcoin from a criminal he had been investigating.
The Bitcoin were initially seized as criminal property during an investigation into online crime on the dark web. Chowles was part of the National Crime Agency investigation, which targeted organised criminal networks selling illegal goods on the dark website Silk Road 1 in 2013.
The operation, which was conducted jointly with the FBI, led to the convictions of several individuals living in the UK for drugs offences.
A second phase of the operation, launched in 2014, led to the 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.
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, who has since been dismissed from the NCA, then either converted the Bitcoin to pounds 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.
The value of Bitcoin was around £59,409 when Chowles stole it and rose in value to more than £4.4m at the time of sentencing. Chowles is said to have benefited financially to the tune of £613,147.29 through his criminality.
Chowles pleaded guilty to theft, transferring criminal property, and concealing criminal property at Liverpool Crown Court on 23 May, and was jailed for five-and-a-half years on Wednesday this week at the same court, following an investigation by Merseyside Police.
Alex Johnson, specialist prosecutor with the Crown Prosecution Service’s Special Crime Division, said Chowles was regarded in the NCA as “someone who was competent, technically minded and very aware of the dark web and cryptocurrencies”.
Johnson said Chowles “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 added. “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.”
How was Chowles brought to justice?
Following the seizure of the 97 Bitcoin from Thomas White, investigators noticed that 50 Bitcoin had been taken from the digital wallet between 6 and 7 May in 2017.
The NCA investigation team initially thought White had accessed the wallet and removed the Bitcoin as he had the skill and knowledge of how to do that, and by late 2021, the lost Bitcoin had been written off as it was deemed untraceable.
After White was convicted, proceedings were brought against him and a confiscation order of £1,560,506 was made. The NCA sold the remaining 47 Bitcoin to fulfil part of the order, leaving £1,066,956 unpaid.
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 Bitcoin.
An investigation was launched by Merseyside Police 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.
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. 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.”