Phantom Secure, the company accused of selling the devices, also has the ability to remotely wipe all of their phones.
Working alongside Australian and Canadian law enforcement officials, the FBI arrested Canadian national Vincent Ramos, CEO of encryption company Phantom Secure, on Thursday for allegedly providing international criminal organizations with customized phones intended explicitly to circumvent surveillance efforts.
On its website, the Canada-based Phantom Secure says it aims "to create a secure communication service where businesses and executives can communicate with one another, without the fear of being monitored."
But a complaint filed in the Southern District of California claims the company was not only aware of how their software and hardware was being used, but were explicitly selling and marketing their products to criminal organizations.
"Phantom Secure operated the encrypted Phantom Secure network, which used Phantom Secure devices to send and receive encrypted messages in furtherance of transnational criminal activity," the complaint read.
"Phantom Secure's devices and service were specifically designed to prevent law enforcement from intercepting and monitoring communication on the network, and every facet of Phantom Secure's corporate structure was set up specifically to facilitate criminal activity and obstruct, impede and evade law enforcement," according to the complaint.
Police agencies across the world have quietly been battling encryption services like this for nearly a decade, even going toe-to-toe with Apple in search of a security backdoor to their products.
Ramos was charged with racketeering, conspiracy to conduct enterprise affairs, conspiracy to distribute narcotics, and aiding and abetting.
Undercover agents, running a sting operation, met with Ramos in Las Vegas last February, according to the complaint.
"We made it—we made it specifically for this [drug trafficking] too," Ramos allegedly told the agents, according to a transcript within the complaint.
FBI Special Agent Nicholas Cheviron, who wrote the complaint, goes on to say that over 20,000 Phantom Secure devices are currently being used worldwide, and many are in the hands of the Sinaloa Cartel and organizations in Cuba, Venezuela, and Mexico.
According to Motherboard, Phantom removes all of the cameras, microphones, GPS systems and browsers from their phones, and installs an encryption standard called Pretty Good Privacy (PGP), which allows them to mask messages and reroute them through a number of other countries.
Motherboard added that the Royal Canadian Mounted Police conducted an operation in which they posed as traffickers and bought Phantom phones. They asked if it was OK to sell drugs using the phones, and Phantom replied affirmatively. Phantom was able to wipe all of the phones remotely after the undercover officers said an associate had been arrested.
In addition to their undercover operations, the complaint adds the testimony of a former drug trafficker for the Sinaloa Cartel, who claims Phantom phones were used to move 5 kilograms of cocaine.
Encryption has become a touchy subject for tech companies, who have to balance the desires of the government and law enforcement officials against the need for privacy demanded by their customers.
In 2016, Whatsapp made waves by ensuring that their service provided end-to-end encryption, right as the FBI and Apple were wrangling over whether they could, or should, unlock the phone of a mass shooter.
Apple refused to unlock the phone, forcing the FBI to hire a third party to crack it open. Who cracked it and how it was cracked remain classified, but Dutch police have had success in breaking through encryption software and cracking down on companies or syndicates using them for illicit purposes.
*this article was featured on the Tech Republic website on March 12, 2018: https://www.techrepublic.com/article/fbi-nabs-ceo-of-encrypted-phone-company-for-sales-to-cartels-gangs/