Authorities Crack Down on Ohio Dark Web ID Racket, Seize Millions in Bitcoin

Two people have been arrested in connection with distributing fake identity cards following a lengthy investigation by the U.S. Secret Service.

by Jennifer Feehan, Allison Reamer, The Blade / February 9, 2018
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(TNS) — A deep entanglement of online currency, gold, and silver, and false identities appeared to unravel this week with the police seizure of $4.7 million in Bitcoin and criminal charges against two northwest Ohioans implicated in a prolific fake ID scheme.

Two people — Toledoan Mark Alex Simon, 34, of the 4700 block of Stengel Drive, and Sarah M. Alberts, 34, of Perrysburg — have been arrested following a multiyear investigation into the production of false identification cards.

Authorities believe Mr. Simon operated under the online pseudonym “TedDanzigSR” on the website Reddit.com. Posts on the website show Reddit users knew TedDanzigSR was someone they could go to when they needed fake IDs.

User Iserj21, for example, asked 11 months ago if TedDanzigSR’s Utah IDs were in-state “passable.”

“Eh... probably not,” TedDanzigSR replied. “Maybe? [Michigan] will be for sure.”

According to a lengthy affidavit filed Tuesday by the U.S. Secret Service in U.S. District Court, agents seized from Mr. Simon’s Stengel Drive home approximately $4.7 million in Bitcoin — a form of online currency — that was contained in approximately 30 “wallets” stored on a USB thumb drive.

They also seized 18 gold coins, more than 200 silver coins, 21 gold and silver bars, documents relating to gold purchases, $7,000 in U.S. currency, a Bitcoin receipt, USB storage devices, identification cards not issued in Mr. Simon’s name, multiple computers and cell phones, and several printing-related items.

Shackled and dressed in an orange jumpsuit, Mr. Simon made a brief appearance in federal court Thursday, where Magistrate Judge James Knepp ordered that he be detained pending trial.

Noah Hood, an assistant U.S. attorney, told the court Mr. Simon currently is charged with three counts that each carry maximum sentences of 15 years in prison and up to a $250,000 fine.

“These charges relate to conduct that occurred between Jan. 12, 2016, and Feb. 6, 2018, specifically related to the production and transfer of Ohio driver’s licenses,” Mr. Hood said.

Mr. Simon likely will be indicted by a federal grand jury on additional charges — a procedure that must take place within 30 days, officials said.

Judge Knepp found Mr. Simon indigent based on a financial affidavit listing his assets and liabilities and then appointed Toledo attorney Jane Roman to represent him. He scheduled a preliminary hearing for Feb. 23.

“Mr. Simon, did you understand everything that just happened here?” Judge Knepp asked.

“Yes, your honor,” he replied.

Court documents show Mr. Simon made no statements to agents upon his arrest, but asked for a lawyer.

Ms. Roman said afterward that she had just met Mr. Simon and knew little about the case. She confirmed that Mr. Simon had no previous criminal convictions.

Mr. Hood declined to answer questions about the case after the hearing, saying he could “not comment on an ongoing investigation.”

Mr. Simon is being held in the Lucas County jail on a $5 million bond, which was set Wednesday by Toledo Municipal Court Judge Joseph Howe.

Ms. Alberts is charged with engaging in a pattern of corrupt activity, conspiracy, money laundering, and manufacturing fake identification cards, according to affidavits filed in Toledo Municipal Court. She was arrested Thursday, according to jail records, and was scheduled to appear in municipal court at 9 a.m. Friday.

No one answered the door when The Blade visited Mr. Simon’s home or Ms. Alberts’ apartment Thursday. Attempts to reach Mr. Simon’s family were unsuccessful.

According to the federal affidavit filed in Mr. Simon’s case, the Ohio Department of Public Safety began investigating a fake ID scam in October, 2015, after receiving a number of fake ID cards collected at a bar in Springfield, Ohio. A Wittenberg University student told agents he and a friend got a fake ID through the Reddit.com website.

From there, investigators discovered a source for the phony Ohio driver’s licenses and identification cards that could be purchased with Bitcoin. Mr. Simon is believed to be the seller who went by the name of “TedDanzigSR,” on Reddit, the affidavit shows.

Reddit is divided into niche forums, known as “sub-reddits.” These online communities break down into a variety of interests, covering everything from kittens and puppies to pornography and drugs.

TedDanzigSR was the username of one of four moderators for the “TedDanzig” subreddit.

Making a purchase from “TedDanzigSR” required consumers to go through a number of online communities, following exact protocols that could be found in a detailed FAQ — frequently asked questions — on the website Reddit.

Visitors to the subreddit could ask questions about the details of fake IDs and leave reviews of previous purchases. They could also explore a FAQ that detailed, among other things, how to make a purchase through dark web browsers such as Tor; how the sellers determine pricing and shipping options, and even how to utilize a “rewards” program for leaving positive reviews.

The dark web is a segment of the Internet considered hidden from normal web browsing. Accessing sites on the dark web often require having special encryption or special software.

In a private message between vendors, TedDanzigSR told another person he employed three people on the “production side.”

In one public Reddit thread labeled, “Buying things with resell money,” TedDanzigSR posted about income and the potential about being audited.

“I haven’t bought much at all with the profit,” the user wrote in the post, which was quoted in the affidavit from Mr. Simon’s case. “Saving for retirement. If you look at my possessions, you would think lower middle class, at best (wife beaters all winter long). But I don’t really see it being a problem if someone wanted to. Just don’t funnel money through any accounts in your name and there isn’t too much to worry about (in terms of IRS, etc.)”

Using a dark web browser, consumers could make ID purchases on Mondays at 6 p.m. — a protocol initiated because of overwhelming demand.

The dark web site — which says the operation began in 2012 — also provides consumers with a guide on how to properly take a photo for a fake ID.

On Thursday afternoon, within hours of Mr. Simon’s federal court appearance, Reddit users began posting about the news.

“I’m somewhere between shock and denial,” user SVACER870 posted. “We lost a legend today guys. Ted you will be missed.”

One person, who has not been charged, told investigators Ms. Alberts approached him to join in the production of the counterfeit identifications scheme, according to court records. He joined the operation, and he said he would be paid in Bitcoin or gold.

According to that person, Mr. Simon received all of the orders and photos for the fake IDs, as well as customers’ personal information, and mailing labels, the affidavit showed. That information was sent to the employee, who produced the fake ID. Once completed, that person alerted Ms. Alberts.

Ms. Alberts would take the package to be mailed, court records state.

The employee was paid by Mr. Simon in Bitcoin, while Ms. Alberts offered to pay the employee in gold coins or gold bars, according to the affidavit.

A Twitter account with the same name, @TedDanzigSR, was created in March, 2013, and posts began a month later referencing fake identifications.

Several of the posts refer to orders being shipped, new equipment being purchased, or specials — such as “only $425 for 5 people!” Many of them included the hashtag #FakeID. Here is one post:

“LIMITED TIME SPECIAL. 1 person $80 or 3 people for $200. Both include free overnight shipping. Email us at TedDanzigSR@hotmail.com #FakeID— TedDanzigSR (@TedDanzigSR) July 22, 2017”

However other Twitter users — including users who billed themselves as fake ID sellers — claimed the TedDanzigSR Twitter account was fake. They urged those looking to buy fake IDs to visit Reddit.

“Sorry to hear you got scammed. No real vendor would use a hotmail email account— Fake ID Legend (@Fakesid) July 2, 2017”

According to Meghan Cunningham, a University of Toledo spokesman, Mr. Simon received bachelor of science degrees in mathematics and physics from UT in 2007 and received a doctorate in physics in 2011.

He worked as a postdoctoral research associate for the physics department from May, 2011, to June, 2012, but is not currently associated with the university, she said.

©2018 The Blade (Toledo, Ohio) Distributed by Tribune Content Agency, LLC.