Michael D. Mihalo, a 40-year-old US resident, pleaded guilty yesterday to leading a conspiracy that sold stolen financial information on the dark web, the Department of Justice announced on May 16.
The dark web is a part of the internet that is intentionally hidden and is only accessible through specific software, configurations, or authorization, often using non-standard communication protocols and ports. It’s part of the internet that isn’t indexed by traditional search engines and is often associated with illegal activities.
Mihalo, who also went by the alias Dale Michael Mihalo Jr. and operated under the moniker ggmccloud1, was the founder and operator of a “carding” site named Skynet Market. “Carding” is a term used in cybercrime circles to refer to the trafficking of credit cards, bank account, and other personal information.
In addition to running Skynet Market, Mihalo and his associates were prominent vendors on other darknet markets, including AlphaBay Market, Wall Street Market, and Hansa Market. Darknet markets are commercial sites on the dark web that operate via Tor or I2P and sell or broker transactions involving drugs, cyber-arms, counterfeit money, stolen credit card details, forged documents, unlicensed pharmaceuticals, steroids, and other illicit goods and services.
These markets necessitate using digital currencies for transactions, such as bitcoin (BTC) or privacy-centric alternative monero (XMR), providing an additional layer of anonymity. From February 2016 to October 2019, Mihalo and his co-conspirators sold the stolen financial information of tens of thousands of U.S. victims.
As part of his operation, Mihalo assembled a team that assisted him in selling the stolen financial and identity information on the darknet. Taylor Ross Staats, a 40-year-old Texan, was one of Mihalo’s co-conspirators who served as a “card-checker”. This role involves ensuring the financial information being sold remains active and has not been canceled by the relevant financial institutions.
During his illicit operation, Mihalo processed the information associated with 49,084 stolen payment cards, earning at least $1 million worth of cryptocurrencies at the time of the sales. The value of these funds has significantly increased since that time due to the fluctuating values of cryptocurrencies.
Mihalo has now pleaded guilty to one count of conspiracy to commit access device fraud, one count of access device fraud, and six counts of money laundering. He faces a maximum penalty of five years in prison for the conspiracy count and a maximum sentence of 10 years for each of the remaining counts.
Furthermore, Mihalo agreed, under his plea agreement, to forfeit any property personally obtained through the offenses, which includes several million dollars worth of cryptocurrency, financial accounts, and real estate. A federal district court judge will determine the sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
This case marks the second guilty plea, with Staats having pleaded guilty in December 2022 to one count of conspiracy to commit access device fraud. He, too, faces a maximum penalty of five years in prison.
This investigation was conducted by the FBI Kansas City Field Office, with Senior Counsel Louisa Becker of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Matthew Blackwood for the Western District of Missouri prosecuting the case. The Justice Department’s Office of International Affairs also provided significant support.
The Justice Department extended its gratitude to its law enforcement colleagues at the Royal Canadian Mounted Police in Canada for their assistance in the case, demonstrating the global efforts required to tackle cybercrime, particularly those operating from the hidden recesses of the internet, such as the darknet.
To aid in the recovery process, stolen victim payment card information obtained during the investigation will be, or has already been, provided to the financial institutions that issued the payment cards.