Before his death, Quebecer behind one of the largest online black markets used offshore accounts to dodge law
Alexandre Cazes, who died in 2017, had shell companies in Belize, Hong Kong tied to accounts around the world
This story is part of a CBC News/Radio-Canada collaboration with the Washington-based International Consortium of Investigative Journalists examining the Pandora Papers, a leak of 11.9 million files from 14 firms that provide offshore services, including emails, bank statements, incorporation documents and shareholder registries.
To the outside world, Alexandre Cazes was the 25-year-old CEO of EBX Technologies, a company that offered website creation services for businesses.
But a wide-ranging investigation by the FBI and RCMP alleged that the Canadian man was secretly Alpha02, the administrator of AlphaBay, one of the largest illegal markets on the dark web where users could sell and purchase drugs, guns and stolen credit card numbers.
His arrest in Thailand in July 5, 2017, and his death a week later of an apparent suicide while in custody, made world headlines. So did revelations of his opulent lifestyle.
He owned several posh properties in Thailand and Cyprus, Lamborghini and Porsche supercars, and millions of dollars in cryptocurrency.
Then-U.S. attorney general Jeff Sessions called a press conference to personally announce Cazes's arrest on charges of narcotics distribution, identity theft, money laundering and related crimes after what he called "one of the most important criminal investigations of this entire year."
The U.S. government claimed that AlphaBay facilitated the equivalent of between $750,000 and $1 million Cdn in sales every day and that Cazes took a two to four per cent cut on every transaction made via the site. It estimated Cazes, originally from Trois-Rivières, Que., had personal wealth of over $29 million.
Less well known was Cazes's use of shell companies to turn his allegedly illegally obtained earnings into material wealth, to buy citizenship in two countries and to skirt local laws.
Used shell companies to access citizenships
Documents included in the Pandora Papers leak show how Cazes had access to a vast and opaque parallel financial system that allows the rich and powerful to hide assets in low- or no-tax jurisdictions. In at least two instances, shell companies set up by Cazes may have remained undetected by the authorities, Radio-Canada's investigation reveals.
Between 2014 and 2016, Cazes was able to create at least six offshore companies, mostly registered in Belize and Hong Kong. These companies had bank accounts in Switzerland, the Seychelles and New Zealand, and virtual offices in Geneva and Hong Kong.
The U.S. Department of Justice (DOJ) claims that Cazes sought to secure citizenship in "six Caribbean and Mediterranean countries." Records show that he used shell companies to buy properties in Antigua and Barbuda as well as in Cyprus, allowing him to obtain citizenship in those countries.
In one instance, Cazes used one of these shell companies to illegally buy a five-bedroom, $7.6-million villa in Phuket, Thailand. In a letter sent by Cazes to an immigration agent, which was included in the DOJ's case against him, he explained how he used Ace Guide Holdings, one of his Hong-Kong based shell companies, to hide his ownership of the property.
"We did not use KGYJ Management [another one of Cazes's offshore companies] because we found out that my name was showing in public records as the 'founder,' and since Thai laws prohibit land ownership by foreigners, we had to find a way to go around this and hide my name," Cazes wrote in the letter, dated April 25, 2017.
Property a key element of global money laundering
Two of Cazes's offshore companies, Infinite Estate Limited and Cosmos Devices Holding, came with nominee directors — people who act, on paper, as the face of the companies so that the real owner's name doesn't appear in public records.
After his death, the U.S. Department of Justice sought to seize all of his assets. Those included his offshore companies and their associated bank accounts. However, Infinite Estate Limited and Cosmos Devices Holding do not appear in the DOJ's seizure documents, and it's unclear whether U.S. authorities were ever made aware of them.
According to James Cohen, executive director of Transparency International Canada, shell companies are often used to buy real estate in order to launder earnings.
"Property is a key asset in global money laundering. You can wash a very large amount of money in one purchase through a multimillion dollar condo or house," he said.
"If you buy a piece of property anywhere in the world through a shell company and you manage to sell it off, you all of a sudden have legitimate cash."
The properties can then be used to gain citizenship in various countries, Cohen said.
"If you have to go on the run quickly, you can," he said. "And it also sets up more bases of operation, more property and more access to financial centres that you can use to move your money around."
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Offshore industry thrives on opacity
Records from the U.S. criminal case against Cazes show he also transferred some of his money to his wife to buy a house in Thailand in her name — to get around the rules against foreign property ownership — and had set aside a further $370,000 to buy a condo in the country.
The records also show that a couple of months before his arrest, he had $3.1 million in a bank account in Dubai registered to an offshore company he had set up.
Jonathan Légaré, an expert in financial crimes, explained that the offshore incorporation industry is a boon for those who want to avoid paying taxes or launder money.
"Cybercriminals, drug traffickers and all sorts of crooks love shell companies," he said. "They can hide behind them and move their money — to buy houses or other assets — anywhere on earth under the nose of the authorities or the media."
He said the offshore industry thrives on opacity.
"In many jurisdictions, identification requirements are minimal when registering a company. You need to answer more questions and show more pieces of ID to get a library card than you need to in order to open an offshore company," Légaré said.
Both experts say that more transparency, by forcing corporate registries to publicly list the name of the actual owners of offshore companies, could help with this problem.
"Publicly accessible registration of beneficial ownership is a huge tool for fighting this," Cohen said. "It opens it up not just for law enforcement but for investigative journalists and civil society as well to track the money."
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With files from Radio-Canada's Frédéric Zalac and Benoit Michaud