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Vancouver-based Sky Global fallout continues three years after U.S. charges

Case against the smartphone tech company’s CEO 'ongoing' but appears dormant, and none of the allegations have been tested in court

Three years ago on March 12, a grand jury in San Diego indicted two men behind a Vancouver encrypted smartphone company on charges of racketeering conspiracy and conspiracy to distribute controlled substances.

The U.S. Department of Justice accused Sky Global CEO Jean-Francois Eap and distributor Thomas Herdman of selling modified smartphones and subscriptions for the encrypted Sky ECC network to transnational drug traffickers.

Prosecutors claimed that over the course of a decade, Sky Global made hundreds of millions of dollars in profits by helping criminals hide their deeds from law enforcement. At least 70,000 Sky Global devices were in use worldwide.

None of the allegations against Eap and Herdman has been tested in court.

At the time of writing, there were no filings with the court in San Diego to end the proceeding.

Eap did not respond to repeated attempts to contact him last week.

Previously, Eap vowed to clear his name.

“I do not condone illegal activity in any way, shape or form, and nor does our company,” Eap reacted in a statement three days after the indictment. “We stand for protection of privacy and freedom of speech in an era when these rights are under increasing attack. We do not condone illegal or unethical behaviour by our partners or customers. To brand anyone who values privacy and freedom of speech as a criminal is an outrage.”

The court file in San Diego appears dormant since prosecutors applied in September 2021 for forfeiture of Eap and Sky Global’s accounts with TD Bank, a California-licensed 2019 McLaren 570S Spider and a list of domain names.

Neither Eap nor prosecutor Joshua Mellor responded for comment. No hearings are scheduled.

“We are not in a position to do interviews on this ongoing case,” said Kelly Thornton, director of media relations for the U.S. Attorney’s Office in the Southern District of California.

Two law professors in a New Journal of European Law article last November say that police in Belgium and France found criminals using Sky ECC phones as early as 2015. The investigation would eventually reap a “treasure trove or jackpot for law enforcement authorities.”

Authors Jan-Jaap Oerlemans and Sofie Royer also offered a theory about the priorities of the prosecutors. 

In mid-2019, a French court permitted wiretapping Sky ECC’s servers in Roubaix, France. Police from Belgium, France and the Netherlands formed a joint investigation team by the end of the year. Their Operation Argus shut down Sky Global on March 9, 2021, and intercepted a billion messages. The company had been so confident of its product that it offered $5 million to anyone who could crack their security.

“Later, it became clear that probably the actual goal, and most certainly the result, of the operation was not to prosecute the individuals behind Sky ECC itself,” wrote Jan-Jaap Oerlemans and Sofie Royer, “but to obtain insight in the criminal activities carried out in Belgium and beyond and to prosecute individuals operating from Belgium and neighbouring countries.”

On Saturday, authorities in Belgium marked the third anniversary of searches at 200 locations around their country after they cracked Sky ECC phones. They boast 592 files against 4,439 suspects. Eighty-seven sentences have been handed down, totalling a combined 1,139 years in prison. They seized 183 million euros (almost $270 million) in dirty money. It is far from over.

"These criminals are not rid of us yet,” prosecutor Franky De Keyzer told Het Niuewsblad.

Closer to home, Damion Patrick Ryan, a full-patch Hells Angel from B.C., allegedly used Sky ECC to help a drug lord connected to Iran’s Ministry of Intelligence and Security hire a hitman.

Ryan, 43; Adam Richard Pearson, 29; and Iranian Naji Sharifi Zindashti, 49, were charged in Minnesota this past January for conspiracy to use interstate commerce in the commission of a murder-for-hire plot between December 2020 and March 2021.

They allegedly shared photographs of the intended victims, maps identifying their locations, discussed logistics, recruited personnel and negotiated payment. All using Sky ECC.

The allegations have not been proven in court, and there was no suggestion of wrongdoing on the part of Eap or Herdman.

“The Sky ECC operation was not the first data-driven criminal investigation and it will most certainly not be the last one,” wrote Oerlemans and Royer. “We expect similar operations to be carried out in the future, focusing on communication service providers such as VPN services, cryptocurrency-mixing platforms and hosting providers.”

Sky ECC was also not the first Lower Mainland “cryptophone” case to make international headlines. Richmond’s Vincent Ramos sold modified BlackBerries from his Phantom Security company to clients including Hells Angels and Mexican drug cartels. Arrested in the U.S. in 2018, Ramos pleaded guilty to racketeering conspiracy, was sentenced to nine years in a U.S. jail and forfeited US$80 million.

The prosecutor in last fall’s national security leaks trial of ex-RCMP civilian intelligence officer Cameron Ortis described Ramos and Eap as associates. The heavily redacted trial transcripts approved for release to reporters included Ortis’s testimony that he had emailed Eap.

But Eap’s lawyer in California, former federal prosecutor Ashwin Ram, said in November that Eap never did business with Ramos and never communicated with Ortis. The alleged links have not been proven.

Ram claimed in a November 2021 court filing that no government agency had expressed concern to Sky Global about illegal use of its products before March 2021, and that the company had its own internal checks and balances.

The application to the U.S. District Court in the Southern District of California said Eap had unsuccessfully sought a resolution with U.S. government lawyers in July 2021.

“While Sky Global appreciates and applauds – and would have assisted – the government’s efforts to identify and prosecute those individuals who used Sky ECC to engage in illicit activity, those efforts do not justify the illegal and improper seizure of Sky Global’s [web domains] or the irreparable and ongoing harm to Sky Global’s business caused by the seizures,” said Ram’s filing.

Ram claimed that Sky ECC had 120,000 users by March 2021. At its peak, Sky Global and related companies employed 70 people. The shutdown caused the layoff of 27 staff member and 14 contractors.

Almost a month before the 2021 bust, Eap had launched the Hello Nori sushi restaurant on Robson Street, designed by his wife’s firm. He was already planning expansion to Park Royal in West Vancouver and the Amazing Brentwood in Burnaby.

Just 20 days after the U.S. charges, Eap found his accounts with National Bank of Canada had been frozen.

National Bank filed a foreclosure petition in B.C. Supreme Court in March 2022, claiming Eap owed $4.4 million on a line of credit and $57,062 on a credit card.

Eap sued the next month and included an appraisal for his West Vancouver residence, pegging its value at $15.5 million. He swore an affidavit that he had always been a good customer since opening the account in 2017. But, on April 1, 2021, he was suddenly unable to access $125,000 in his account or use his credit card.

Eap said that disrupted his businesses, which also included real estate investment, and Fido and Rogers mobile phone dealerships. He did not explicitly mention Sky Global or its legal problems in the affidavit, but said he ran “a technology company that does research and development software, secure messaging and fintech products such as gift cards.”

“As a businessman with approximately 200 employees, freezing my bank account and credit cards caused losses for my business and damage to my reputation. It also negatively impacted my credit because I couldn't use my credit card to make preauthorized payments,” said Eap’s affidavit.

“I also had supplementary cards for my employees who were shocked they could not use their credit cards and were worried about the financial health of my businesses. Even though I was in full compliance with the credit documents, the bank did not explain to me why they were allowed to freeze my accounts.”

A letter from National Bank on June 10, 2021, gave Eap until the end of October to close out and repay or refinance outstanding obligations. That letter mentioned discussions on five days between April 8 and June 8.

“We appreciate the dialogue with you, allowing us to hear directly from your U.S. legal counsel and your willingness to be open with us,” said the bank’s letter. “As mentioned when we spoke on April 20, and based on the available information and considerations at this time, National Bank has, subject to our comments below, made a decision that it is preferable to exit our banking relationship.”

Eap and the bank appear to have settled out of court: Both sides filed notices of dismissal in January 2023, both on a no-costs basis.

A Burnaby Hello Nori location opened Feb. 10. Work continues on a Park Royal South location, where the hoarding went up in summer 2021 below a West Vancouver Keg Restaurant. An architect applied for municipal permits in June 2021 based on plans for a $150,000 project. The next month, Eap ceased to be a director of Hello Nori Inc.

Last July, plans were revised upward to $180,000. Where it used to read “opening 2022” and then “opening 2023,” the sign simply says “coming soon.”