When Can a Buyer-Seller Relationship Result in Criminal Liability? U.S. v. Bondars, Fourth Circuit Court of Appeals, Filed January 10, 2020

In an unpublished opinion, the Fourth Circuit affirmed Bondars’ convictions for conspiracy under 18 U.S.C. § 371, conspiracy to commit wire fraud under 18 U.S.C. § 1349, and aiding and abetting computer intrusions under 18 U.S.C. §§ 1030(a)(5)(A) and 2, denying his claim that he was merely in a buyer-seller relationship with hackers and not a co-conspirator.

Although the Court denied several claims on appeal, the one that interests me the most is Bondar’s claim that he cannot be prosecuted for a purely buyer-seller relationship and the district court’s refusal to give a “buyer-seller” jury instruction. What was Bondars’ argument and why did the Fourth Circuit disagree?

Can a seller of a product or service be convicted of conspiracy based on the buyer’s use of the product to commit a crime?

Did Bondars Engage in a Criminal Conspiracy or Was He Simply in a Buyer-Seller Relationship with Hackers?

Bondars and a partner, Martisevs, created and operated an online service that was used to develop malware. Although it doesn’t appear that Bondars’ service, “Scan4You,” created malware, it allowed users to scan their malware files or web address to see if antivirus services could detect them:

Bondars was convicted for his role in creating and operating an online service used to develop malware. The service, called “Scan4You,” allowed users to scan a file or web address to determine whether it was detectable by antivirus programs. The key feature of Scan4You was anonymity: unlike other scanning services, Scan4You didn’t report results to antivirus companies. This enabled hackers to use the tool anonymously to develop undetectable malware.

They advertised to hackers, included advertisements for malware products on their website, and operated on the Dark Web.

Is it a crime to provide a service that helps hackers to develop undetectable malware?

Maybe…

There was Evidence that Bondars Did More than Simply Provide a Product

Bondars was charged with “the commission and aiding and abetting of computer intrusions and wire fraud. Martisevs and Scan4You were named as co-conspirators.

Although Bondars argued that he could not be convicted because he was simply the seller of a product and did not participate in any illegal activity himself, we don’t know if that argument would have carried the day under these facts because there was additional evidence of criminal intent.

In addition to providing the service which allowed hackers to develop undetectable malware, the government also produced evidence that:

• Bondars and Martisevs collaborated on hacking schemes themselves;
• They used Scan4You to develop their own malware, rather than just providing the service to other hackers;
• They acknowledged in their communications to one another that what they were doing was illegal and they needed to “conceal their operations;”
• They discussed a need to “be discreet” when they realized they were under investigation;
• They “discussed the potential need to scale back operations and ‘clean[] up the news’” after a Scan4You partner was arrested in the UK; and
• They discussed how they had been “exposed” following the publication of an article that described their company as providing “criminal services.”

Martisevs also sent Bondars an article titled “Criminal Services – Counter Antivirus Services” that named Scan4You as “[p]erhaps the best known” counter-antivirus service, and told him that “[t]hey exposed us big time right here” and “[t]his is all about us.” J.A. 593–94. Again, the pair discussed the potential need to scale back operations and clean up the news. Nonetheless, they continued to operate Scan4You as usual.

What distinguishes Bondars’ activity from other buyer-seller relationships is evidence of Bondars’ knowledge that his service was used for criminal activity and his intent to participate in that criminal activity…

Substantial evidence controverted Bondars’s narrative that his relationships to Scan4You customers were merely innocent buy-sell agreements. The government’s evidence showed that Bondars and Martisevs operated the tool for the purpose of developing malware, intentionally marketed the tool to hackers, entered into customer agreements with prolific hackers, and took various measures to conceal their activity from authorities because they believed they were doing something illegal. Moreover, Bondars’s conspiracy conviction also rested on his dealings with Martisevs. Extensive evidence—including detailed testimony from Martisevs and chat messages between the pair—supported a conspiracy conviction based on that relationship.

What if someone sells a product that can be used for criminal activity, but the seller does not participate in that criminal activity or have any knowledge of how the buyer uses the product?

When Does a Buyer-Seller Relationship Result in Criminal Liability?

What if a garden-supply store sells grow tents, nutrients, heat lamps, and other equipment that is commonly used to grow marijuana? When buyers purchase the items and use them to grow marijuana, does the seller become a co-conspirator subject to criminal prosecution?

Not if there are other reasonable uses for the equipment, the seller does not discuss illegal activity, and the seller does not advise the buyers on how to use the product.

For example, in United States v. Superior Growers Supply, Inc., 982 F.2d 173 (6th Cir. 1992), the Court found that a seller of “grow equipment” could not be prosecuted criminally where the company and employee did not take part in the illegal activity of growing marijuana and there was no evidence that the company or employee was aware of the use the equipment was put to:

…the government alleged that the owner of a garden supply store (and his employee) conspired to aid and abet the manufacture of marijuana. Id. at 174–75. The indictment alleged various legal acts associated with manufacturing marijuana, but neither (i) that the underlying crime occurred nor (ii) that the defendants’ otherwise legal conduct advanced an underlying crime. Id. at 175–77. As a result, the court held that the indictment failed to allege essential elements of conspiracy to aid and abet: “knowledge of the underlying crime and intent to further it.” Id. at 179–80

Other examples may include:

• Sellers of bongs, pipes, or other “paraphernalia” that could be used for illegal drug activity; and
• Sellers of illegal weapons like brass knuckles that are also commonly used as novelty items or paperweights.

The key in most cases is knowledge – if a store employee is discussing illegal uses of the product with customers or giving them advice on how to use the product in a way that is not legal, that employee, store, and potentially store owner are involved in more than a mere buyer-seller relationship and could be charged with aiding and abetting criminal activity….

Federal Criminal Appellate Attorney in Columbia, SC

Elizabeth Franklin-Best is a federal white collar criminal defense and federal appeals lawyer located in Columbia, SC.

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