A 2007 investigation by Homeland Security agents led them to conclude that a Texas company was raking in as much as $2.5 million per year through the importing and reselling of mod chips obtained from a supplier in China, GamePolitics has learned.
When installed in video game consoles, mod chips allow for the playing of pirated copies of games, but have other more legitimate uses as well. Although they are legal in some countries (Canada, Australia, UK), mod chips are prohibited in the United States under terms of the Digital Millenium Copyright Act.
To date, federal law enforcement officials have kept a tight lid on "Operation Tangled Web," their code name for a wide-ranging investigation into mod chip distribution in the United States which culminated in a series of raids in August, 2007. However, a detailed search of publicly-accessible court records by GamePolitics has turned up signed copies of warrants authorizing investigators from U.S. Immigration and Customs Enforcement to seize two accounts controlled by a Texas man, identified by investigators as Manuel S. Diaz-Marta of Dallas. The warrants were sworn to by ICE Agent Vaughn Johnson, an asset seizure specialist.
GamePolitics readers may recall that on August 1, 2007, ICE agents raided 32 locations in 16 states, seeking evidence of mod chip distribution. Federal agents received technical assistance in the case from video game publishers trade group the Entertainment Software Association.
According to the documents obtained by GamePolitics, the investigation into Diaz-Marta began in November, 2006 when ICE Agent William Engel of the agency’s Cleveland Field Office made undercover purchases of PlayStation 2 mod chips from www.modchipstore.com. An ICE check of domain registration records showed that the URL was registered to a Dallas company, NonStop Technologies. Feds then traced a money order used to make their undercover purchase and found that it had been deposited into a Wells Fargo Bank account registered to NonStop Technologies and Diaz-Marta. ICE alleges that Diaz-Marta listed his gross annual sales as $1,800,000 on Wells Fargo account application forms. When investigators seized the Wells Fargo account on August 1, 2007 it contained $109,100.55.
ICE also alleges that, between August, 2006 and February, 2007, the Wells Fargo account was used to make forty wire transfers totalling more than $500,000 to Supreme Factory, a Chinese company which federal investigators say is known to them as a distributor of mod chips. During the same time period, more than $1.2 million was deposited into the Wells Fargo account, presumably from mod chip sales within the United States. At that rate, federal investigators calculated that modchipstore.com would have been generating roughly $2.5 million per year in sales.
During the August 1, 2007 raid, investigators searched Diaz-Marta’s residence, according to one of the affidavits signed by Agent Johnson. At that time agents discovered more than 100 mod chips as well as invoices from Supreme Factory for additional devices. Agent Johnson estimated that 80% of NonStop Technologies’ business derived from mod chip sales, writing in a seizure affidavit:
The business cycle for NonStop Technologies more closely resembles that of a drug dealer than that of a provider of legitimate consumer goods. The sales volume and turnover being conducted by NonStop Technologies is indicative of the sale of a highly sought after and scarce product…
As a result of the search of Diaz-Marta’s residence, agents also moved to seize a Scottrade account. No funds were contained in that account, however.
GP: Today’s GamePolitics exclusive coverage is the first public indication that 2007’s Operation Tangled Web was a major investigative success for the feds, as well as something of a coup for the ESA’s anti-piracy team. Heretofore, the only publicly available information on the case has consisted of scattered, largely unofficial reports concerning apparent small-fry who were caught up in the sweep. Now, with evidence of NonStop Technologies’ impressive revenue stream and large wire transfers to China, the picture of the investigation has changed considerably.
It is important to point out, however, that no information has been released by the U.S. Attorney’s Office regarding potential indictments of anyone involved in the case, including Diaz-Marta. ICE declined GP’s request to comment for this story. We should also point out that 31 other places were raided on August 1, 2007. Very little is known so far about what was found at most of those locations.
1.) seizure warrant for Wells Fargo Bank account
2.) seizure warrant for Scottrade account