U.S. Navy engineer and his wife arrested for selling nuclear submarine designs to an undercover agent for $70,000 in crypto

In 2020, Jonathan Toebbe, 42, and his wife Diana Toebbe provided data on the designs to a foreign nation, as well as instructions for establishing a business relationship with the government. According to the Department of Justice’s statement on the issue, it appears that the undercover agent began investigating the case as if he were a representative of a foreign government and exchanged encrypted emails with Toebbe.

The undercover agent paid $10,000 in cryptocurrency to Jonathan Toebbe as “good faith” payment on June 8, 2021. Jonathan and Diana Toebbe traveled to a location in West Virginia shortly after. At a predetermined “dead drop” place, Toebbe placed a concealed SD card within half of his wife’s peanut butter sandwich with his collaborator, Diana Toebbe as a lookout. Jonathan Toebbe was arrested and charged with receiving a $20,000 cryptocurrency payment after police intercepted and seized his SD card.

Toebbe, a former naval nuclear propulsion engineer who was assigned to the Naval Nuclear Propulsion Program, emailed a decryption key to the SD card, allowing the officer access to the information. He was authorized by the Department of Defense to view restricted data by press release.

The two expanded their communications in August to help with yet another trade transaction, this time involving even greater amounts of crypto.

“After making a payment to Toebbe of $70,000 in cryptocurrency, the FBI received a decryption key for the card. It, too, contained Restricted Data related to submarine nuclear reactors. The FBI arrested Jonathan and Diana Toebbe on Oct. 9, after he placed yet another SD card at a pre-arranged “dead drop” at the second location in West Virginia.”

While law enforcement has seized huge quantities of cryptocurrency from criminals, especially ransom payments, crypto criminality is on the rise, and this time it’s being used by people who operate from within the Department of Justice. Cryptocurrencies are preferred to cash because of their pseudonymous nature and underlying technology and protocols.

It’s not the first time that government or security officials, especially those in charge of investigations, have been linked to such apparent crypto crimes, implying how widespread corruption is and how complex the issues are.

Two FBI agents, Shaun Bridges from the Secret Service and Carl Mark Force IV from the Drug Enforcement Administration, were indicted in February for allegedly hacking into and stealing Bitcoins belonging to Silk Road masterminds including the now imprisoned Ross Ulbricht. Following investigations into the issue, 70,000 Bitcoins have been seized.

The Department of Justice has established a task force to examine cryptocurrency-related felonies starting this week. The new task force, known as the Crypto-Crime Working Group, is a cooperative effort between law enforcement and private sector companies to investigate cryptocurrency-related money laundering.

According the DoJ’s statement:

“The purpose of this working group is to identify investigative priorities and propose strategies to address those priorities that will enable more effective prosecutions of federal crimes involving cryptocurrencies. Among those crimes, we intend to focus on the most serious threats presented by virtual currencies such as online marketplace fraud schemes and intrusions into digital currency exchanges. We will work with our law enforcement partners domestically and abroad to develop prosecutable cases targeting cyber criminals who use virtual currencies to defraud individuals and businesses.”