United States District Court, M.D. Tennessee, Nashville Division
MEMORANDUM OPINION AND ORDER
WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE
the Court are the parties' objections to aggravating role
enhancements applied in the Defendants' Presentence
Reports. The Government objects to the enhancements applied
to Defendants Faulkner, Leslie, and Budesek for Count 1.
(See Doc. Nos. 167, 169, 171.) Falte objects to the
enhancement applied to him for Counts 4 through 9.
(See Doc. No. 160.) For the following reasons, the
Government's objections are sustained and Falte's
objection is overruled.
Background and Enhancements Applied by Probation in the
Defendants' Presentence Reports
Falte, Faulkner, Leslie, and Budesek pled guilty to Count
One, which charges that, between July 16, 2015, and October
2, 2016, they knowingly engaged in a child exploitation
enterprise, in violation of 18 U.S.C. § 2252A(g). Falte
also pled Guilty to Counts 4, 5, and 6, advertising child
pornography, in violation of 18 U.S.C. § 2251(d)(1)(A)
and (d)(2)(B), and Counts 7, 8, and 9, distribution of child
pornography, in violation of 18 U.S.C. § 2252(a)(2). The
offense conduct in the case centers around the Giftbox
Exchange, a website that operated as a “hidden
service” on the Tor anonymity network, which is
designed specifically to facilitate anonymous communication
over the Internet. The Giftbox Exchange was dedicated to the
advertisement and distribution of child pornography and
served as a forum for networking by individuals, including
Defendants, interested in the sexual exploitation of
U.S. Probation Department calculated Defendants' offense
level in their Presentence Reports. Under U.S.S.G. §
3B1.1(a), Probation assessed Falte a 4-level adjustment on
Count 1 because he was “an organizer or leader of a
criminal activity that involved five or more participants or
was otherwise extensive.” Specifically, Probation found
that the instant offense involved “a sophisticated
child pornography scheme” over which Falte “had
ultimate decision-making authority, ” including
“develop[ing] and implement[ing] the website and
set[ting] up the rules for membership in the website, ”
and “review[ing] and approv[ing] posts containing child
pornography.” Falte Presentence Report
(“PSR”) at ¶ 54. Further, Probation found
that Falte “maintained a public key cryptography system
to verify the identity of Giftbox Exchange members and paid
for the computer server hosting Giftbox Exchange using
bitcoin, a type of encrypted digital currency. Id.
He also controlled the private key access. Id.
Probation assessed Falte a 4-level upward adjustment on
Counts 4, 5, 6, 7, 8, and 9 on the same “organizer or
leader” basis under U.S.S.G. § 3B1.1(a).
Specifically, Probation found that Falte oversaw other
Defendants and members of Giftbox Exchange when he:
advertised and distributed child pornography to induce
website visitors to become members and post additional child
pornography. He distributed child pornography from this site
by creating content for [Giftbox Exchange], advertising for
[Giftbox Exchange], and reviewing and approving posts
containing child pornography by users who sought membership
to [Giftbox Exchange]. Once a user was a member, the
defendant continued to review and approve posts containing
child pornography by the members and members who sought to
become VIP members.
Falte PSR at ¶ 65.
assessed Faulkner a 3-level upward adjustment, under U.S.S.G.
§ 3B1.1(b) because he was “a manager or supervisor
of a criminal activity that involved five or more
participants or was otherwise extensive.” Specifically,
Probation concluded that Faulkner was “an administrator
of [Giftbox Exchange]” and, in that role, (1)
“reviewed and approved posts containing child
pornography”; (2) with Defendant Falte maintained a
public and private key cryptography system to verify the
identity of Giftbox Exchange members; and (3) maintained
backup databases that would allow Faulkner to restore Giftbox
Exchange if it went down. Faulkner PSR at ¶ 42.
did not assign any aggravating role enhancement to Leslie or
Sentencing Guidelines provides that, “[b]ased on the
defendant's role in the offense, ” the Court may
increase a defendant's offense level as follows:
(a) If the defendant was an organizer or leader of a criminal
activity that involved five or more participants or was
otherwise extensive, increase by 4 levels.
(b) If the defendant was a manager or supervisor (but not an
organizer or leader) and the criminal activity involved five
or more participants or was otherwise extensive, increase by
(c) If the defendant was an organizer, leader, manager, or
supervisor in any criminal activity other than described in
(a) or (b), increase by 2 levels.
U.S.S.G. § 3B1.1. The Sixth Circuit has explained:
In distinguishing a leadership and organizational role from
one of mere management or supervision . . . the court should
consider the exercise of decision making authority, the
nature of participation in the commission of the offense, the
recruitment of accomplices, the claimed right to a larger
share of the fruits of the crime, the degree of participation
in planning or organizing the offense, the nature and scope
of the illegal activity, and the degree of control and
authority exercised over others. ...