Appeals Court Upholds Life Sentences For Silk Road Mastermind

from the 'plus-cancer'-sentencing-enhancement-considered-reasonable dept

Ross Ulbricht -- sentenced to two life sentences for running a dark web drug marketplace -- has just had his appeal rejected by the Second Circuit Appeals Court. Ulbricht raised several challenges to the verdict and sentence, including the denials of his motion to suppress, motion for a new trial, and several alleged errors by the district court. He also challenged the reasonableness of the sentence (which certainly seems unreasonable): two life sentences plus a judgment holding him personally financially responsible for every drug transaction on the Silk Road ($184 million).

On the Fourth Amendment grounds, the appeals court panel determined IP addresses have no more expectation of privacy than dialed phone numbers -- no warrants needed. Ulbricht pointed out a lot has changed, even in terms of jurisprudence, since 1979's Smith v. Maryland decision (the basis for the Third Party Doctrine) but the appeals court isn't interested in setting new precedent [PDF link].

[W]hatever novel or more intrusive surveillance techniques might present future questions concerning the appropriate scope of the third-party disclosure doctrine, the orders in this case do not present such issues. The recording of IP address information and similar routing data, which reveal the existence of connections between communications devices without disclosing the content of the communications, are precisely analogous to the capture of telephone numbers at issue in Smith… The substitution of electronic methods of communication for telephone calls does not alone create a reasonable expectation of privacy in the identities of devices with whom one communicates. Nor does it raise novel issues distinct from those long since resolved in the context of telephone communication…

Ulbricht struck out on every other appealed issue as well. The court found the warrants issued to search Ulbricht's accounts and devices were broad, but sufficiently particular. That the FBI may have had to dig through plenty of irrelevant files just to get what it was looking for is irrelevant. The judges point out simple keyword searches would have been defeated by actions Ulbricht took to obscure the contents of files, like name a folder of Tor chat logs "mbsobzvkhwx4hmjt."

As for the supposed errors committed by the trial court, the one discussed the longest is the denial of Ulbricht's motion to obtain grand jury evidence used in the indictment of DEA agent Carl Force, who stole Bitcoin and sold the movie rights to his Dread Pirate Roberts investigation, all while still on the clock. The court agrees Force's actions were reprehensible and reflected badly on the government, but the evidence itself was of no value to Ulbricht's defense. (Obviously, this theory can't be tested post facto.) The court, however, makes the point that there's little use in attacking the credibility of a witness the government isn't interested in making available.

The government’s commitment to eliminating all evidence that came from Force’s work on the Silk Road investigation further undermines Ulbricht’s claim that he needed the information to avoid a possible injustice. Had Force been called as a government witness, or had any of the government’s evidence relied on his credibility, his character for truthfulness would have been at issue during the trial, and information that impeached his credibility would have become highly relevant. Ulbricht’s reliance on the general fact of cooperation among different government agencies and different U.S. Attorney’s Offices does not undermine the government’s explicit representations that none of the evidence presented at trial derived from Force, and nothing in the record suggests that those representations were false. Ulbricht had no need to rely on the grand jury investigation of Force to attack the credibility of the actual government witnesses or the integrity of its other evidence.

The appeals court goes on to deny every challenge, leaving Ulbricht back where he started: facing life without parole. The judges aren't entirely unsympathetic to Ulbricht's challenge of the sentence's reasonableness, but they note this is how American society as a whole has decided drug dealers should be treated.

At this point in our history, however, the democratically-elected representatives of the people have opted for a policy of prohibition, backed by severe punishment. That policy results in the routine incarceration of many traffickers for extended periods of time.

This indictment of the public is no more reasonable than the sentence handed to Ulbricht because you go to the polls with the candidates you have. And many candidates have made long careers out of long drug sentences, thanks to endless PR campaigns by our nation's law enforcement agencies, who themselves rely on draconian policies to keep themselves federally funded.

And there were aggravating factors which cannot be undone simply because actions bought and paid for apparently were never carried out.

[T]he facts of this case involve much more than simply facilitating the sale of narcotics. The district court found by a preponderance of the evidence that Ulbricht commissioned at least five murders in the course of protecting Silk Road’s anonymity, a finding that Ulbricht does not challenge in this appeal. Ulbricht discussed those anticipated murders callously and casually in his journal and in his communications with the purported assassin Redandwhite.

[...]

The attempted murders for hire separate this case from that of an ordinary drug dealer, regardless of the quantity of drugs involved in the offense, and lend further support to the district court’s finding that Ulbricht’s conduct and character were exceptionally destructive. That he was able to distance himself from the actual violence he paid for by using a computer to order the killings is not mitigating.

[...]

[I]n evaluating Ulbricht’s character and dangerousness, the most relevant points are that he wanted the murders to be committed, he paid for them, and he believed that they had been carried out. The fact that his hired assassin may have defrauded him does not reflect positively on Ulbricht’s character. Commissioning the murders significantly justified the life sentence.

In the end, it appears Ulbricht was the guy he never wanted to be: a violent drug dealer. He may have fired up the Silk Road with the best of worst intentions -- a utopian deep web drug market that could have removed some of the danger associated with buying and selling drugs. But by the end of it, he was apparently ordering hits and rationalizing away the sale of cyanide.

The sentence upheld here reflects that, but it also indicates the government is still inconsistent, even with a stack of sentencing minimums to work with. The government got its man, but it also showed it's willing to pin life sentences on third party marketplace facilitators, which is a bit like locking up Backpage execs because sex traffickers use their site to… oh wait.

Filed Under: 4th amendment, appeal, ross ulbricht, silk road
Companies: silk road

Ross Ulbricht's Lawyers Uncover Evidence Showing His Silk Road Account Was Accessed While He Was Imprisoned

from the TWISTS-FOR-THE-TWIST-GOD dept

The government's Silk Road prosecution is the gift that keeps on giving. On its way to a life without parole sentence for the man behind the dark web drug marketplace, nearly everything that possibly could have happened actually happened.

As more evidence flowed in, more dirt on both sides of the prosecution was uncovered. The government appeared to engage in parallel construction to cover up evidence likely obtained by the NSA. (But the only reason for the coverup would be to protect the NSA's "means and methods," not to provide some sort of Fourth Amendment sanitizing. The Silk Road server was located in Iceland, somewhere the NSA could have performed an interception without troubling its domestic restrictions.)

It also emerged that government investigators had engaged in plenty of illegal activities of their own, including stealing Bitcoin, freezing accounts, and setting up a sting operation designed to rope Ross Ulbricht into hiring someone to kill a thieving employee… apparently set up by the same DEA agent engaged in the theft.

Also uncovered during the trial was the fact that the government had paid Carnegie Mellon researchers to develop a method to de-anonymize Tor users.

Now, there's this, reported by Jason Koebler of Motherboard:

Attorneys for Ross Ulbricht, the man convicted of running the Silk Road online drug marketplace under the pseudonym “Dread Pirate Roberts” say they’ve discovered evidence that someone logged into the Dread Pirate Roberts account on the Silk Road forums six weeks after Ulbricht was arrested. Ulbricht was in federal custody at the time.

[...]

Ulbricht was arrested on October 2, 2013. The Silk Road marketplace was taken down that same day, but the forums stayed up until November 22. His attorneys say that someone logged into the DPR account on the forum November 18.

These new details were uncovered by forensic analysts who studied backups of the Silk Road forums that were entered as evidence by the government during Ulbricht’s first trial. Ulbricht’s attorneys Dratel and Lindsay Lewis say that government tampering calls into question the evidence used to convict Ulbricht.

This could mean a few things. One possibility is that law enforcement agents continued to operate and access DPR's account after the investigation had concluded. Or it may point to one of Ulbricht's original defenses: that someone else actually ran Silk Road. It may be that Silk Road was run by multiple people, but the government was only able to track down Ulbricht.

Ulbricht's attorney seems to believe it's the last possibility on that list:

It’s unknown whether other Silk Road administrators had the username and password for the DPR account, whether there actually were other “real” DPRs, or whether government officials were somehow able to get the DPR login credentials.

“They had access only to Ross’s laptop,” Lewis told me. “I don’t think they had access to the login credentials.”

It could very well be that the government believes there were multiple DPRs, but felt that one DPR was more than enough for the purposes of prosecution. If so, its handling of this case echoes that of journalist Matthew Keys, who the government hung out to dry over 40 minutes of website defacement performed by someone else. Zero effort has been made to punish those who actually participated in the small-scale hacking of the LA Times website. The government seemed more than satisfied to let Keys carry all of this weight on his own.

This new information doesn't make the government's case look any more solid. Plenty of government deception and misconduct was uncovered during the trial and yet it was still able to obtain a life without parole sentence for Ulbricht and a $184 million fine. Now it looks like the government may have rung up the wrong Silk Road mastermind… or more likely, only one of them. The best case scenario for the government is that it was one of its own logging in and looking around, although it will still have to explain how it got ahold of Ulbricht's login info.

Filed Under: dpr, ross ulbricht, silk road
Companies: silk road

Secret Service Agent Who Pleaded Guilty To Stealing Bitcoin From Silk Road Trying To Change His Name

from the flight-risk-or-concerned-about-opm-hack dept

Back in March, an absolutely crazy story came out about two members of the Baltimore-based law enforcement team that were trying to track down Dread Pirate Roberts who was behind the original Silk Road. An FBI team out of NY beat the Baltimore DEA/Secret Service team to finding Ross Ulbricht, leading to a weird situation in which, hours later, the Baltimore folks filed their own indictment with somewhat different charges, including a trumped up fake murder of a former Silk Road employee, that was supposedly "carried out" by an undercover agent, later revealed to be DEA agent Carl Force, who Ulbricht contacted for help. The story was crazy and cinematic, but apparently that wasn't even half of it, because the story in March revealed that two members of the Baltimore team, including Force, had stolen hundreds of thousands of dollars from Silk Road. It also revealed that the "murder for hire" plot against the ex-employee only happened after the Secret Service agent, Sean Bridges, stole Bitcoin from Silk Road, leading Ulbricht to think that it was the former employee, Curtis Green.

So, yes, you had a DEA agent, Carl Force, who was already moonlighting for a Bitcoin company, and who used his position as a DEA agent to steal a bunch of money from a customer of that Bitcoin company, befriending Ross Ulbricht of Silk Road while supposedly "investigating" him. Then, you had a colleague of Force's, the Secret Service agent Bridges, go and steal a bunch of Bitcoin from Silk Road immediately following the arrest of Curtis Green, one of Ulbricht's top lieutenants. Green revealed his admin login, and Bridges just went in and took a ton of money. Ulbricht then contacted Force, to help him kill Green, because Ulbricht believed that Green had stolen the money that Bridges had actually stolen. It's so complicated it feels like it needs a graphic to explain it all, but even that might be too confusing.

Either way, earlier this summer, Force pleaded guilty, and earlier this week Bridges also pleaded guilty. In both cases, some interesting additional information came out. With Force, it was that, prior to his own arrest, he'd apparently sold the rights to his story of tracking down Ulbricht to Fox for $240,000. As the government pointed out, this was a conflict of interest (you think?).

With Bridges, it's that he had been attempting to change his name and social security number, leading the judge to wonder if he was a flight risk. According to Joe Mullin at Ars Technica:

Before the proceeding ended, prosecutor Katherine Haun mentioned that the government had just received information that gave them concerns that Bridges could be a flight risk.

"The defendant had been actively trying to change his name and social security number in the state of Maryland," she told the judge. "That's very concerning."

According to Hahn, Bridges had tried to change his last name to be the same as his wife's last name and change his first name to "a very odd name." She also noted that Bridges had handed over four firearms after he was charged, and if he changed his name he could again be able to acquire weapons.

Bridges' lawyer came up with an excuse that is so ridiculous that it literally made me laugh out loud. Bridges wasn't trying to change his first name, last name and social security in order to disappear from the law, or to avoid the reputational harm of being known as a former Secret Service agent who stole hundreds of thousands of dollars from an operation he was investigating... but because he was so, so worried about the recent OPM hack of government employee files. Bridges, of course, was a government employee:

Bridges' lawyer said his client's name change attempts had been a response to concerns about identity theft following the widely reported hacking into US federal government personnel files.

"Those of who work in the federal government have to deal with that," said Seeborg. "When you're concerned with flight risk, activity of this kind sends up a lot of red flags. I’m not surprised they’re bringing this to my attention."

Somehow, among the millions of others concerned about the OPM hack, you don't hear too many stories about them trying to change their first and last names along with their social security number...

Filed Under: bitcoin, carl force, flight risk, ross ulbricht, sean bridges, silk road

Justice Department Issues Subpoenas To Reason To Identify Angry Anonymous Commenters

from the your-taxpayer-dollars-at-work dept

Back in 2011, as some of you may recall, we received a note from the US Marshals service, telling us that they were "investigating" a comment that had been placed on an article about a ruling by Judge Beryl Howell, who had received some criticism, given that she had previously been an RIAA lobbyist, and was now issuing rulings friendly to the legacy copyright industry. The comment in question was:

Is it time to start murdering the corrupt yet?

The guy from the US Marshals told us that he was investigating this comment and asked us to remove it (but did not ask for any information about the anonymous commenter). We found it somewhat disturbing that the US government would be asking us to delete comments, even if they, somewhat obliquely, questioned whether or not it might make sense to murder a judge (though the comment in question did not advocate such a move). We had our lawyer reach out the US Marshals, and after we told them that we would not be removing the comment, they told us that they understood our decision, and that was the last we ever heard about it.

It appears that things have gone much, much further with a similar situation with the website Reason, who we link to on a semi-regular basis. As Popehat is reporting, the DOJ has issued a grand jury subpoena to Reason seeking to identify the people behind a bunch of angry, hyperbolic comments on this post about Ross Ulbricht. As was the case with our post, some of the comments talk about killing judges, though in fairly typical internet fashion:

AgammamonI5.31.15 @ lO:47AMltt
Its judges like these that should be taken out back and shot.

AlanI5.31.15 @ 12:09PMltt
It's judges like these that will be taken out back and shot.
FTFY.

croakerI6.1.15 @ 11:06AMltt
Why waste ammunition? Wood chippers get the message across clearly. Especially if you
feed them in feet first.

Cloudbusterl6.l.15 @ 2:40PMIIt
Why do it out back? Shoot them out front, on the steps of the courthouse.

Rhywunl5.3l.15 @ 11:35AMIIt
I hope there is a special place in hell reserved for that horrible woman.

AlanI5.31.15 @ 12:11PMIIt
There is.

Product PlacementI5.31.15 @ 1:22PMIIt
I'd prefer a hellish place on Earth be reserved for her as well.

croakerl6.l.15 @ 11:09AMIIt
Fuck that. I don't want to oay for that cunt's food, housing, and medical. Send her through
the wood chipper.

The subpoena says that it's investigating possible violations of 18 USC 875, which outlaws interstate threats. Popehat, of course, does an excellent job explaining why it is fundamentally and legally ridiculous to argue that any of these comments are "true threats" under the law.

True threat analysis always examines context. Here, the context strongly weighs in favor of hyperbole. The comments are on the Internet,  a wretched hive of scum, villainy, and gaseous smack talk. The are on a political blog, about a judicial-political story; such stories are widely known to draw such bluster. They are specifically at Reason.com, a site with excellent content but cursed with a group of commenters who think such trash talk is amusing.

The "threats" do not specify who is going to use violence, or when. They do not offer a plan, other than juvenile mouth-breathing about "wood chippers" and revolutionary firing squads. They do not contain any indication that any of the mouthy commenters has the ability to carry out a threat. Nobody in the thread reacts to them as if they are serious. They are not directed to the judge by email or on a forum she is known to frequent.

Therefore, even the one that is closest to a threat — "It's judges like these that will be taken out back and shot" isn't a true threat. It lacks any of the factors that have led other courts to find that ill-wishes can be threats.

There's much more detail in the article.

Unfortunately, he also notes that the US Attorneys' office can probably get away with this kind of bogus fishing expedition. Despite the fact that it's extraordinarily unlikely that anyone engaged in these comments actually broke the law, the DOJ likely just needs to show that it has a "compelling interest" in investigating the mere possibility of a threat, and Reason can be forced to hand over the information. Following that, if the DOJ is feeling particularly nasty, it can make life horrible for those commenters in question. This seems like it should raise all sorts of First Amendment alarm bells about the chilling effects it can create for anonymous speech (especially political speech), but according to Popehat's analysis, the courts (so far) aren't buying it.

Equally as troubling is the fact that, when Ken "Popehat" White reached out to the US Attorney's Office with questions about this, Niketh Velamoor, the Assistant US Attorney who signed the subpoena, pretended that there might be a gag order on the subpoena, even though he likely should have known that there was no such gag order:

Mr. Velamoor was suspicious and defensive. At one point he told me that he "believed" that there was a gag order prohibiting this subpoena from being released by its recipients, and that whoever gave it to me must have violated that order, and that he would be "looking into it" and how I got it.

Such gag orders do exist. However, I note that two days earlier on June 2, 2015, Mr. Velamoor signed the cover letter on the subpoena, which contained the Department of Justice's standard language about secrecy:

The Government hereby requests that you voluntarily refrain from disclosing the existence of the subpoena to any third party. While you are under no obligation to comply with our request, we are requesting you not to make any disclosure in order to preserve the confidentiality of the investigation and because disclosure of the existence of this investigation might interfere with and impede the investigation.

In other words, two days before he told me that he believed there was a gag order on the subpoena, Mr. Velamoor told Reason.com that it was not required to keep the subpoena secret.

Perhaps Mr. Velamoor misspoke. Perhaps Mr. Velamoor misremembered. Perhaps Mr. Velamoor didn't secure the gag order until after he issued the subpoena.

Or perhaps Mr. Velamoor, bless his heart, was lying in an attempt to intimidate me.

It's much easier to try to intimidate anonymous internet commenters if you can do so without having to publicly disclose your own disdain for the First Amendment in the process....

Either way, shouldn't we take a step back and ask a simple question: is this kind of thing really what the US Attorneys should be working on? Especially in the Southern District of NY where so many high profile cases are going on all the time? At best, this is just a typical "cover your ass" situation. If the judge in Ross Ulbricht's case actually did come to some harm, eventually it would get out that people were saying mean stuff on the internet, and the DOJ would like to be able to show that it did, in fact, investigate things, rather than ignore them. That means, most likely, nothing would ever come of this anyway in the long run. None of those commenters are likely to get charged with anything because they almost certainly didn't do anything illegal.

But still... it's frightening. The chilling effects are real. The Popehat article goes into these in much more detail, but in short, the US government can still cause tremendous problems for these commenters, even if everything they said is clearly protected speech. As White notes, you may think you're just blowing off steam in making an angry comment, but that won't stop you from being summoned to testify before a grand jury or to hire lawyers to defend yourself. Nor will it much matter should the FBI suddenly show up at your workplace, telling people there that they need to talk to you "just to clear some things up."

Should the DOJ be investigating threats? Sure. But, at some point, someone has to have a little perspective and to understand what's a threat and what's just some commenters saying idiotic things online.

Filed Under: anonymous speech, chilling effect, doj, free speech, grand jury, internet comments, ross ulbricht, subpoena, true threats, us attorneys office
Companies: reason

Silk Road Mastermind Ross Ulbricht Sentenced To Life In Prison

from the just-another-drug-dealer,-no-more,-no-less dept

Ross Ulbricht, the man behind the darkweb drug marketplace known as the Silk Road, has just been sentenced to more imprisonment than he has actual lives: two life sentences and "max sentences on all other charges." In addition, the government has chosen to hold him financially culpable for every single transaction that occurred at the Silk Road -- a fine of $184 million -- $166 million of which it has already recouped through the auction of seized Bitcoins.

Ulbricht had argued for leniency, arguing his online market "reduced harm" by moving the sale of drugs off the street. This argument was greeted with contempt by the presiding judge, who called Ulbricht's actions "thoughtful and calculated" and Ulbricht no different than a "dangerous dealer" pushing drugs in the Bronx. She also dismissed his argument as a "privileged fantasy," stating "There's no way Silk Road could reasonably be expected to reduce violence."

His last-ditch attempt to rely on the kindness of the court failed just as spectacularly as most of his legal arguments during the course of the prosecution. This is how it ends (pending appeal) for The Internet's Own Drug Dealer: a maximum sentencing coda, bringing closure to a cautionary tale of darkweb exploits, nearly non-existent operational security and a government that seemed to regularly color outside the lines of normal investigative techniques. While the story is certainly colorful and with a tech edge not normally associated with drug trafficking, Ulbricht's legal fate is ultimately no different than any "dangerous Bronx drug dealer."

Filed Under: life in prison, ross ulbricht, sentencing, silk road
Companies: silk road

Judge Responds To Ross Ulbricht's Request For A New Trial: Ha Ha Ha Ha, No.

from the nice-try,-though dept

This is not a huge surprise, but the judge who oversaw Ross Ulbricht's trial for being the guy behind the original Silk Road wasted very little time in flat out rejecting his request for a new trial. To say that Judge Katherine Forrest is skeptical of his arguments would be an understatement. First, the straight up denial:

There is no basis in fact or law to grant the motion and it is DENIED.

And the basic idea behind the reasoning: overwhelming evidence that Ulbricht is guilty, according to the judge:

The evidence of Ulbricht’s guilt was, in all respects, overwhelming. It went unrebutted. This motion for a new trial urges that Ulbricht was prejudiced by that which he could not know in time, or at all. But the motion does not address how any additional evidence, investigation, or time would have raised even a remote (let alone reasonable) probability that the outcome of the trial would be any different.

It then proceeds to lay out the rather long list of evidence pointing a finger directly at Ulbricht to demonstrate just how little Ulbricht's side has going for his argument.

As for the three arguments made for a new trial, Judge Forrest finds none of them convincing. This included the fact that the Justice Department dumped a bunch of things on Team Ulbricht less than two weeks before the trial, including the investigation into two federal officers who were stealing money themselves from Ulbricht -- information that was revealed to Ulbricht's lawyers, but which they were barred from using at the trial, as the investigation was still ongoing at the time.

Despite the attention given to the Rogue Agents issue in defendant’s brief, this Court remains unclear (as it always was) as to how any information relating to that investigation is material or exculpatory vis-a-vis Ulbricht. Either the defense assumes the answer is so obvious that it need not explain, or its omission is purposeful. For purposes of the instant motion, this Court assumes that defendant believes he was deprived of information which would have revealed that (1) the Rogue Agents’ conduct may have tainted any evidence relating to the website (since they assumed identities on the site), (2) the Rogue Agents may provide a link to someone (including themselves) who may have taken over the DPR account and framed Ulbricht, and/or (3) the Rogue Agents may know the identity of the real DPR. There is no basis in the record—including in any of what defendant has cited regarding the Rogue Agents—which supports any one of these theories. These theories are based on no more than speculation and premised on erroneous assumptions as to the scope of discovery obligations and the meaning of exculpatory evidence.

To start, there is no basis for this Court to believe that any undisclosed materials relating to the Rogue Agents would have been remotely useful, let alone exculpatory, vis-à-vis Ulbricht. The Rogue Agents did not participate in the USAO-SDNY’s investigation of Silk Road that resulted in defendant’s arrest and indictment, and none of the evidence at defendant’s trial came from the USAOBaltimore investigation in which the Rogue Agents participated. That the Rogue Agents may have exceeded the scope of their authority in the USAO-Baltimore investigation does not, in any way, suggest that Ulbricht was not the Dread Pirate Roberts. As this Court explained in an earlier (sealed) ruling on this topic, the investigation of SA Force is, if anything, inculpatory as it suggests that Ulbricht, as DPR, was seeking to pay law enforcement for inside information to protect his illegal enterprise.

Moreover, even if defendant could point to a favorable piece of evidence from the investigation of the Rogue Agents, defendant has not constructed any argument that had he had earlier disclosure, the result of the trial may have been different. There is no reasonable probability of a different outcome here: the circumstances of defendant’s arrest, and the evidence found in his own possession at the time of the arrest, are in and of themselves overwhelming evidence of his guilt.

Ulbricht's other arguments fail, meaning it's likely that his lawyers will now move on to the appeals court to see if it has any more luck there, but it seems like a massive long shot.

Filed Under: katherine forrest, ross ulbricht, silk road, trial
Companies: silk road

Ross Ulbricht's Lawyers Were Told About Corrupt Investigators, But Barred From Using That During His Trial

from the hello-due-process-problems dept

We already wrote about Monday's unsealed criminal complaint against two government agents who were key players in investigating Silk Road -- but who used that position to steal Bitcoins and a lot of other questionable behavior. Now it comes out that the Justice Department revealed the existence of this investigation to Ross Ulbricht's lawyers five weeks before Ulbricht's trial -- but then blocked Ulbricht's legal team from using that information, even as the Justice Department continued to rely on evidence from both of the apparently corrupt federal agents. Ulbricht's lawyer, Joshua Dratel, has put out a statement pointing out some of the problems here:

In addition to keeping any information about the investigation from the defense for nearly nine months, then revealing it only five weeks prior to trial, and then moving to keep sealed and secret the general underlying information so that Mr. Ulbricht could not use it in his defense at trial, and then stymying the defense at every turn during trial when the defense tried to introduce favorable evidence, the government had also refused to agree to the defense’s request to adjourn the trial until after the indictment was returned and made public – a modest adjournment of a couple of months, since it was apparent that the investigation was nearing a conclusion.

Throughout Mr. Ulbricht’s trial the government repeatedly used the secret nature of the grand jury investigation as an excuse to preclude valuable defense evidence that was not only produced in discovery, independent of the investigation of Mr. Force, but also which was only at best tenuously related to that investigation. In that manner the government deprived the jury of essential facts, and Mr. Ulbricht of due process. In addition, the government failed to disclose previously much of what is in the Complaint, including that two federal law enforcement agents involved in the Silk Road investigation were corrupt. It is clear from this Complaint that fundamentally the government’s investigation of Mr. Ulbricht lacked any integrity, and was wholly and fatally compromised from the inside.

Dratel suggests that the corrupt behavior of Force and Bridges raises questions about nearly all aspects of the Ulbricht case, especially since they have already showed that they abused their access to the Silk Road platform in a way that could change the site and account information.

Additional information shows that Force not only acted as "Chief Compliance Officer" for CoinMKT while still employed as a DEA agent (and abusing his ability to use government databases for the job), but as a report from Sarah Jeong at Forbes shows, he also reached out to Mt. Gox CEO Mark Karpeles: And then even asked about working with Mt. Gox as well, with this bizarre "American government and economy will crash in the next five years" statement: Just about a month later, when Bridges was the affiant on helping the government seize millions of dollars from Mt. Gox (just days after withdrawing the money he himself allegedly stole from Silk Road), Force emailed Karpeles again, saying "told you should have partnered with me!" And that doesn't even get into the fact that the whole "murder plot" that was such a headline grabber in the original criminal complaint only happened after Bridges apparently took the money and Ulbricht reached out to Force to get him to put out a hit on the guy he thought had stolen the money (who had actually been cooperating with the government, which allowed Bridges to get the info to steal the money in the first place).

As we noted in our earlier piece, the criminal complaint shows that Force himself abused his power as a DEA agent to fake a subpoena against Venmo trying to get his own account unfrozen -- and it appears that when that didn't work, Force tried to further abuse his power to seize Venmo's bank account in response. A snippet from an email he sent to a colleague:

Venmo has since registered with FinCEN, but I want to know if they have state money license remitting licenses in California and New York. Can you check? If not, I want to seize their bank accounts (need to identify them) a la BRIDGES and [M.M.’s] seizure warrants for Mt. Gox.

And here's the big question: were Bridges and Force really just two "bad apples" in the investigation? Or could it have gone much deeper? As Jeong notes in her report:

During the trial, the defense kept trying to introduce the character of “mr. wonderful,” a Baltimore DHS agent who coerced a Silk Road moderator into giving her account over to law enforcement. Although many of Force’s aliases are listed in the criminal complaint against him, none of them are “mr. wonderful.” (In any case, Force is a DEA agent, and “mr. wonderful” is DHS). Who is mr. wonderful? What exactly did he do?

In other words, whether or not you believe that Ulbricht was DPR, the investigation and trial against him was a complete and utter mess, and these new charges raise an awful lot of questions about the fairness of that trial.

Filed Under: bitcoin, carl force, dea, doj, joshua dratel, mark karpeles, ross ulbricht, secret service, shaun bridges, silk road
Companies: silk road

Jury Wastes No Time In Finding Ross Ulbricht Guilty On All Counts

from the going-away-for-a-long-time dept

If you've been following the Ross Ulbricht trial, this won't come as much of a surprise, but Ulbricht has been found guilty of all the charges related to creating, running and using the Silk Road dark marketplace:

1. Distribution/Aiding and Abetting the Distribution of Narcotics
2. Distribution/Aiding and Abetting the Distribution of Narcotics by Means of the Internet
3. Conspiracy to Distribute Narcotics
4. Continuing Criminal Enterprise
5. Conspiracy to Commit or Aid and Abet Computer Hacking
6. Conspiracy to Traffic in Fraudulent Identity Documents
7. Conspiracy to Commit Money Laundering

Sentencing will be May 15th, but it seems likely that he'll be locked up for a fairly long time. There is likely to be some sort of appeal, and some have made a valid argument that the court very much limited Ulbricht's possible defenses. Also, as with the Kevin Bollaert revenge porn conviction earlier this week, there are concerns to be raised about how this kind of ruling could be used to pin liability on other websites for activities done by users of those websites. It seems likely that some of Ulbricht's direct activities violated the law, but it still appears that some of the charges conflate his own actions with users of his site -- and so it's a concern about what kind of precedent that sets for other cases involving less controversial websites and services.

Either way, this kind of result was almost a foregone conclusion. In a criminal case, the defense almost always wins if it gets to trial. Also, even for the more nuanced legal arguments -- or Ulbricht's attorney's chosen path of trying to toss out a bunch of alternate scenarios to sow "reasonable doubt" in the jury -- the simple nature of the fact that many people used Silk Road to buy and sell illegal drugs was always going to cloud the overall case against Ulbricht.

Filed Under: dark market, guilty, ross ulbricht, silk road
Companies: silk road

Ross Ulbricht's Lawyers Claim That Mt. Gox CEO Was The Real Dread Pirate Roberts

from the behind-this-curtain... dept

It's pretty rare that a trial has a real "surprise" unveiling or twist. It happens all the time in TV and movie courtrooms, but in real courtrooms... not so much. Most people know the basics. Someone may admit something surprising, or testimony can go awry, but the "big dramatic reveal" isn't so common. Yet in the trial of Ross Ulbricht, concerning whether he was or wasn't the "Dread Pirate Roberts" behind the Silk Road hidden market, things are already off to quite a start. We'd already mentioned his "some other dude did it" defense (while he admits that he did create the site, he argues he handed it over to someone else long before that). However, during yesterday's testimony Ulbricht's lawyer revealed who they believed the "other" Dread Pirate Roberts really was: Apparently they believe it was Bitcoin pariah and Mt. Gox CEO, Mark Karpeles.

If you don't follow the Bitcoin space, you might not recognize the name. However, in the Bitcoin space, Karpeles is widely despised. For a long time, Mt. Gox was the Bitcoin exchange for people who wanted to buy or sell Bitcoin. However it mysteriously shut down over a year ago under questionable circumstances -- with Karpeles arguing that Mt. Gox had all its Bitcoins stolen, while many people claimed that the evidence didn't suggest that at all, and that there may have been a lot of other fraud going on. In short, if you wanted to pick someone who is widely hated among Bitcoin supporters, Karpeles is the perfect "villain." And Ulbricht's lawyers make the case that the Homeland Security Investigator who infiltrated Silk Road and helped nab Ulbricht, Jared DerYeghiayan, originally suspected Karpeles:

"I have a wealth of evidence to prove that [Karpeles] is Dread Pirate Roberts," the agent wrote at the time.

Karpeles, who is from France, ran what was once the world's largest Bitcoin exchange, Mt. Gox, which was based in Tokyo. DerYeghiayan's theory was that Karpeles wanted to create a market that used Bitcoin in order to keep the price of the semi-anonymous cryptocurrency robust, which he believed was probable cause for Karpeles's arrest. (Mt. Gox went bankrupt in early 2014.)

"[Silk Road] would be a device for leveraging the value of Bitcoin, and if he could create a site independent of Bitcoin, you could control the value of Bitcoin," Dratel said, reading from DerYeghiayan's emails.

DerYeghiayan believed his evidence was so strong that he even drafted a search warrant for Karpeles's email in May of 2013.

Later, prosecutors objected to this effort, but the judge, Katherine Forrest, correctly pointed out that the idea was to "raise reasonable doubt that the defendant is the real DPR."

Karpeles, not surprisingly, is denying that he is DPR. According to Ars Technica:

"This is probably going to be disappointing for you, but I am not Dread Pirate Roberts," Karpeles told Ars via e-mail. "The investigation reached that conclusion already—this is why I am not the one sitting during the Silk Road trial, and I can only feel defense attorney Joshua Dratel trying everything he can to point the attention away from his client."

He also posted this to Twitter: During the trial, the prosecution did also reveal that other investigators, in Baltimore, had seized a site that was run by Karpeles. The Vice article doesn't name that site, but Sarah Jeong points out that it was SilkRoadMarket.org. In his denial to Ars Technica, Karpeles discusses that domain:

"I have nothing to do with Silk Road and do not condone what has been happening there," Karpeles continued. "I believe Bitcoin (and its underlying technology) is not meant to help people evade the law, but to improve everyone's way of life by offering never thought before possibilities. As for the silkroadmarket.org domain, it was registered by a KalyHost.com customer and paid in Bitcoins (KalyHost is a service of Tibanne that has been up since 2009)."

Tibanne was Karpeles' company that supposedly purchased Mt. Gox. However, his argument here seems a bit questionable, as the Feds have released the seizure warrant showing that Karepeles was directly involved. As another article on Ars Technica summarizes:

Homeland Security used a confidential informant, based in Maryland, to conduct the investigation. The informant simply created accounts with Dwolla and Mt. Gox, bought bitcoins, and then changed them back into dollars. Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles, the president and CEO of Mt. Gox. The Dwolla account shows transfers to Dwolla going back to at least December 2011, according to the warrant.

That account was registered to Mutum Sigillum LLC, which is the company that supposedly registered the silkroadmarket.org domain. And the reason Karpeles got in trouble: Mutum Sigillum, when it opened the account, denied that it was in the money services business, even though it clearly was. All of this is a bit of a mess. Either way, the point here isn't to necessarily prove that Karpeles absolutely was DPR, but rather to show reasonable doubt to get Ulbricht off the hook. While a fascinating turn of events all around, this still seems like an uphill battle for Ulbricht's lawyers.

Filed Under: dread pirate roberts, mark karpeles, reasonable doubt, ross ulbricht, silk road
Companies: kalyhost, mt. gox, mutum sigillum, silk road, tibanne

Ross Ulbricht's Defense In Silk Road Trial: Some Other Guy Did It, I'm Just The Fall Guy

from the good-luck-with-that dept

On Tuesday, the trial for Ross Ulbricht, the guy accused of being the "Dread Pirate Roberts" behind Silk Road (1.0) began, and apparently the defense's legal strategy is to claim some other guy was the real DPR, and Ulbricht was just the fall guy. According to Andy Greenberg:

In his opening statement in a Manhattan courtroom, defense attorney Joshua Dratel began with a surprising admission: that his client Ross Ulbricht was in fact the founder of the Silk Road.

But Dratel went on to explain that the site was meant merely to be a kind of “economic experiment” that Ulbricht only controlled for a brief time. The eventual adoptive owners of the Silk Road, Dratel claimed, would later trick Ulbricht into serving as the “fall guy” when they sensed an impending law enforcement crackdown.

“After a few months, he found it too stressful for him, and he handed it over to others,” Dratel told the jury, describing the Silk Road’s early days. “At the end, he was lured back by those operators to…take the fall for the people running the website.”

That's.... a different argument than has been suggested in the past. It also seems like it would require a bit more evidence. And that's going to be tough. The admission that he created the Silk Road apparently was necessary, as Ulbricht had apparently confessed that to an old friend whom the prosecutor plans on calling as a witness. However, Ulbricht's lawyer claims they may know who the real Dread Pirate Roberts is, but, again, this seems like it's a massive legal long shot. While I have many concerns about how Ulbricht was found out, and about whether or not merely operating an online marketplace should be illegal (leaving aside the question of whether and how Ulbricht participated in that market...), to argue that "some other guy did it" and then (conveniently) set Ulbricht up to be the fall guy... seems extremely far fetched. Greenberg's summary:

The new operators of the Silk Road “had been alerted the walls were closing in,” Dratel said. “That’s what compelled the Dread Pirate Roberts to put his escape plan into action,” framing Ulbricht, according to Dratel’s telling.

In Dratel’s version of events, Ulbricht’s store of bitcoins was simply the earnings from his early investments in the cryptocurrency, not the Silk Road profits the prosecutors allege. He points out that the bitcoins seized from Ulbricht are only a “small fraction” of the full $18 million the government has said the Dread Pirate Roberts earned in Silk Road commissions. And he implied that the evidence found on Ulbricht’s computer at the time of his arrest was falsified to “leave him holding the bag when the real operators of Silk Road knew their time was up.” He didn’t elaborate on how evidence could have been planted on Ulbricht’s PC.

“[The Dread Pirate Roberts] is someone who studiously avoided revealing his identity to anyone on the site…This same person goes to a public library and uses a public Wifi connection?” Dratel asked the jury. “That Ross is DPR is a contradiction so fundamental that it defies common sense.”

There's no doubt, if the US's argument is accurate, that Ulbricht was somewhat sloppy, but using that sloppiness as "proof" that he wasn't really DPR, while admitting he had founded Silk Road and when he was found logged into the admin... just seems unbelievable.

Filed Under: defense, dread pirate roberts, ross ulbricht, silk road