US agents have been arrested for allegedly stealing Bitcoin from Silk Road and other fraud.
When it was revealed that two US agents had allegedly engaged in money laundering and fraud during their investigation of the dark web marketplace Silk Road, there was one obvious question. Why hadn't this information come up during the trial of Ross Ulbricht, the 31-year-old who was recently convicted of crimes related to running the site?
A trove of court documents were unsealed on Tuesday, shedding more light on what happened behind the scenes before the trial even began. In short, Ulbricht's lawyer knew about the investigation into corruption by the federal agents from early on, but wasn't able to use the information in his defense.
To recap, former US Secret Service (USSS) Special Agent Shaun Bridges and former Drug Enforcement Administration (DEA) agent Carl Mark Force IV were arrested on money laundering and fraud charges stemming from their time on the Baltimore Silk Road Task Force, an agency that worked to take down the site.
Bridges is accused of stealing more than $800,000 in Bitcoin from Silk Road. Force is alleged to have stolen a large amount of Bitcoin as well, and is said to have taken on several unauthorized personas to communicate with and ultimately try to extort Ulbricht, known at the time as the Dread Pirate Roberts, or DPR. Force adopted the authorized username "Nob" while undercover on the site, as well as several unauthorized names, including French Maid, alpacino, and DeathFromAbove. He also allegedly acted as a mole, informing DPR of bits and pieces of the investigation.
The prosecution maintained that Force "played no role" in its investigation of Silk Road
The investigation into Force remained off limits for the entirety of the trial, which started January 13 and ended when Ulbricht was convicted on February 4, despite several efforts from the defense to allow it to be included.
The unsealed documents show that the government first alerted the defense about the ongoing investigation, which began in May 2014, in a letter in November.
There were multiple parallel investigations into Silk Road, including one in Baltimore and one in New York. The New York investigation was the one that ended up in court. In the letter to the judge, the New York prosecution maintained that Force, who was assigned to the Baltimore investigation, "played no role" in its separate investigation of Silk Road but wanted to disclose the ongoing issues to the court "in an abundance of caution."
"The Government does not believe that the ongoing investigation of SA Force is in any way exculpatory as to Ulbricht or otherwise material to his defense," the government wrote to Judge Katherine Forrest. It also requested pre-trial litigation regarding the investigation of Force remain sealed in the interest of maintaining grand jury secrecy.
The defense wanted the initial letter from the government about the investigation into Force unsealed so they could use it in Ulbricht's trial, saying the information was relevant and exculpatory. Force was of particular interest to Ulbricht's defense because he is said to have orchestrated a murder-for-hire scheme with DPR under the username Nob. The "hit" was a set-up—Force and Bridges staged a fake murder and sent photos to DPR—and the charge was not included in this trial, but the plot was mentioned in the proceedings as a means to prove how far Ulbricht was willing to go to protect his empire.
Is the alleged theft of Bitcoin by one officer that led to the false assassination of a site admin by another officer relevant to Ulbricht's case?
Much of the argument came down to how the staged murder-for-hire of Silk Road employee Curtis Clark Green, known as Flush on the site, went down. As part of the Baltimore-based investigation, agents took over Green's admin account in January 2013. Around that time, there was a major theft of Bitcoin from Silk Road, which DPR traced to Green but is now thought to have been associated with former government agent Bridges, according to the criminal complaint against Bridges. In retaliation, DPR ordered a hit on Green from Nob, a user who was thought to be a drug dealer and hitman but was actually Force.
So, is the alleged theft of Bitcoin by one corrupt officer that led to the false assassination of a site admin by another corrupt officer relevant to Ulbricht's case? The defense says yes. It demanded the trial be delayed until after the investigation of Force was finished.
"The government's effort to use its ongoing grand jury investigation as both a sword and shield cannot be reconciled with Mr. Ulbricht's right to a fair trial," Ulbricht's attorney Joshua Dratel wrote in December. "The only appropriate solution is an adjournment of the trial until the government's investigation of former SA Force is complete, and the defense can effectively pursue and ultimately use at trial the information disclosed. Having the trial proceed first puts the cart plainly, and unconstitutionally, before the horse."
It suggested that evidence of the investigation into Force "might be helpful to support an entrapment defense," according to a letter from the government. The government rejected the idea of entrapment, saying Ulbricht suggested the murder himself, independent of "Nob," aka Force.
"Regardless of whether SA Force, Green or anyone else stole the Bitcoins, the identity of the culprit is wholly irrelevant to the fact that the defendant believed that they were stolen by his employee, 'Flush,'" the government said. "Upon learning that 'Flush' had been recently arrested, and fearing that he was cooperating with law enforcement, Ulbricht made the conscious decision to seek to murder 'Flush,' in order to protect his interests in his underground black market website and the illegal proceeds it generated."
The government supplied pages of journal entries and TorChats, an anonymous instant messaging service, found on Ulbricht's laptop showing conversations between DPR and site admins to support the claim that Ulbricht prompted the murder-for-hire on his own.
Ultimately, the government asserted Force did not play any role in the investigation in the district where Ulbricht was indicted; it would not use any evidence obtained by Force's Baltimore investigation; and that it would not call Force as a witness or use any communications between Ulbricht and Force at trial.
Judge Forrest sided with the government, rejecting Ulbricht's motion to postpone the trial and his motion to unseal information about the investigation, saying the defense "has not made a showing that either the fact of the Force Investigation or the information learned during that investigation is 'needed to avoid a possible injustice.'"
(Bridges is not mentioned in the documents that were unsealed, but the criminal complaint makes it sound like the two agents were colluding on at least some of their scams, texting about the price of Bitcoin and getting their coins out of Silk Road.)
This means everything about the Baltimore scandal was under seal during the trial. Forrest did say "the Court will, over the course of the trial, entertain specific requests to use information from the November 21, 2014 Letter on cross-examination." But when Dratel tried to sneak in references to these issues during the trial, he was repeatedly shot down.
Ulbricht said he planned to appeal after he was convicted on all seven charges stemming from the operation of Silk Road in February, and Dratel said the Baltimore scandal will help the process.
Dratel filed a motion after the trial ended accusing the government of a Brady violation (failure to disclose evidence favorable to the defendant) and calling for a new trial. Specifically, he is alleging the government did not identify username DeathFromAbove as Force until February 1, in a sealed letter, but chat logs from that username were read during the trial. He said this proves the investigation into Force was producing evidence relevant to Ulbricht's trial that was not properly disclosed.
"That passage demonstrates that the investigation of former SA Force continued to gather exculpatory information–essentially, that Brady material was being collected during the trial itself, and being generated by the investigation of former SA Force," Dratel wrote.
The government is set to respond to the motion on Friday. Dratel said the motion will be addressed in Ulbricht's reply papers on April 15. Should the post-trial motions not succeed, the issue will be included in Ulbricht's appeal. He faces life in prison and is scheduled to be sentenced on May 15.