Judge Rejects Every Defense Argument In The Silk Road Trial
As it was published in wired, things are not looking too bright for Ross Ulbricht:
In a ruling released Wednesday, Judge Katherine Forrest denied a motion by Ross Ulbricht, the 30-year-old alleged creator of the Silk Road billion-dollar online drug bazaar, to dismiss criminal charges against him that include narcotics trafficking conspiracy, money laundering, and hacking conspiracy charges, as well as a âcontinuing criminal enterpriseâ charge thatâs better known as the âkingpinâ statute used to prosecute criminal gang and cartel leaders.
That earlier motion, filed in April, raised potentially trial-shifting questions: Can Ulbricht really be accused of running a drug-selling conspiracy when he merely ran a website that made the narcotics sales possible? And can he be charged with money laundering when bitcoin doesnât necessarily meet the requisite definition of money?â
According to Forrestâs latest ruling, yes and yes. She rejected every argument made in the defenseâs motion, starting with the idea that Ulbricht had merely provided an innocent platform for hosting the Silk Roadâs illicit e-commerce, just as eBay might occasionally host illegal content without its knowledge.
âSilk Road was specifically and intentionally designed for the purpose of facilitating unlawful transactions,â Forrest writes in her 51-page order, embedded below. âUlbricht is alleged to have knowingly and intentionally constructed and operated an expansive black market for selling and purchasing narcotics and malicious software and for laundering money. This separates Ulbrichtâs alleged conduct from the mass of others whose websites mayâwithout their planning or expectationâbe used for unlawful purposes.â
Ulbrichtâs lawyer, Joshua Dratel, had made the argument that if anything, the Silk Road should be covered instead by a law known as the âCrack House Statute.â That 1986 law was created to hold landlords accountable for knowingly owning a property where drug deals were taking place. Dratel argued that if the more serious narcotics charges in Ulbrichtâs case applied, there would be no need for that landlord-focused law.
But Forrest countered in her opinion that Ulbricht is accused of being more than a disinterested landlord. By allegedly designing the Silk Road to use tools like the anonymity software Tor and the potentially tough-to-trace bitcoin, she argues that he had invited drug dealers onto the property. âUlbrichtâs alleged conduct is more akin to a builder who designs a house complete with secret entrances and exits and specially designed traps to stash drugs and money,â she writes. âThis is not an ordinary dwelling, but a drug dealerâs âdream house.ââ
She went on to note that Ulbricht is accused of working to organize and command control of the Silk Roadâs operations, and also took a commission from its profitsâall the kind of behavior that would make him an active participant. âThe allegations amount to Ulbricht acting as a sort of âgodfatherââdetermining the territory, the actions which may be undertaken, and the commissions he will retain; disciplining others to stay in line; and generally casting himself as a leader â and not a service
By far the most closely followed argument in Ulbrichtâs April defense motion, however, had been its contention that bitcoin users canât be accused of money laundering because bitcoin isnât âmoney.â The motion cited statements about bitcoin by the IRS and U.S. Treasuryâs Financial Crimes Enforcement Network (FinCEN) that described it as neither âfundsâ nor a âmonetary instrument,â the two terms used in money laundering statutes. In fact, the IRS has instead described bitcoin as âpropertyâ for tax purposes.
But Forrest tossed out that argument, too. She points out in her opinion that neither the IRS nor FinCEN have the power to define money laundering laws. And she said it was easily clear enough that bitcoin had function as money in the Silk Roadâs dealings. âSellers using Silk Road are not alleged to have given their narcotics and malicious software away for free â they are alleged to haveÂ sold them,â she writes. âThe money laundering statute is broad enough to encompass use of Bitcoins in financial transactions. Any other reading wouldâin light of Bitcoinsâ sole raison dâetreâbe nonsensical.â
The rejection of Ulbrichtâs motion could have rippled effects beyond the Silk Road case. Former Bitcoin Foundation vice chairman Charlie Shrem was also arrested last January and charged with Bitcoin money launderingâhis trial is still pending. Projects like Darkcoin and Dark Wallet that seek to enable the anonymous use of cryptocurrency could also find themselves on thinner ice as that the limits of bitcoinâs legal anonymity have become clearer.
Bitcoinâs appeal for many of its users, after all, has been the potential to spend the currency privately, without any ties to the userâs identity. Wednesdayâs ruling serves as a reminder: Get caught using that anonymity for illegal purposes, and you could face just as much trouble as if youâd been dealing in old-fashioned dollars.