United States v. Dread Pirate Roberts: Lessons from the Silk Road Trial

 In Criminal, White Collar Crime Blog

There has been a lot of news lately about the Silk Road. Not the Silk Road of yesteryear that connected Asian trade with the West, but instead the online black market where almost anything can be bought and sold. A recent trial brought the Silk Road into the limelight, and there are lessons to be learned from the trial that implicate your Fourth Amendment rights.

What was the Silk Road?

Silk Road was, before the federal government took them down, an anonymous online marketplace where items could be purchased with Bitcoins, a form of virtual currency. The Silk Road was used mainly as a black market to anonymously sell and purchase contraband. The Silk Road was part of what is referred to as the “Dark Net.” The Dark Web refers to websites that cannot be reached or found by traditional search engines. A subset of the Dark Web are sites that are considered part of the “Dark Net.” The Dark Net includes sites that intentionally and actively hide from prying eyes, including search engines. For all intents and purposes, Silk Road was the Amazon of the Dark Net. Buyers and sellers remained anonymous through the use of online anonymity software TOR, and online currency called BitCoin.

BitCoin became the basis for all transactions on Silk Road. Buyers could convert regular currency into BitCoin digital currency. Silk Road would hold the Bitcoins for the purchaser until the sale was complete, at which point they would take a cut of the profit. Sellers would receive the BitCoin payment upon delivery, and could convert BitCoin into real currency. The process allowed people to deal in commodities and services anonymously in an attempt to avoid arrest and prosecution.

The business model was attractive to sellers. Silk Road heroin dealer Michael Duch testified the reason he started selling drugs was because he could do it with reasonable safety using an anonymous platform like Silk Road. Not only was Duch making $60,000 – $70,000 a month selling heroin. Rather than being confined to a street corner, Duch was able to sell on a national scale.

Who is Dread Pirate Roberts?

Ross Ulbricht grew up in Texas, just outside of Austin. The government also claimed, and successfully argued at trial, that he was also the creator and administrator of SilkRoad where he made $20,000 each day in commissions off of Silk Road transactions. The government claimed that Ulbricht, acting under the name Dread Pirate Roberts operated Silk Road for the two years it was in existence.

The Silk Road Trial

On February 4, 2015, Ross Ulbricht was convicted by a jury in federal court of seven charges. He was convicted of:

  • Distributing, or aiding and abetting the distribution, of narcotics.
  • Distributing narcotics, or aiding and abetting distribution, over the internet via the website he created, Silk Road.
  • Distributing false identification.
  • Conspiracy to commit money laundering by using a Bitcoin-based payment system for anonymous illegal transactions.
  • Conspiracy for computer hacking because, in addition to selling drugs, Silk Road also listed for sale many types of malicious software used in hacking.
  • Conspiracy to violate narcotics laws by establishing a website designed to help people anonymously sell drugs in violation of the law.
  • And most importantly, Ulbricht was convicted for running a continuing criminal enterprise, aka the Kingpin Charge.

What is the “Kingpin Charge?”

A “kingpin charge” is a charge created specifically to give harsher punishments for the leaders of continuing criminal enterprises. Specifically, this law targets the leaders of drug-dealing organizations. In order to be charged you must oversee at least five people in continuing violations of felony drug laws and must make substantial income from doing so.

What makes this law so strong is that this charge carries a sentence of twenty years to life if convicted. Additionally, there will be a potentially multimillion-dollar fine and asset forfeitures of all profits made from the criminal enterprise. Also of note is that when the principal leaders of the criminal enterprise are convicted, if a large amount of drugs or money is involved, a life sentence in prison is mandatory. This law is designed to put drug kingpins away for a long time and destroy their resources so that their drug business cannot continue.

 Fourth Amendment Implications of the Silk Road Trial

The Fourth Amendment protects against unreasonable searches and seizures. During trial the defense argued that the FBI’s warrantless hack into servers in Iceland that served as the datacenter for Silk Road. The FBI accessed and secretly copied all of the files on the server as part of its investigation. During trial Ulbricht’s attorney argued that this violated Ulbricht’s right of privacy and violated the Fourth Amendment.

Lesson: Standing is Required to Claim Fourth Amendment Rights

In order to assert a claim of Fourth Amendment protection, you need to actually have a personal privacy interest in whatever has been searched. In other words, you must have “standing.” You cannot object when the government searches something that does not belong to you.

Ulbricht was caught between a rock and a hard place. If he admitted the server was his, he would be incriminating himself by showing ownership over Silk Road. If he denied ownership, he had no right to protest the FBI’s potentially illegal search. Because Ulbricht did not claim ownership of the server, the judge stated that Ulbricht had not actually put forth a valid Fourth Amendment claim and that the FBI’s evidence could be used against him, even if that evidence was illegally obtained. This may seem like a minute distinction, but it is one that has huge consequences.

Ulbricht was ultimately found guilty on all seven counts, and awaits sentencing. Cases such as these require attorneys who understand how modern information systems work and who have a solid grasp on the law. If you have questions regarding a charge you are facing, call us at (817) 203-2220.

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