Two Former Federal Agents Charged With Stealing Bitcoin During Silk Road Investigation

By March 30, 2015Bitcoin Business
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Image Credit: Associated Press

Two former federal agents have been charged with stealing Bitcoin for their own personal gain while working undercover to help unmask Ross Ulbricht, the convicted mastermind behind the drug trafficking website.

The two agents were both members of the Baltimore Silk Road Task Force, which helped conduct the investigation that led to the seizure of the Silk Road servers and Ross Ulbricht’s arrest in October 2013. Drug Enforcement Administration special agent Carl Mark Force IV, 46, was charged with wire fraud, theft of government property and money laundering. Maryland Secret Service agent Shaun Bridges, 32, was charged with wire fraud and money laundering.

The lengthy account of how Force and Bridges allegedly abused their roles as federal agents during the Silk Road investigation was never mentioned in Ulbricht’s trial, which began in January in New York City. After a month-long trial, Ulbricht was found guilty of creating and running the Silk Road after less than four hours of jury deliberation. He faces sentencing in May, unless an appeal for a new trial filed earlier this month is granted. After the criminal complaint against Force and Bridges was unsealed on Monday, Ulbricht’s lawyer Joshua Dratel tweeted:

Major Silk Road govt corruption scandal revelation today that we’ve had to sit on for four months and were not permitted to use at trial.

— Joshua Dratel (@JDratel) March 30, 2015

The Department of Justice’s 50-page complaint unsealed Monday details a wide range of alleged corrupt acts from Force and Bridges during the Silk Road investigation—from creating unauthorized undercover personas, to extorting Bitcoins from Ulbricht in exchange for information, and forging a subpoena for Venmo.

“Force and Bridges abused their positions as federal agents and engaged in a scheme to defraud a variety of third-parties, the public, and the government, all for their own financial enrichment,” the complaint reads.

Force’s charges are tied to his actions while undercover on the Silk Road towards the end of his 15-year career as a special agent. As part of the Silk Road investigation, Force went undercover as “Nob,” an imaginary drug smuggler in the United States with global criminal connections, in order to communicate with the Dread Pirate Roberts (Ulbricht’s moniker on the Silk Road).  Force interacted with DPR as instructed, but allegedly took his communications with DPR much further than he reported back to the DEA, according to the criminal complaint.  After the Silk Road servers were seized in October 2013, the feds discovered that “Nob” had had many encrypted conversations with DPR that were never officially recorded.

One of Nob’s cover stories on the Silk Road was, ironically, that he had access to “Kevin,” a corrupt government employee who worked for the Department of Justice but gave Nob information about the Silk Road investigation.  Most of Nob’s conversations with DPR about Kevin were encrypted, except one revealing message. In August 2013, DPR allegedly wrote Nob, “I could not decrypt your second message, got an error. I could decrypt the first, and have sent the 525 btc as requested.” Nob responded, telling DPR to use PGP and the two continued to chat. In his DEA file about Kevin and the conversation with DPR, Force included an agent’s note that said: “DPR made no such payment.” According to the complaint, however, DPR allegedly paid Force twice in Bitcoin—400 Bitcoins for fraudulent identification documents in June 2013, and 525 Bitcoins for Kevin’s inside information in August 2013.

Force’s alleged communication with DPR didn’t end with “Nob,” and Force allegedly used two other unauthorized personas –“French Maid” and “Death From Above.” Ulbricht allegedly paid French Maid approximately $100,000 in bitcoins in exchange for a name that French Maid claimed Mark Karpeles had given to law enforcement.  Karpeles was then CEO of Mt. Gox digital currency exchange, and the Baltimore Silk Road Task Force was trying to interview him about the Silk Road. (In Ulbricht’s trial, a special agent revealed on the stand that the FBI considered Karpeles as a possible suspect before pursuing Ulbricht as the Silk Road mastermind). The complaint lists several reasons that “French Maid” and “Nob” were believed to be the same person (aka Force): the investigation into Karpeles was privileged information, both Nob and French Maid used the same outdated PGP software, and the 770 bitcoins paid to French Maid ended up in Force’s personal account. Force used his third persona, “Death From Above,” to allegedly attempt to solicit $250,000 from DPR in exchange for personal indentifying details about one of the Homeland Security’s possible Silk Road suspects. The complaint details other alleged misconduct by Force, including subpoenaing Venmo to unfreeze his personal account.

In addition to his work undercover work, Force worked extensively with former Secret Service agent Bridges, who was also on the Baltimore Silk Road Task Force. The complaint details how Force worked with Bridges to allegedly steal Bitcoins from the Silk Road, transfer them to an account with Mt. Gox, and then remove the money just before Bridges served a seizure warrant on the Bitcoin exchange. Because Bridges was the Baltimore Silk Road Task Force’s Bitcoin and Tor expert, he was the affiant on many seizure warrants related to digital currency, including the $2.1 million seizure of Mt. Gox.

A few months before the Mt. Gox accounts were seized,  one of DPR’s employees–referenced as C.G. in the complaint—showed Bridges and Force how to log into Silk Road vendor accounts, reset passwords, and do other administrative tasks on January 25, 2013. C.G. had been caught with a kilogram of cocaine by the Baltimore Task Force earlier in January 2013. The same day C.G. gave Bridges and Force the inside scoop, the Silk Road was hit with series of large thefts, tied to C.G.’s account. Believing that C.G. was responsible for the thefts, DPR commissioned hits on C.G. from Nob and another individual. DPR allegedly paid Nob $80,000 for the hit through a wire transfer, and Force and others on the Baltimore Task Force faked C.G.’s death to look like the hit actually took place. Bridges was allegedly responsible for creating “proof-of-death” photos of C.G. for Nob to send to DPR.

According to the criminal complaint, the feds believe that Bridges–under the monikers “Hush” and “Number13”– was responsible for the original thefts from the Silk Road, in coordination with Force.  A total of 20,000 Bitcoins were stolen from the Silk Road, which would have been worth $350,000 at that time and more than $20 million at Bitcoin’s height. After the theft, Bridges allegedly began bugging Force to ask DPR for advice on how to exchange Bitcoins for dollars. DPR didn’t have an answer, and Bridges answered: “Roger. Just curious.”

Two weeks later, Bridges created “Quantum QTM +1.23% International Investments, LLC,” in Maryland, and an account at Fidelity in Quantum’s name.  Bridges allegedly continued badgering Force about how to transfer Bitcoin, and the two monitored the Bitcoin market in various chat exchanges.  In the following months, Bridges’ Fidelity account received nine separate wire transfers totaling more than $820,00 from Mt. Gox in Japan, where the feds believe Bridges allegedly deposited the stolen Bitcoins.  Two days after the final wire transfer on May 7, 2013, Bridges served as the affiant for a seizure warrant for $2.1 million in Mt. Gox accounts. The complaint describes this as a conflict of interest, as Bridge’s would have known about the impending seizure of Mt. Gox accounts as he withdrew his own money ahead of time.

The feds investigation into Force began in May 2014. When interviewed, Bridges told the FBI that he knew Force because of their joint work on the Baltimore Silk Road Task Force, but that they had “minimal contact.” Bridges also denied owning any Bitcoin that year, according to the complaint. On June 2, 2014, days after being interviewed, Bridges allegedly wired approximately $225,000 from his Fidelity Quantum account to an account at PNC Bank. He allegedly also wired $30,000 on July 7, 2014. The account belonged to a third party who was close to Bridges. The complaint describes this as money laundering as the money from the Fidelity Quantum account could be traced to the Mt. Gox account and then back to the Silk Road.

Force was arrested in Baltimore on Friday, and Bridges surrendered himself in San Francisco on Monday. Both Force and Bridges appeared in federal court on Monday.

The two agents were both members of the Baltimore Silk Road Task Force, which helped conduct the investigation that led to the seizure of the Silk Road servers and Ross Ulbricht’s arrest in October 2013. Drug Enforcement Administration special agent […]

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