Following Ross Ulbricht's Silk Road conviction, extraordinary details have emerged about two of the investigating federal agents charged with extortion, fraud, and theft of bitcoins from the marketplace. With a shocking dossier of information now revealed, it is possible that the Feds might have had a role in the Mt Gox implosion.
Lead agents involved
Two federal agents who took part in the Silk Road trial have been charged with fraud for allegedly embezzling bitcoin while on assignment.
Secret Service agent Shaun Bridges, and Drug Enforcement Agency agent Carl Force, had both served as federal agents for years prior to the start of the “murder-for-hire” investigation that brought them to the case of Ross Ulbricht and the Silk Road.
Force was the lead agent in the case, tasked with investigating the much reported assassination services that became intertwined with the dark market's general reputation, and specifically with Dread Pirate Robert's alleged attempts to silence blackmailers.
Bridges was brought in as the computer forensics expert in this case, and the criminal complaint sheet now filed against the agents elaborates on how their positions brought them into the digital currency ecosystem. The sheet reads:
“In this capacity, FORCE was the lead undercover agent in communication with DPR, the owner, administrator and operator of the Silk Road website. BRIDGES was the computer forensics expert on the Baltimore investigation. In their capacity as members of the Baltimore Silk Road Task Force, both FORCE and BRIDGES had significant exposure to and developed expertise in the digital currency known as Bitcoin.”
Although this investigation was separate from the main drug trafficking operation against the site and its allegations remain pending to this day, the story of DPR's attempts to have his opponents murdered would go on to be used extensively during Ulbricht's trial.
The scene that unfolded in front of Force and Bridges however was probably unlike any they had ever encountered in their previous work on federal investigations.
It was 2012 when the case opened and the agents stepped into a world in which Ulbricht was making millions of dollars through the Silk Road marketplace. Unlike conventional drug trafficking however, he would have appeared to remain completely divorced from the criminal gangs, and drug lords that normally control this space through violence and intimidation.
Years of tracking money laundering through off-shore accounts and front companies must have seemed redundant as the agents learned more about Bitcoin's decentralized and apparently anonymous technology. Seeing the early 2013 price spike to US$238/BTC must have excited the two investigators just as much as it did the rest of the Bitcoin community.
The criminal charge sheet in the case shows just how large the volume of funds involved in the Silk Road must have seemed to the pair, as it became too tempting for Force to resist.
“FORCE sought to extort DPR by seeking monetary payment, offering in exchange not to provide the government with certain information if DPR paid $250,000.”
Even the payments Force received for his undercover role on the Silk Road site must have appeared irresistible to a federal agent making around US$90,000.
“FORCE stole and converted to his own personal use a sizeable amount of bitcoins that DPR sent to FORCE in FORCE's official undercover capacity and rather than turning those bitcoin over to the government, FORCE deposited them into his own personal accounts.”
The excitement surrounding Bitcoin at the time seems to have also swept Bridges along with it. Following the arrest of Brian Richard Farrell, the Task Force gained access to a Silk Road's administrator account. The complaint sheet reads:
“On January 25, 2013, the Silk Road website suffered a sizable theft of bitcoins, bitcoins which were moved into Mt. Gox […]. On February 12, 2013, BRIDGES formed and registered a personal liability company called ‘Quantum International Investments, LLC (Quantum)’ […]. Between March 6, 2013 through May 7, 2013 BRIDGES' Quantum Fidelity account in the United States received nine wire transfers from Mt. Gox totaling approximately $820,000.”
Both agents found themselves involved in Bitcoin at a time when a large number of individuals were getting incredibly rich. Many made money through honest investments and trading, but even those involved with criminal activity appeared untainted by the normal criminal operations. Like Bridges and Force, these individuals were also sitting behind a computer screen each day, the difference being that DPR and other users weren't receiving a federal salary.
Despite knowing how the Silk Road investigation was proceeding however, the scale of available money seems to have blinded the agents to just how traceable, open, and trustless, the blockchain really is as it can be used to view to historic transactions, in addition to the ease, with which governments can link wallet addresses to individuals through the monitoring of web traffic.
Ironically, the same chat logs that have put Ulbricht behind bars are now unraveling a web of false identities Force and Bridges used to extort DPR.
The blockchain still holds every transaction the agents made as they scrambled to remove funds from the Silk Road to their personal wallets while the false companies and traditional money laundering the pair attempted still links their records to the stolen funds.
Force allegedly tried to cover his tracks by using his federal badge to demand BitStamp, the exchange he has used, to delete his transaction history. The site had repeatedly blocked Force's account due to his suspicious activity and extensive use of TOR.
Heightening the sense of federal links in the digital currency space, it has also emerged that the Assistant Attorney from the Department of Justice who filed the complaint again Bridges and Force is Kathryn Haun, who took part at the Miami TNABC conference held in January. Her conference bio highlights her credentials for the new role working against the corrupt agents:
“She has investigated and prosecuted hundreds of violations of federal criminal law in U.S. courts, with a particular focus on transnational and organized crime syndicates, money laundering, virtual and digital currency providers.”
Despite many government's repeated accusations that digital currencies are hot-beds of money laundering, the truth is that even two federal investigators armed with an inner knowledge of how such investigations work, were unable to effectively use Bitcoin to move and hide funds anonymously.
Ulbricht's lawyer Joshua Dratel has now issued a statement voicing his outrage that none of this evidence was allowed as admissible in Ulbricht's trial, arguing that “the government deprived the jury of essential facts, and Mr. Ulbricht of due process.”
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
But for now, with Ulbricht already convicted and the trial of Bridges and Force able to get underway, many in the community are now beginning to question just how involved agents like these two are in cases such as the infamous implosion of Mt. Gox. Interestingly enough, the information that Mt. Gox CEO Mark Karpeles was under investigation in relation to the Silk Road was a key bargaining chip used by Force when extorting DPR, and it was Bridge's signature that seized US$5 million from the exchange in August 2013.
Six months later the site closed following the loss of US$620 million, and it's only now with Bridges
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Two federal agents who took part in the Silk Road trial have been charged with fraud for allegedly embezzling […]