The Silk Road Kingpin and the Legal Implications of His Conviction

BY PAT MCBRIDE — On February 4, 2015, Ross Ulbricht was convicted on seven federal charges ranging from money laundering and hacking to trafficking forged identities and distribution of narcotics. These charges could carry a sentence of up to life in prison. Ulbricht was convicted of being the founder and kingpin of the Silk Road Bazaar—a website that allowed people the ability to anonymously buy commodities such as illegal drugs or hacking services. While the weight of one man’s freedom was at stake, the trial could be remembered for the many other legal issues involved: such as bitcoin’s legal status as money, anonymity on the dark web, and constitutional rulings.


This was one of the first trials in which a virtual currency played a main role in a money laundering prosecution. Judge Katherine Forrest, U.S. District Court Judge for the Southern District of New York, rejected the argument that Ulbricht could not be prosecuted under a money laundering statute because bitcoin is not technically money. Judge Forrest made this ruling despite the IRS and U.S. Treasury’s Financial Crimes Enforcement Network’s (FinCEN) determination that bitcoin isn’t a “fund” or “monetary instrument,” which are the terms used in the money laundering statute. Ulbricht’s attorney argued that Silk Road should fall under the “Crack House Statute,” which holds landlords accountable for knowingly allowing tenants to sell drugs from the property that the landlord owns. However, Judge Forrest saw Ulbricht as an active participant in commanding and controlling the enterprise, not as a disinterested landlord or service provider.


The anonymous features that the software Tor and digital currency bitcoin provided were some of the main reasons Silk Road was able to operate for almost three years. Forbes estimates that Ulbricht made around $80 million in bitcoins, an amount that remains largely untouched by the government. In order for bitcoins to be transferred from one user to another, the transaction requires that the first user have his or her “private key” to verify the transaction. Typically, the government is blocked by the Fifth Amendment when trying to compel defendants to give access to their passphrases and private keys. If the right against self-incrimination protects Ulbricht from turning over his private keys, he may be able to keep the government from accessing his new found wealth. This case may have large implications regarding the compelled disclosure of any digital property that can be construed as self-incriminating.


Ulbricht’s lawyers and privacy supporters in the community stand firm that the FBI violated his Fourth Amendment rights when they seized the Silk Road server in Iceland without a warrant. The government responded to these illegal hacking claims by alleging that a flaw in the Tor software leaked the server’s IP address. However, Judge Forrest dismissed the Fourth Amendment claim on what many see as a technicality. She ruled that because Ulbricht never demonstrated that he owned the server, he could not claim that his privacy rights were violated. This could have been an important moment in privacy rights because the prosecution was claiming that the government has the right to hack into websites. If the court had ruled that the search and seizure was unreasonable, it would have made Ulbricht’s conviction very unlikely because of the fruit of the poisonous tree doctrine.


The trial and ultimate conviction of Ross Ulbricht is a mixed bag for law enforcement. It gave much publicity to the dark web and two newer websites, Agora and Evolution, are already flourishing. One of the ways the new sites will try to combat law enforcement is to put their servers in countries that are hostile to the U.S. It will be interesting to see how Fourth and Fifth Amendment doctrine adapts as the government tries to combat new criminal activity that uses newer and even more sophisticated technologies.

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