Why The Case Against The Man Accused Of Running Silk Road Is Unprecedented

The trial of the alleged creator of an online marketplace for illicit goods began began yesterday in Manhattan after many delays over the past few months.

The case is being hailed as the most significant — and maybe even the first — of its kind.

The reasons this case is unprecedented:

  • It’s the first time the government will be using the term “money laundering” to include digital currency.
  • It will be one of the first times an individual is charged for building a website. The trial could open the door to criminal liability for web hosts, who are supposed to be protected by the 1996 Communications Decency Act.

The challenge for the prosecution will be to prove that 30-year-old Texas native Ross Ulbricht is in fact Dread Pirates Roberts — the creator and owner of the black market e-commerce site Silk Road when the site was shut down by the FBI in 2013.

Ulbricht has been charged with hacking, money laundering, and narcotics trafficking. He has pleaded not guilty to all of the charges, and continues to deny that he is Dread Pirate Roberts.

Opening statements were fiery, and, on the defence’s side, surprising. Ulbricht’s team, led by defence attorney Joshua Dratel, conceded for the first time that Ulbricht was in fact the founder of Silk Road, but had long since given up control of the site when he was arrested back in October 2013.

The prosecution, led by Assistant U.S. Attorneys Serrin Turner and Timothy Howard, begged to differ, claiming that Ross was caught red-handed, “literally with his fingers at the keyboard, running the Silk Road” when agents surrounded him at the San Francisco Public Library, Forbes reported yesterday.

Ross ulbrichtSpencer Platt/Getty ImagesSupporters of Ross Ulbricht, the alleged creator and operator of the Silk Road underground market, stand in front of a Manhattan federal court house on the first day of jury selection for his trial on January 13, 2015.

In today’s hearing, the prosecution seemed intent on emphasising Silk Road’s dedication to anonymity. The site couldonly be accessed via Tor — an web browser that hides users’ IP addresses, allowing them to surf the web anonymously — andusers were never required to reveal any personal information. This meant that anyone, regardless of their age or their country’s laws, could buy or sell illicit goods and remain untraceable by law enforcement officials.

This as-yet unanswered question of how far the government may go to uncover Internet users’ identities has given the defence a potential advantage. If it turns out that the FBI infiltrated Silk Road’s servers in a warrantless hack, the defence could argue that such a hack is tantamount to an illegal search. For its part, the prosecution has claimed that they simply had a “lucky break” when an error in the Silk Road page leaked the IP address linking Silk Road servers back to Ubricht.

Because all Silk Road transactions were made anonymously using Bitcoin, the government has also expanded the statute of money laundering to include digital currency for the first time. In today’s witness testimony, Homeland Security agent Jared Deryeghiayan noted that Silk Road gave vendors the option of selling their bitcoins for cold hard cash — a liquidation process the prosecution described as laundering.

Silk roadScreenshotA screenshot showing the various drugs available for purchase on Silk Road, including MDMA and marijuana.

Ulbricht’s defence, who objected to the use of this term, tried to get out of money laundering charges last year by claiming that Bitcoin is not real money, but thejudge didn’t buy it, ruling that “Bitcoins carry value — that is their purpose and function — and act as a medium of exchange.”

Shortly after his arrest, Ulbricht was accused of hiring assassins to murder 6 targets that threatened the existence of Silk Road. The prosecution — led by Serrin Turner — alleged that files were collected from Ulbricht’s laptop detailing his plans to kill staff members he suspected were stealing money or leaking clients’ information. Ulbricht was denied bail on the basis of these accusations, but the murder charges have since disappeared.

Ulbricht’s supporters worry that his conviction could open the door to criminal liability for web hosts, thereby curbing online freedom of speech. Ulbricht’s family has said that Ulbricht should be protected under the 1996 Communications Decency Act, which protects ISPs from liability for the user content they host in order “to preserve the vibrant and competitive free market that presently exists for the Internet…unfettered by Federal or State regulation.”

The prosecution has said that it will be calling as a witness an old college friend of Ulbricht’s to whom he allegedly bragged about building and running Silk Road.

Ulbricht, for his part, looked to be in good spirits, frequently turning around and smiling encouragingly at his mother who was seated towards the back of the courtroom.

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