Why the FBI Can’t Get Its Hands on Silk Road Kingpin’s $80 Million Hoard

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Sean Gallup / Getty Images

The FBI made headlines last week when it announced that it had shut down the illegal online drug bazaar Silk Road and arrested its alleged operator Ross Ulbricht. According to the FBI’s complaint, the arrest led to the seizure of $3.6 million in bitcoins—the virtual currency Silk Road users employed to buy and sell illegal drugs online.

Though the FBI’s seizure was the second most valuable act of bitcoin confiscation ever, the Feds were actually unable to appropriate the vast majority of bitcoins associated with the Silk Road enterprise, Ulbricht’s personal stash. According to Forbesroughly $80 million worth of bitcoins—the personal fortune Ulbricht amassed by running Silk Road—remains untouched by the government

So why can’t the FBI get its hands on the money? The reason has to do with the design of bitcoins themselves. A bitcoin cannot be transferred  from one user to another without the first users “private key,” or password to verify the transaction. Unless Ulbricht hands over his password, the FBI will be unable take possession of the money. But can the government force Ulbricht to hand over a password? Is it conceivable that even if Ulbritch is convicted that the government could end up never seizing his riches?

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According to Susan Brenner a professor of law and technology at the University of Dayton, Ulbricht could be protected by the fifth amendment from having to hand over the key to his  wealth. The 5th amendment protects citizens from being forced to incriminate themselves, and producing a password that enables access to these coins could be construed as an act of self-incrimination. Brennan explains:

“In order to take the 5th Amendment privilege and refuse to produce something, the act of producing it must communicate that (i) it exists (which may seem obvious, but sometimes producing the thing says it exists), (ii) you have it (or have control over it) and (iii) this is the thing you were ordered to produce (authentication . . . i.e., this is my gun, my money, etc.). The Supreme Court has held that the act of producing something is NOT testimonial if the government knows all three things, i.e., if they all are a foregone conclusion.”

In other words, if the government already knows conclusively that the bitcoins are Ulbricht’s, then he will be unable to claim 5th amendment privilege. He must show that handing over the password somehow makes it evident that the bitcoins are his. Brennan continues:

“If I represented Ulbricht, I would argue that while the generic existence of the bitcoins is a foregone conclusion, his “possession” of them is not . . . and that by providing the password would conclusively establish that they belong to him, which would mean that he would, under the act of production as testimony standard, be “testifying” and, since the testimony would incriminate him, he could take the 5th Amendment.”

So what if Ulbricht is denied 5th amendment protection? Can the government ever actually force Ulbricht to give up his stash? Well, no, but Ulbricht can be held in contempt of court and held in jail indefinitely for defying its order. Then again, Ulbricht is accused of operating perhaps the most vast and far-reaching illegal drug operation in history, so he might be headed to jail for a very long time regardless of whether or not he decides to hand over his bitcoins.

Given this reality, and Ulbricht’s disdain for all forms of governmental coercion, it’s possible he refuses to hand over the loot even if he’s denied 5th amendment protection.

31 comments
BobFromDistrict9
BobFromDistrict9

Find the site, hack it. If you can't get the money wipe out the site and let it all go away. 


RichardRosefsky
RichardRosefsky

The money is not that important.

Let him keep it; and give him a life sentence in a labor camp with no outside or internet access.

Time to dispose of drug dealers for good; nobody misses them but the junkies.



Snerdguy
Snerdguy

Depending on how vindictive Ulbricht is, he could use his wealth to wreak havoc on those who convict him. 80 million dollars can get you a lot of friends in very low places. Plus, bitcoins are deliberately hard to trace, even for the government. So, he need only pass on his confidential password to an associate and that person can arrange for a wide array of hack attacks on databases and destroy large amounts of data. Considering that he tried to arrange a couple of hits in the past, I would not put it past his associates to arrange a hit on a judge or other official that aids in convicting him. I think that is what has the government deeply worried. If they can't get to the wealth, it could be used to wage war on them.

as12andrew
as12andrew

The likely scenario given his intelligence and foresight is that he has multiple wallets and his money is spread out over different accounts. It is also likely that he has a "fall" account specifically for such a case where he may be denied his rights and forced to give up passwords. It would probably contain a decent amount of B to look legit but not nearly his nest-egg.... I'm sure he was aware that things would eventually catch up with him. Given his nature I wouldn't be surprised if he is still just as much enjoying the thrill of the chase/game now as he was before. Now he will have a totally public platform upon which to further his beliefs and face off against the Govt. and win. He could also fabricate stories regarding a made up applications that requires him to sign in every-so-often for the stash to stay fresh or else erase or self destruct etc... you can make up any story that you want in court it's how the game is played by both sides!

stooge75
stooge75

he's fubar'd. he WILL end up giving them the key or instead of 12yrs he will get 32 yrs to life. SIMPLES!!

stooge75
stooge75

how would it be funny like?

discordian23
discordian23

It would be funny if he served his sentence, got out and then was able to retrieve the entire $80 million.

indigo.frank
indigo.frank

Well with 80.000.000 you can get a lot of protection , the fBI lost , this is the new reality , 

without private key no bitcoins.

 

JohnGalt2013
JohnGalt2013

This is another article based completely on that one line in the Forbes article. I don't believe the FBI knows how much money he has. The 600,000 bitcoins is the revenue of the site, not the profit. He probably spent most of that on expenses when bitcoins were worth 1/100 of what they are worth now.

arvote
arvote

It would give this case an interesting twist if he claimed that he accidentally deleted his private keys and the coins are forever lost.

Firstly, this is a plausible claim since it happened to a lot of other bitcoin users, and secondly, it's a claim that is impossible to disprove, even if it is false.

Younai
Younai

What the DA is going to do is offer a deal. Give us the password to your 80 million and we will give you only 10 years instead of 50. 

DrDavidStephenson
DrDavidStephenson

I bet he will leverage his fortune to get a sweet deal in a federal prison camp somewhere and do a short bid. With the feds, money always talks.

ZipReeper1
ZipReeper1

surely nsa eavesdroppers would have the password

HarryJamesbr
HarryJamesbr

Well, if he's bedevilled he's traveling to be in bastille until the apocolypse, so if I were the Dept of Justice, I'd just leave the 80mil sitting on his server on a angle just alfresco his corpuscle area he can accumulate an eye on it. mensagens para celular It's abundance precioussssssss......

xcsler
xcsler

I don't think that most people realize that if Ulbricht shared his Bitcoin wallet password with his parents, or anyone for that matter, they could transfer the $80,000,000 worth of bitcoins right out from under the Feds noses and there is nothing they could do about it. At the moment, the Feds don't have any more control over that money than you or me. While lost on many Americans, this feature of Bitcoin is likely appreciated by Argentinians and Cypriots.

benzschoen
benzschoen

I don't believe for a minute this guy has $80 million. No one with that much dough would be living with roommates, even if it would reduce suspicion. 

OzarkGranny
OzarkGranny

Bitcoin ... a financial system the government can't regulate, tax, or control.  Very interesting.

Asklepios
Asklepios

Well, if he's convicted he's going to be in prison until the apocolypse, so if I were the Dept of Justice, I'd just leave the 80mil sitting on his server on a stand just outside his cell where he can keep an eye on it. It's mine precioussssssss......

arvote
arvote

@ZipReeper1  

No, not "surely".  Not if he generated his password offline, like any sensible person with that many coins would have done. NSA is just as powerless to eavesdrop on offline activity as anyone else.  Unless they were able to hide cameras in his house since the beginning of Silk Road 2 years ago, they are not likely to know that password.

ozette11
ozette11

@HarryJamesbr He will beat the charges my bitter friend. He has the best attorney’s. The DEA, FBI are grasping at straws. Yes they shut down the site. but more have already appeared. It is called freedom. I am sure you must like the NSA listening to your phone and checking your emails right??

pyrodice
pyrodice

@xcsler That's the interesting part though, since the blockchain is public domain, if anyone else DOES transfer the coins away, they can track them again.  The trick would be to do it through a perfect proxy to a non-extradition country, preferably through a third party who doesn't know what they're doing.  Even then the government would know it's happened, they just wouldn't be able to do anything about it.

DrDavidStephenson
DrDavidStephenson

@benzschoen your dead wrong. There are some people for whom money is just a tool that does not compare to the thrill of getting over on the government and getting away with an almost perfect crime.  

213iuoywedd
213iuoywedd

@Asklepios You have to realize that all bitcoins in existence are distributed over the entire internet on computers from people who run the Bitcoin software. You can spend them anywhere you have access to a PC. All you need is the password (private key).

BobFromDistrict9
BobFromDistrict9

@indigo.frank @ZipReeper1  

 I've seen that claim many times, Yet it fails so very often. One operator offered a very large reward, 6 or 7 figures, and his encryption was broken within days, by private operators using a large array of processors. 

indigo.frank
indigo.frank

@213iuoywedd @Asklepios exactly he can pass the password to anybody and its very possible that he already did , the fbi can not steal DPRs money , necause there is no "trusted" trirth party as a bank , in the protocol so there is no way to take the btc without concent of the user.