Digital Currency Perspectives
July 6, 2015

Lines Crossed: From Enforcing to Breaking the Law

Last week, former Drug Enforcement Agency (“DEA”) agent, Carl Force, pleaded guilty to charges of money laundering, obstruction of justice, and extortion while investigating Silk Road’s illicit activities.  Force’s plea follows the guilty plea of Shaun Bridges, former Secret Service agent, who also used his insider role to pilfer hundreds of thousands of dollars’ worth of digital currency during the Silk Road investigation.

By way of background, Silk Road was a notorious black market for narcotics that used seemingly untraceable digital currencies (i.e., Bitcoins) to facilitate illegal activities on the “dark web.”  It was accessed via an “onion” address (allowing users to remain anonymous) and flourished until 2013 when the FBI shut down the marketplace and arrested creator and mastermind, Ross Ulbricht.  During its operation, Silk Road generated over $213 million in revenue, and Ulbricht, operating under the pseudonym Dread Pirate Roberts, took millions of dollars in commissions.  A jury quickly convicted Ulbricht of seven crimes, including, narcotics and money laundering conspiracies, and a “‘kingpin’ charge usually reserved for mafia dons and drug cartel leaders.”  Ulbricht was sentenced to life in prison.

Force’s recent guilty plea further taints the Silk Road story with corruption.  As the lead agent in charge of investigating and communicating with Ulbricht, Force defrauded the U.S. government of hundreds of thousands of dollars by extorting Bitcoin from Ulbricht and selling him information in exchange for Bitcoin.  Specifically, using “Nob” (his official undercover moniker) and “French Maid,” Force sold Ulbricht information that he allegedly acquired through a corrupt government agent.  Using his unsanctioned “Death from Above” handle, Force used information from the investigation to extort Bitcoins from Ulbricht. Without DEA approval, Force also invested in CoinMKT and entered into a $240,000 contract with 20th Century Fox Film Studios for a movie about the Silk Road investigation.

Adding to the web of corruption, Bridges, on the team with Force, utilized his computer forensics expertise to divert over $800,000 in Bitcoin to a personal account.  The details of his plea agreement have yet to be publicly disclosed.

In the end, Ulbricht fashioned “‘the most sophisticated and extensive criminal marketplace on the Internet,’” and two former United States agents, tasked with investigating the drug market, sought personal enrichment by exploiting the very secrecy that made Silk Road so difficult for law enforcement officials to penetrate.  With illegal conduct from both the criminal and the enforcement sides, which story of Silk Road will be remembered?