Silk Road Prosecutor Says IRS is Wrong, Bitcoin is Money

Ross Ulbricht- Alleged Owner of Silk Road

Eric Blair
Activist Post

The alleged developer of the dark market Silk Road, Ross Ulbricht, is facing up to 30 years in prison for computer hacking, drug conspiracy and money laundering charges. Most publications have written him off as guilty, but recent arguments highlight how weak the prosecution’s case actually is.

When the Internal Revenue Service issued tax guidance stating Bitcoin is not money, Ulbricht’s attorney immediately filed a motion to dismiss money laundering charges. The argument being if bitcoin is not considered a “monetary instrument”, money laundering charges can not apply.

However, yesterday the prosecutor responded to the motion to dismiss by directly contradicting the IRS guidance claiming that bitcoin fits “comfortably” in the government’s “broad definition” of “funds”.

“Bitcoin transactions comfortably fit within the broad language of the definition,” wrote Assistant U.S. Attorney Serrin Turner. “as Bitcoins are ‘funds’, and Bitcoin transactions, which are conducted via the Internet, therefore involve ‘the movement of funds by wire or other means.’”

Turner’s best legal argument that bitcoin transactions fall “within the broad language of the definition” seems flimsy compared to IRS’s official guidance. It is obvious to anyone who uses bitcoin that it acts as a currency, but if the U.S. government claims otherwise, then money laundering charges should be dropped or the IRS must reconsider bitcoin’s classification.

This is not the prosecution’s first sign of weakness. Early on the FBI and prosecutors loudly accused Ulbricht of trying to hire hitmen. Yet the formal “murder for hire” charge was quietly dropped from the case, showing the prosecution didn’t have quite the level of evidence it claimed it had. Character assassination without facts is par for the course for prosecutors yet the establishment media continues to ignore this development.

Computer hacking is another dubious charge in Ulbricht’s case.  Pretty much any “unauthorized” computer innovation or activity may fall into this category as we’ve seen with the tragic case of Aaron Swartz and the recently exonerated Andrew “weev” Auernheimer. Both accessed public content via the Internet and prosecutors sought sentences equivalent to rape and murder. Swartz, facing $1 million in fines and 35 years in prison, committed suicide two days after the prosecution denied his lawyer’s second offer of a plea bargain.

Silk Road was a first-of-its-kind website that allowed users to engage in anonymous commerce by cleverly combining dark web hosting, the Tor browser, and bitcoin. Additionally, its unique automated escrow feature allowed users to achieve trust without revealing their identities. Because of its exotic anonymity features, the feds impulsively assume computer hacking or fraud was somehow involved except for one tiny detail – there is no victim of the alleged hacking. It seems like a vague tack-on charge used to justify forcing decades in prison to a non-violent offender.

Even the drug conspiracy charge is weak despite the website’s obvious use, as the prosecutor’s best argument is that current law is “expansive and adaptable”.  The law they hope is adaptable is the the Communications Decency Act, §230(c), passed by Congress, which says a website owner is not legally responsible for illicit actions of its users.

But Turner disagrees: “It hardly matters that Ulbricht’s conduct took place on the Internet,” he argues. “The federal criminal laws are expansive and adaptable, and readily reach his conduct online to the same extent as if it occurred on the street.”

In other words, the prosecution says Ulbricht should be treated like the “kingpin” of a violent drug cartel even though it appears that he merely ran an ecommerce website — a rather insignificant charge that Ulbricht has pleaded not-guilty to.

Ulbricht’s defense says the Communications Decency Act shields him from cartel-like charges and to say it doesn’t is a threat to freedom and privacy for the entire Internet:

For example, is Craigslist responsible for the murders or prostitution occurring through the site? Can Google be charged with terrorism because of jihadist recruitment on Google? Can eBay be held liable for stolen goods sold there? The law says no, it can’t. 

The intention of §230(c) is to support a free Internet by protecting providers from civil liability for what happens on their sites. This includes ISPs that take an active — or even aggressive — role in making content available. The point is not to protect illegal activity, but to safeguard Internet freedom, entrepreneurship and commerce, as well as the First Amendment, our precious freedom of speech. Ultimately, it is to keep the Internet the great, free-wheeling phenomenon that we all enjoy, where ISPs can host sites without fear.

So here’s a brief recap of where the prosecution’s case stands:

1. The most egregious initial charge of soliciting murder-for-hire fails to appear on formal charges
2. First, the prosecution has to prove that Ulbricht is the “Dread Pirate Roberts” which, to date, no evidence suggests he is accept an admitted ownership of a large sum of seized bitcoins.
3. To prove Ulbricht was involved with money laundering charge, they first have to prove bitcoin fits a “broad definition” of money in the face of official government decree that it’s not. Then they have to prove laundering when it appears no bitcoins were ever moved into dollars.
4. Next, to prove Ulbricht was a drug conspiracy “kingpin” they have to overturn the Communications Decency Act which will ruin the free Internet, and then they have to prove that “dealers” worked for him.
5. Finally, computer hacking needs a victim and there is no victim, unless you count the FBI stealing users’ assets after the fact.

Source: http://www.activistpost.com/2014/04/silk-road-prosecutor-contradicts-irs.html