Silk Road Agents Charged With Stealing Bitcoin

The US Justice Department said on Monday it is charging two former federal agents accused of stealing funds during the investigation of Silk Road, an online marketplace best known for selling drugs.

Silk Road was shut down in October 2013 with the arrest of Ross Ulbricht, its alleged founder, known online by the pseudonym “Dread Pirate Roberts”. Ulbricht was found guilty in February of charges including conspiracy to commit drug trafficking and money laundering, but an appeal is pending. Several others involved with the site as administrators have also been convicted.

Fraud and extortion

The site is estimated to have generated about $200 million (£135m) in sales using the digital currency Bitcoin, with Ulbricht allegedly earning $18m in Bitcoin from the operation.

Former Drug Enforcement Administration agent Carl Force, 46, and former Secret Service special agent Shaun Bridges, 32, were part of the Baltimore-based federal task force investigating Silk Road and, in a criminal complaint filed in San Francisco federal court, were accused of offences including wire fraud and money laundering.

Force had a leading role in the probe, being the primary undercover agent tasked with communicating with “Dread Pirate Roberts”.

However, prosecutors said he also created unauthorised pseudonyms to communicate with “Roberts”, allegedly using them to extort $250,000 from Ulbricht and offering to sell him information about the government’s investigation for $100,000.

Force “developed additional online personas and engaged in a broad range of illegal activities calculated to bring him personal financial gain”, prosecutors said in the complaint.

Force also allegedly stole $90,000 in Bitcoin that Ulbricht had paid him in a transaction officially sanctioned as part of the investigation.

Bridges, for his part, is accused of diverting more than $800,000 worth of Bitcoin, part of a fund he controlled as part of the probe, into Mt. Gox, a Japanese digital currency exchange that filed for bankruptcy in February. He then allegedly wired funds into a personal account in the US only days before seeking a $2.1m seizure warrant for Mt. Gox’s accounts.

Investigation ‘lacked integrity’

Force was arrested in Baltimore on Friday and appeared in court there on Monday, while Bridges surrendered on Monday and was released from custody after appearing in a court in San Francisco. Bridges’ lawyer said he maintains his innocence, while Force’s attorney declined to comment.

Ulbricht’s lawyer said in a statement that the charges indicate the investigation’s lack of “integrity”, noting that prosecutors kept the investigation of the agents secret for nine months before revealing it only five weeks before trial.

“It is clear from this complaint that fundamentally the government’s investigation of Mr. Ulbricht lacked any integrity, and was wholly and fatally compromised from the inside,” he stated.

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