Ulbricht: Day two Onwards & The Alleged Mt. Gox Connection

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Posted by: Allen Hoffmann, JD

January 19, 2015

More articles about the Silk road trial at this tag: #SilkRoadTrial

There’s no getting past it – Its been an interesting few days in the Pearl Street, with the trial of Ross William Ulbricht now well under way, and a few more bombshells being dropped inside the court room, and a couple of potential revelations outside of it.

“Cirrus” was an undercover DHS agent, and a couple of other names were the same guy, too.

Earlier speculations that the user account of “cirrus” was utilised by an undercover LE agent have now been publicly confirmed. As at July 2013, the “cirrus” account had been acquired or otherwise compromised, and was being paid for his time to boot. Day one saw the basics of his investigative efforts spilled; 52 buys of drugs from 10 different countries using Silk Road to make the purchases, with all bar one package delivering him drugs, and taking the jury through the basics of how both BTC and the Silk Road communities themselves, worked. Day two saw details of the methods used to engineer the temporal and physical proximity correlations needed to mark Ross Ulbricht as the Dread Pirate Roberts spelled out in detail, as well as giving us all a narrative of the day on which Ulbricht was arrested and his laptop seized, with a Pidgin chat open between the agent and Ulbricht on Ulbricht’s laptop. It was revealed he had acquired a buyer account under the name “dripsofacid” and also had a seller account under the name “SuperTrips” before ultimately acquiring the “Cirrus” staff member identity.

The Department of Homeland Security’s man at the centre of the subterfuge, Jared Der-Yeghiayan, is a TSA special agent. Why was a TSA SA involved at all, you may ask? Surely, DHS has other staff it could call on for an investigation of this magnitude? What about the DEA? Its unlikely that his involvement flows directly from being first on the case seizing MDMA tablets from letter stream mail in 2011… Maybe its to do with him being the son of US federal court judge Samuel Der-Yeghiayan.

Sidebar – I wouldn’t think it idle or baseless to speculate that the same “cirrus” identity on the original Silk Road, now publicly acknowledged as being federal agent, may have been the last man standing at Silk Road 2.0 for reasons other than being skilled in evading arrest.

DHS regarded Mt. Gox’s founder as a ‘potential’ DPR…

Things got more interesting one day 3, when Der-Yeghiayan testified under cross examination from defense counsel that various URLs which he alleged were related to Silk Road were linked to Mark Karpeles, of Mt. Gox fame and infamy had caught investigators’ attention, and went so far as to admit that DHS had even considered him to be a possible suspect for the DPR identity up until less than two months before Ulbricht’s arrest owing to the way in which he wrote, and his technical expertise. Ulbricht’s name didn’t come up until the IRS thought he matched their target profile around September 10, 2013. The implication for the defense? Without actually getting up and saying ‘Mark Karpeles was DPR’, counsel Joshua Dratel has managed to drag the spectre of doubt to the surface, and is leaving the inference to linger in the minds of the jury.

.. and even if he wasn’t DPR, Karpeles may have known who was.

Things were getting contentious enough Friday afternoon that the jurors were ordered out when the defense sought to drop yet another bombshell – that during a separate LE investigation into Karpeles in Baltimore, Karpeles had sought to make a deal to avoid the filing of unspecified charges in the future… in return for identifying DPR. Somewhat unsurprisingly, Karpeles turn issued a public statement which denied that he was ever DPR – doing so, amusingly, via Twitter:

but after being so comfortable with making a public comment on the issue of whether or not he was DPR, Karpeles has been noticeably reluctant to either confirm or deny the occurrence of this meeting. The court adjourned for day 3 before the matter could be fully resolved, and will reconvene Tuesday following MLK day.

Outside court, “Internet detectives” are uncovering material which is not painting Ulbricht in a positive light.

Outside the court room, people are starting to get interested in the Ulbricht case and are doing digging of their own, and it would seem that internet detective is becoming a popular pass time for some parties who are doing the defense case no favors at this point. In one instance, Forbes magazine, a reputable media outlet which was only too happy to interview the shadowy DPR way back September of 2013, is now champing at the bit to play internet detective, seeking to link a $300k transfer of BTC from the holdings of the Silk Road market place to Ulbricht in August of 2013. It may bear asking why someone who claimed publicly, in the first day of what is to be a media circus of a trial, to have severed ties with the marketplace after its founding, would be in receipt of this not insubstantial amount of money from the marketplace in August of 2013..

Whilst its not new information, it is instructive to view this material in the context of the story which the defense is running with – that yes, Ross Ulbricht created Silk Road, but he had quit running it a long, long time ago. Does any of this matter for the purposes of the trial? Not as yet, its not evidence which we’ve seen led.

What’s next for the case?

Next on the witness list for the prosecution is IRS CID special agent Gary L. Alford, the guy who stripped Silk Road’s asset in the wake of the seizure, before DPR had an alleged real name. We’ve learned that Ulbricht came to investigative attention thanks to the work of Alford, who when he isn’t busy with his duties on the New York OCDETF and slamming BTC exchangers doesn’t mind advertising himself as an expert in chasing cryptocurrency matters. In an instructive lesson to all of you would-be (and probably already, sometimes) tax cheats out there, when it comes to protecting its revenue stream, don’t ever forget – the Government plays for keeps. We’ll be hearing from Alford on Tuesday, most likely as soon as the admissibility of the Karpeles meeting is resolved, for insight into how Ulbricht came to be targeted, and the pathways taken by Silk Road BTC.

The pathway to reasonable doubt is already well underway.

The prosecution needs to prove Ulbricht’s guilt, and all his defense needs to do is create reasonable doubt to secure his acquittal. Are there more names to throw at the jury as alternate DPRs? Time will tell. The prosecution needs to prove beyond reasonable doubt that Ulbricht is ‘the’ Dread Pirate Roberts. Within the space of three days, Josh Dratel for the defense has already all but given the jurors ‘a’ feasible potential Dread Pirate Roberts, by name, to think about, in the form of Karpeles. We’re only in the opening days of what could be a month long trial, and already, the defense is making life appreciably difficult for the prosecution from a legal perspective, in terms of securing a conviction. Let’s wait and see what the remaining witnesses for the prosecution have to say to sway the jury’s opinions.

Updated: 2015-01-19