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Silk Road

  • June 24, 2017
  • Clayton Rice, Q.C.

It was a case that reads like a Mickey Spillane novel – big money, corrupt undercover agents, drug deaths and commissioned murders.

On February 4, 2015, a Manhattan jury convicted Ross Ulbricht on seven counts including conspiracy to distribute narcotics, money laundering and a kingpin charge arising from his creation and operation of a website called Silk Road under the username Dread Pirate Roberts. On May 29, 2015, Judge Katherine Forrest of the United States District Court for the Southern District of New York sentenced Ulbricht to life imprisonment without parole. The verdict didn’t seem to surprise anyone. The sentence did.

Silk Road was an anonymous drug emporium using the Tor network that also sold false identification documents and computer hacking software. Business was conducted in Bitcoin digital currency. Between 2011 and 2013 thousands of vendors used Silk Road to sell $183 million worth of drugs and other goods and services. Ulbricht earned millions in profit from commissions.

One of the tactics used to expose Ulbricht as Dread Pirate Roberts was to find Silk Road administrators, obtain their cooperation, take over their usernames and chat with Dread Pirate Roberts using those identities. Government agents also created their own usernames and posed as drug dealers. One of the main witnesses, Jared Der-Yeghiayan, a member of the Silk Road support staff before the government took over his account, used Silk Road’s messaging system to communicate with Ulbricht and other administrators as Cirrus. Cirrus also gave the government access to the staff chat which was a separate program allowing Ulbricht to communicate only with his employees.

Secret Service Special Agent Shaun Bridges and DEA Special Agent Carl Force were assigned to the Baltimore branch of the two pronged investigation. Both Bridges and Force used their undercover access to exploit Silk Road for their own benefit. Bridges used an administrator account to change other users’ passwords, empty their Bitcoin wallets and keep $350,000 in Bitcoins in offshore bank accounts. Force purloined $190,000 and offered to sell information to Ulbricht about the investigation. They eventually pleaded guilty to money laundering and obstruction of justice. Bridges received a 71 month sentence and Force was sentenced to 78 months.

On May 31, 2017, the United States Court of Appeals, Second Circuit, released the 139 page opinion of Judge Gerard E. Lynch, writing for a unanimous three member panel, dismissing Ulbricht’s appeal from conviction and sentence reported as US v Ross William Ulbricht, Case No.: 15-1815-cr. Judge Lynch concluded, at pp. 83-4, that the agents’ corrupt behaviour was not exculpatory. The relevant question was whether any evidence was tainted by their misconduct. There was nothing in the trial record or the government’s disclosure to suggest that either Bridges or Force had that capacity. I will therefore comment on these two aspects of the ruling (a) the penn/trap orders and (b) the sentence.

(a) Pen/Trap Orders

Pursuant to orders issued by New York magistrate judges the government used five pen registers and trap and trace devices to monitor IP addresses associated with Internet traffic to and from Ulbricht’s wireless home router and devices that regularly connected to that router. The Pen/Trap Act, 18 USC s. 3122(a)(1), the governing statute, does not require a search warrant for the use of a pen register or trap and trace device, nor does it demand a showing of probable cause. The statute only requires that the application contain a “certification that the information likely to be obtained is relevant to an ongoing investigation”. In rejecting Ulbricht’s argument that the orders violated the Fourth Amendment based on the third party doctrine, Judge Lynch held, at pp. 41-2:

“The recording of IP address information and similar routing data, which reveal the existence of connections between communications devices without disclosing the content of the communications, are precisely analogous to the capture of telephone numbers at issue in [Smith v. Maryland, 442 U.S. 735, 743-44 (1979)]. That is why the orders here fit comfortably within the language of a statute drafted with the earlier technology in mind. The substitution of electronic methods of communication for telephone calls does not alone create a reasonable expectation of privacy in the identities of devices with whom one communicates. Nor does it raise novel issues distinct from those long since resolved in the context of telephone communication, with which society has lived for the nearly forty years since Smith was decided. Like telephone companies, Internet service providers require that identifying information be disclosed in order to make communication among electronic devices possible. In light of the Smith rule, no reasonable person could maintain a privacy interest in that sort of information.”

The second circuit therefore joined the other circuits that have held that collecting IP address information devoid of content is constitutionally indistinguishable from the use of a pen register. A defendant cannot claim a reasonable expectation of privacy in the government’s acquisition of his subscriber information, including IP address and name, because it has been revealed to a third party. Relying on US v Carpenter, 819 F.3d 880, 887 (6th Cir. 2016) Judge Lynch concluded, at p. 43, that “third-party information relating to the sending and routing of electronic communications does not receive Fourth Amendment protection.”

On June 5, 2017, five days after the second circuit released the opinion in Ulbricht, the Supreme Court of the United States agreed to hear Carpenter on the question whether the Fourth Amendment protects historical cell site information that I discussed in my post titled Digital Crumbs dated May 26, 2017. The broader issue raised by Carpenter is that the third party rule is ill suited for the digital age and the United States Supreme Court ought to adopt the restricted purpose doctrine – that the disclosure of data for one purpose (maintaining cellular service) does not mean that an individual’s privacy interest in that data is relinquished for all other purposes. Ulbricht had argued that some aspects of modern technology, which entrust vast quantities of personal information to third parties, arguably making extensive government surveillance possible, call for re-evaluation of the third party doctrine. Judge Lynch concluded however, at p. 41, that the court was bound by the rule until it is overturned. (See also: R v Spencer, [2014] 2 SCR 212, per Cromwell J., at para. 44; US v Jones, 565 US 400, 417-18 (2012) (Sotomayor J. concurring); and, Orin Kerr. Supreme Court agrees to hear ‘Carpenter v. United States,’ the Fourth Amendment historical cell-site case. The Washington Post, June 5, 2017)

(b) Sentence

I will discuss three issues that arose from Ulbricht’s life sentence; one of procedural reasonableness and two of substantive reasonableness.

An issue of procedural reasonableness arose regarding the propriety of Judge Forrest considering six drug related deaths as relevant to sentence. Circumstantial evidence linked the fatalities with varying degrees of certainty to drugs purchased on Silk Road. Ulbricht argued that there was insufficient information connecting the deaths with drugs purchased on the site. One user was found with a needle, a bag of heroin and an open delivery package. A Silk Road chat was open on his computer describing a package that matched the delivery package. Another user leap from a balcony while high on a psychedelic drug that he bought from the site. Although Judge Lynch described the introduction of this evidence, at pp. 118 and 124, as “incautious” and although “we might not, in the prosecutors’ shoes, have chosen to offer this evidence at sentencing, or have admitted it as district judges”, it played a minimal role and there was no error by Judge Forrest in finding that the six deaths were connected to Silk Road.

A question of substantive reasonableness involved the finding by Judge Forrest that Ulbricht commissioned five murders in the course of protecting Silk Road’s anonymity. There was no evidence that any of the murders actually occurred. Ulbricht discussed the anticipated murders in his journal and in communications with a purported assassin Redandwhite. Judge Lynch said this, at p. 131: “The attempted murders for hire separate this case from that of an ordinary drug dealer, regardless of the quantity of drugs involved in the offence, and lend further support to the district court’s finding that Ulbricht’s conduct and character were exceptionally destructive. That he was able to distance himself from the actual violence he paid for by using a computer to order the killings is not mitigating. Indeed, the cruelty that he displayed in his casual and confident negotiations for the hits is unnerving. We thus cannot say that a life sentence was outside the ‘range of permissible decisions’ under the circumstances.”

Ulbricht also argued that Judge Forrest placed too much weight on general deterrence – the threat of long sentences has no more deterrent effect than the threat of shorter sentences as evidenced by several lucrative dark markets that emerged after Silk Road was taken down in 2013. In an article titled The Silk Road Creator’s Life Sentence Actually Boosted Dark Web Drug Sales published by WIRED on May 23, 2017, Andy Greenberg cited a study in the British Journal of Criminology by Boston College sociologist Isak Ladegaard that “the dark web drug trade actually received a sales bump following the news of Ulbricht’s surprisingly harsh sentence.” It is in the context of the harshness of Ulbricht’s sentence and the doctrine of general deterrence that Judge Lynch commented on the wisdom of the war on drugs, at pp. 120 and 138, that I will edit and condense as follows:

“Reasonable people may and do disagree about the social utility of harsh sentences for the distribution of controlled substances, or even of criminal prohibition of their sale and use at all. It is very possible that, at some future point, we will come to regard these policies as tragic mistakes and adopt less punitive and more effective methods of reducing the incidence and costs of drug use.

At this point in our history, however, the democratically-elected representatives of the people have opted for a policy of prohibition, backed by severe punishment. That policy results in the routine incarceration of many traffickers for extended periods of time. We agree with Ulbricht that life sentences are extraordinary and infrequent. But the rarity of life sentences does not mean that the imposition of such a sentence in this case is substantively unreasonable under our law. Although we might not have imposed the same sentence ourselves in the first instance, on the facts of this case a life sentence was ‘within the range of permissible decisions’ that the district court could have reached. Courts have the power to condemn a young man to die in prison.”

On June 17, 1971, forty-six years ago, President Richard Nixon announced the war on drugs when he declared drug abuse “public enemy number one”.

And for Ulbricht? Carpenter is waiting in the Last Chance Saloon.

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