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Lawyer of alleged Silk Road founder: No currency = no money laundering

Published time: April 02, 2014 09:25
Alleged Silk Road founder, Ross Ulbricht. Image from http://mashable.com

Alleged Silk Road founder, Ross Ulbricht. Image from http://mashable.com

The attorney for alleged Silk Road founder is asking that the money laundering charge against Ross Ulbricht be dismissed, arguing the black-market website operated in bitcoin, ruled a ‘non-currency’ in a recent decision by a US government agency.

The motion submitted by Ulbricht’s lawyer, Joshua Dratel, was made public on Tuesday by the Wired.

The document shows Dratel was quick to react to the new definition given to bitcoin only a week ago by the Internal Revenue Service (IRS), which explained that virtual money “is treated as property” and “is not treated as currency.”

The money-laundering indictment requires a ‘financial transaction’ to be carried out with the involvement of either ‘funds’ or ‘monetary instruments’, Dratel argues, adding that bitcoin appears to be neither.

Thus, an essential element of §1956 – a ‘financial transaction’ – is absent because a necessary component thereof – either ‘funds’ or ‘monetary instruments’ – is lacking. Consequently, it is respectfully submitted that Count Four must be dismissed,” Dratel says in his motion.

Apart from the money laundering one, Ulbricht’s lawyer is asking to dismiss all of the three other charges his client is facing. Those include drug trafficking, computer hacking and engaging in a criminal enterprise.

Ulbricht was arrested in October, 2013, and indicted in February. Prosecution alleges he was operating Silk Road, a clandestine website that allowed its users to buy and sell drugs and other illegal goods and services anonymously. The site could only be accessed through the Tor anonymizing service and the deals were made using a bitcoin-based payment system, which also enabled users to conceal their identities.

Dratel described the charges as "unconstitutionally vague” as applied to Ulbricht and compared the alleged Silk Road founder to a landlord renting out his property.

Yet that does not describe a co-conspirator in the controlled substances transactions because a landlord – in this instance, with Silk Road acting as the digital landlord for its tenants (the alleged ‘drug dealers’, ‘unlawful vendors’ and other ‘users’ of the Silk Road website) – is a not a co-conspirator of, and/or liable for, the criminal conduct of his tenants, under §846 regardless whether the landlord possesses knowledge that the premises are being used for illegal purposes.”

Silk Road had been operating for three years before it was closed in October 2013. Prosecutors argue that among services available on the site were drug sales, document forgery and computer hacking.

The site was operated by administrator concealing his identity under the name ‘Dread Pirate Roberts’. Prosecutors allege it was Ross Ulbricht, something the accused denies.

When Ulbricht was arrested, authorities seized 173,991 bitcoins worth more than $150 million, which they found on Ulbricht’s computer hardware.

Apart from the four charges brought forward against him in New York, Ulbricht has also been indicted in Maryland, where he is accused of having solicited a murder-for-hire.