from the behind-this-curtain... dept
It’s pretty rare that a trial has a real “surprise” unveiling or twist. It happens all the time in TV and movie courtrooms, but in real courtrooms… not so much. Most people know the basics. Someone may admit something surprising, or testimony can go awry, but the “big dramatic reveal” isn’t so common. Yet in the trial of Ross Ulbricht, concerning whether he was or wasn’t the “Dread Pirate Roberts” behind the Silk Road hidden market, things are already off to quite a start. We’d already mentioned his “some other dude did it” defense (while he admits that he did create the site, he argues he handed it over to someone else long before that). However, during yesterday’s testimony Ulbricht’s lawyer revealed who they believed the “other” Dread Pirate Roberts really was: Apparently they believe it was Bitcoin pariah and Mt. Gox CEO, Mark Karpeles.
If you don’t follow the Bitcoin space, you might not recognize the name. However, in the Bitcoin space, Karpeles is widely despised. For a long time, Mt. Gox was the Bitcoin exchange for people who wanted to buy or sell Bitcoin. However it mysteriously shut down over a year ago under questionable circumstances — with Karpeles arguing that Mt. Gox had all its Bitcoins stolen, while many people claimed that the evidence didn’t suggest that at all, and that there may have been a lot of other fraud going on. In short, if you wanted to pick someone who is widely hated among Bitcoin supporters, Karpeles is the perfect “villain.” And Ulbricht’s lawyers make the case that the Homeland Security Investigator who infiltrated Silk Road and helped nab Ulbricht, Jared DerYeghiayan, originally suspected Karpeles:
“I have a wealth of evidence to prove that [Karpeles] is Dread Pirate Roberts,” the agent wrote at the time.
Karpeles, who is from France, ran what was once the world’s largest Bitcoin exchange, Mt. Gox, which was based in Tokyo. DerYeghiayan’s theory was that Karpeles wanted to create a market that used Bitcoin in order to keep the price of the semi-anonymous cryptocurrency robust, which he believed was probable cause for Karpeles’s arrest. (Mt. Gox went bankrupt in early 2014.)
“[Silk Road] would be a device for leveraging the value of Bitcoin, and if he could create a site independent of Bitcoin, you could control the value of Bitcoin,” Dratel said, reading from DerYeghiayan’s emails.
DerYeghiayan believed his evidence was so strong that he even drafted a search warrant for Karpeles’s email in May of 2013.
Later, prosecutors objected to this effort, but the judge, Katherine Forrest, correctly pointed out that the idea was to “raise reasonable doubt that the defendant is the real DPR.”
Karpeles, not surprisingly, is denying that he is DPR. According to Ars Technica:
“This is probably going to be disappointing for you, but I am not Dread Pirate Roberts,” Karpeles told Ars via e-mail. “The investigation reached that conclusion already?this is why I am not the one sitting during the Silk Road trial, and I can only feel defense attorney Joshua Dratel trying everything he can to point the attention away from his client.”
He also posted this to Twitter:
“I have nothing to do with Silk Road and do not condone what has been happening there,” Karpeles continued. “I believe Bitcoin (and its underlying technology) is not meant to help people evade the law, but to improve everyone’s way of life by offering never thought before possibilities. As for the silkroadmarket.org domain, it was registered by a KalyHost.com customer and paid in Bitcoins (KalyHost is a service of Tibanne that has been up since 2009).”
Tibanne was Karpeles’ company that supposedly purchased Mt. Gox. However, his argument here seems a bit questionable, as the Feds have released the seizure warrant showing that Karepeles was directly involved. As another article on Ars Technica summarizes:
Homeland Security used a confidential informant, based in Maryland, to conduct the investigation. The informant simply created accounts with Dwolla and Mt. Gox, bought bitcoins, and then changed them back into dollars. Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles, the president and CEO of Mt. Gox. The Dwolla account shows transfers to Dwolla going back to at least December 2011, according to the warrant.
That account was registered to Mutum Sigillum LLC, which is the company that supposedly registered the silkroadmarket.org domain. And the reason Karpeles got in trouble: Mutum Sigillum, when it opened the account, denied that it was in the money services business, even though it clearly was. All of this is a bit of a mess. Either way, the point here isn’t to necessarily prove that Karpeles absolutely was DPR, but rather to show reasonable doubt to get Ulbricht off the hook. While a fascinating turn of events all around, this still seems like an uphill battle for Ulbricht’s lawyers.