This is an opinion editorial by Aaron Daniel, appellate attorney and author of “The Bitcoin Brief” and William D. Mueller, an appellate attorney with a national practice.
After a several-week trial in Manhattan’s U.S. District Court for the Southern District of New York, Ross Ulbricht, the creator and operator of Silk Road, one of the first markets to exclusively use bitcoin, has be sentenced to die in prison. The jury deliberated just three and a half hours before convicting Ulbricht of the seven counts indicted by the US government: distribution of narcotics, distribution of narcotics over the Internet, conspiracy to distribute narcotics, engaging in a continuing criminal enterprise, conspiracy to commit computers. hacking, conspiracy to traffic in false identity documents and conspiracy to commit money laundering.
For these convictions, Ulbricht received five different sentences:
- One for 20 years,
- One for 15 years,
- One for five, i
- two for life.
Ulbricht is serving the sentences concurrently, without the possibility of parole.
The sentence handed down by the district court judge – two life sentences plus forty years – sent shock waves through the financial technology community, where many thought the sentence was disproportionate to the crime. After all, none of Ulbricht’s seven convictions included charges of violent conduct.
Looking back a decade later, it appears that the severe condemnation sought by the US government was, at least in part, driven by a desire to favor the US dollar. Indeed, fiat is supported by the state’s monopoly on violence, which, in Ulbricht’s case, manifested itself through extreme fiscal power.
Using Bitcoin, Mixing and Tor
First, it’s worth taking a look at what factors played a role in Ulbricht’s sentencing. Under the applicable US sentencing guidelines, a mandatory minimum sentence of 20 years was required for three of Ulbricht’s convictions and a maximum sentence of seven years for two others. Because the sentences can be served concurrently, Ulbricht could, in theory, have been sentenced to only a 20-year term. However, in the US government’s sentencing filing, prosecutors for the Southern District of New York asked the court to “impose a lengthy sentence, one substantially above the mandatory minimum of 20 years.”
Because? After Ulbricht’s conviction, the United States attorney for the Southern District of New York argued that the prosecution stemmed from Ulbricht’s involvement with drugs and narcotics: “Make no mistake: Ulbricht was a drug dealer and a criminal profiteer who exploited people’s addictions and contributed to the deaths of at least six young people”.
But the U.S. attorney also highlighted Ulbricht’s use of Bitcoin as a payment method that feeds into the anonymity offered by the Silk Road:
“Ulbricht deliberately operated Silk Road as an online criminal marketplace intended to allow its users to buy and sell drugs and other illegal goods and services anonymously and beyond the reach of law enforcement…. Ulbricht designed Silk Road to include a payment system based on Bitcoin which served to facilitate illegal trading conducted on the site, even by concealing the identities and locations of users transmitting and receiving funds through the site.”
What role did Ulbricht’s decision to implement bitcoin and a bitcoin mixer (or tumbler) play in his sentence? It’s hard to say.
Ulbricht’s sentence was meant to be harsh from the start, given that the criminal laws under which Ulbricht was convicted were applied to make him responsible for total amount of drugs and narcotics exchanged through the Silk Road. The more drug trafficking involved, the higher the recommended initial sentence. But it should be noted that this loose interpretation of conspiracy has been criticized as a misapplication of the statute.
In a standard conspiracy, all the conspirators are aware of each other and agree to commit the crime multilaterally. With the Silk Road, there was not one big multilateral agreement, but many separate and distinct bilateral agreements between the website and each individual seller, many separate conspiracies, in other words. Leaving aside this bad application, by aggregating the agreements between each user and the website into a massive criminal conspiracy, Ulbricht was accused of helping transfer more than 60,720 kilos of cocaine, heroin and methamphetamine.
From that starting point, the sentencing judge applied several sentencing enhancements—aggravating factors that increase the recommended prison sentence in the U.S. Sentencing Guidelines table—including those stemming from the charges Ulbricht paid for murders for hire in connection with the Silk Road (the sentence). The judge determined that “there is abundant and unequivocal evidence that Ulbricht ordered five murders as part of his efforts to protect his criminal enterprise and that he paid for those murders.” These allegations were not fully presented or proven during the sentencing phase of the New York prosecution, and therefore Ulbricht’s lawyers could have challenged their admission at the sentencing phase. But the defense refused to do so, and so the murder-for-hire evidence was admitted and became a key aggravating factor.
And Bitcoin itself was classified as an aggravating factor. Ulbricht’s hacking charges were upgraded due to his use of “sophisticated means.” The judge cited “the use of Tor as requiring some sophistication, the bitcoin glass, of course, [and] the use of stealth lists” as the reason for the improvement.
Those enhancements increased Ulbricht’s suggested prison sentence under federal sentencing guidelines to the maximum amount: life in prison, double that.
Competition with the dollar
Many of Ulbricht’s supporters have cited the prison sentence as disproportionate to the crime. They may be right. Ulbricht’s sentence far exceeded the average federal sentence length for drug offenders: about six years. As a first offender for a non-violent crime, Ulbricht’s sentence was eight times more severe than the sentence handed down to former Minneapolis police officer Derek Chauvin for fatally kneeling on George Floyd’s neck for nine and a half minutes. His double life sentence is more in line with the sentences given to serial killers, serial rapists and child abusers.
Examining the prosecutor’s statements, the judge’s rulings, the federal sentencing guidelines, and the average sentences for other, more reprehensible crimes, it thus appears that Ulbricht’s extreme sentence is at least in part due to the government’s concern of the United States for Ulbricht’s use of bitcoins. the exclusive pseudonymous payment system of the Silk Road.
That the US government liberally applied its judicial power against Ulbricht and Silk Road to deter competition for the dollar becomes clearer when placed in the context of other aggressive prosecutions of users and promoters of alternative currencies.
Take Bernard von NotHaus, the founder of the National Organization for the Repeal of the Federal Reserve Act (NORFED). The NotHaus organization created the Liberty Dollar, a private exchange money system of coins and notes backed by specific weights of gold and silver. In 2009, NotHaus was arrested and charged with conspiracy and counterfeiting, despite marketing the Liberty Dollar as a competitor to the US dollar, not the genuine article. Prosecutors asked for a sentence of 14 to 17 years for the septuagenarian (essentially life in prison) and issued a press release criticizing the private ransom money as “a unique form of domestic terrorism.” Fortunately for NotHaus, cooler heads prevailed and the judge sentenced him to a reasonable six months of house arrest.
And just last month, Mark Hopkins, a Bitcoin educator known as “Doctor Bitcoin,” pleaded guilty to charges of selling bitcoin peer-to-peer without a “money transmitter license,” in violation of regulations of the Financial Crimes Enforcement Network (FinCEN). Hopkins, who is now serving six to 15 months in federal prison, claimed prosecutors coerced him into the plea deal by threatening to indict his wife alongside him if he didn’t cooperate.
These cases, including Ulbricht’s, indicate that the US government is quick to use tough prosecutorial tactics for nonviolent crimes against its currency. One can only imagine the fate that would have awaited Satoshi Nakamoto, had he not been a pseudonym.
This is a guest post by Aaron Daniel and William D. Mueller. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
