Ross Ulbricht’s attorney Joshua Dratel submitted a reply to the prosecution on May 27 (full document below) supporting his pretrial motions and illustrating the fundamental deficiencies in the government’s arguments. Here are some key points.
- The government claims that “federal criminal laws are expansive and adaptable,” in particular as applied to the internet. However the law says it cannot rewrite or expand statutes, or apply them in a way that deprives someone of their Fifth Amendment Due Process rights.
- The government never alleges that Ulbricht sold drugs or malicious software as described in three of the statutes. This omission is important. To satisfy the statutes, the government must allege more than that Ulbricht maintained the Silk Road website and “facilitated” or created a “platform” for illegal sales. But it doesn’t. Instead, it completely ignores the very specific Second Circuit standard and language which states that an indictment must sufficiently and specifically allege a charged offense. In other words, the statute and the allegation must match up. Two examples:
1. In order to establish that Ulbricht is a conspirator, as stated in Counts One and Three, he must have actually joined a conspiracy to sell drugs or software.
2. In order to establish Ulbricht as a “kingpin,” (someone who manages/supervises a drug-selling enterprise) the government must allege more than that he provided others an opportunity to sell drugs. Otherwise, their description could apply to any ISP or website host whose site is used for illegal purposes.
- The government uses the description of a website manager to describe a kingpin. These include: making the site available for use; setting rules for site participants; protecting buyers/sellers from fraud; maintaining user privacy; receiving compensation. It also stretches definitions when it argues for an expansive, “pragmatic” application of the terms “organizer, supervisor, manager.” Yet any pragmatic, every day use of these terms eliminates Ulbricht from those roles over site users and vendors.
- The government calls site users Ulbricht’s “partners.” “There is simply no basis, in practical, legal, or business terms, for classifying the vendors who sell on an internet site as ‘partners’ of the website host. Otherwise, Amazon.com, Google, Ebay, and other sites would have a rather awkward time explaining their corporate structures to their shareholders and the Securities and Exchange Commission,” the defense states. What is missing – and what is not sufficiently alleged – is the agreement between any Silk Road user and Ulbricht to violate the law.
- In Count Three (computer malware charge) the government completely dodges the problem of “transferred intent.” It fails to articulate how a website manager is responsible for the intentions of buyers who do not reveal how they plan to use a product. Furthermore, in this case even the government acknowledges the software can be used legitimately. Even if the buyer did harbor criminal intent, unless it is shared by Ulbricht, merely making such software available would not establish his criminal intent. If it did this would “herald criminal liability across the board for many manufacturers, wholesalers and retailers of almost every product available,” according to the reply.
- The government equates the use of Tor, and the desire for confidentiality and anonymity, with criminal intent. This perverts the concept of privacy by making it suspicious: “Consumers should not have to demonstrate why they prefer privacy and anonymity; rather, the government should be required to articulate specific proof why such preference should be considered evidence of illegal intent,” states the defense.
- In Count Four (money laundering) the government adopts a position that would dispense with any limiting definitions in the statute. Consequently, any item that could be exchanged for money would become “funds.” The government could then apply that definition to any exchangeable property and subject it to money laundering charges.
- The IRS, which regulates funds, has definitively declared Bitcoin is not money and classifies it as property. Property is not “funds,” and neither are barter or other means of exchange. The Supreme Court has repeatedly explained that agency determinations and interpretations must be given the high level of deference.
- Bitcoin is a relatively new phenomenon. This case likely represents the first challenge to the government’s attempt to stretch §1956 to encompass Bitcoin as the basis for a prosecution.