Investigation Derailed

Ross was not a target until very late in the government’s investigation of Silk Road—just a couple of months before his arrest. Until then (and even after Ross’s arrest), the lead investigator believed that Mark Karpeles and his “right hand man,” Ashley Barr, were behind Silk Road and the DPR accounts. However, rogue agents tipped Karpeles off that he was under investigation, and prosecutors worked with him to target someone else, possibly Ross.

The investigation

The government’s lead investigator was HSI Special Agent Jared Der-Yeghiayan. He was the first to suspect Karpeles and Barr and found the following:

  • Karpeles was a “self-proclaimed hacker” and “experienced programmer” specializing in Bitcoin and e-commerce websites, making him “well-suited to operating…Silk Road.”[1][2][3]
  • Karpeles had acquired Mt. Gox (the only major Bitcoin exchange back then) around the time Silk Road was started. He therefore “had a strong motive to create a large underground marketplace where bitcoins would be in high demand.”[4]
  • Karpeles owned bitcointalk.org where Silk Road was first publicized. The Silk Road forum and bitcointalk.org used the same uncommon software: Simple Machines.[5]
  • The domain name server (DNS) for silkroadmarket.org was registered to Karpeles’s company, Mutum Sigillum.[6]
  • tuxtelecom.com (one of Karpeles’s websites), silkroadmarket.org, and Silk Road all used the same out-of-date version of MediaWiki.[7]
  • Karpeles moved silkroadmarket.org and tuxtelecom.com repeatedly and simultaneously to different IP addresses.[8]
  • Multiple accounts belonging to “the Silk Road operators,” containing bitcoins worth “millions of U.S. dollars” were linked back to Karpeles and Barr.[9]
Jared Der-Yeghiayan
Illustration: Susie Cagle
Mark Karpeles (left) –
Ashley Barr (right)

Rogue agents

Der-Yeghiayan shared all this information with another HSI agent, Michael McFarland. Despite Der-Yeghiayan telling him not to, McFarland informed members of his Silk Road task force that Karpeles was behind Silk Road. Among them were corrupt agents Carl Force and Shaun Bridges. After “working” Karpeles for months, Bridges “went rogue” and with the help of AUSA Richard Kay, seized $2 million from Karpeles’s bank account.[10] This tipped Karpeles off that “the U.S. government had him on its radar,” and the “walls were closing in on them.”[11][12]

Carl Mark Force(left) –
Shaun Bridges (right)

Mystery meeting

Two months later, Karpeles’s lawyers secretly met with Kay and offered him someone else to target instead of Karpeles in exchange for legal immunity for their client. It is not known if Ross’s name was the one given, but he was arrested just a couple months later and Karpeles was never prosecuted.[13]

“With pressure mounting toward the end of 2013…the government seized on Ulbricht as DPR, thereby letting [Karpeles] escape justice and leave Ulbricht as the wrongfully prosecuted culprit.”
– Joshua Dratel arguing to overturn Ross’s conviction.[14]

The cover-up

After Kay met with Karpeles’s attorneys, the various law enforcement offices around the country investigating Silk Road met to coordinate their efforts. Der-Yeghiayan repeatedly expressed “deep concern” that McFarland and his task force were damaging his investigation. Those running the meeting asked if anyone else was pursuing Karpeles. McFarland, Justin Herring (McFarland’s AUSA), Herring’s supervisor, and Bridges “all remained silent” despite knowing that the meeting with Kay had just taken place.[15]

All of this was buried in thousands of pages of 3500 material and was only revealed to Ross just before his trial started. When Joshua Dratel, Ross’s attorney, attempted to question Der-Yeghiayan about it at trial, he was repeatedly interrupted by objections from the government. Ultimately, all mention of the rogue agent’s interference with Karpeles and Karpeles’s meeting with Kay was ruled “off limits” by Judge Forrest.[16]

References