5 ms·

Silk Road Update: Federal Prosecutors File Separate Forfeiture Complaint

49 points by jstalin 13y ago

jstalin 13y ago
The IP addresses listed are interesting: Latvia, Romania, Iceland, and New York, USA.
intslack 13y ago
>The forfeiture complaint is considerably more blunt about the feds' position that the entire Silk Road enterprise is inherently criminal What a bunch of horseshit on part of the feds, while the market was overwhelmingly populated with drugs I know for a fact that there were sellers who only sold things like laptops, flash drives pre-loaded with anonymity software, and DVDs of tails and such.
- justinsb 13y ago
  Edit: intslack has fixed the quotation :-) What are you quoting from?
  - tjbiddle 13y ago
    I don't think it's a direct quote, I couldn't find it - but I'm assuming he's speaking of the fact that the feds are treating all transactions as criminal.
  - deleted 13y ago
    [deleted]
- joshmn 13y ago
  Couldn't someone open up a suit against the feds to claim their stolen BTC if this was the case? Sure, they'd need a whole lot of evidence, but like you said, there were some 'legit' sellers.
  - justinsb 13y ago
    I bet "the feds" will happily return the money of any seller that is willing to provide them the complete records of their customers, as it would probably give them a whole bunch of real-world identities that they could then use to start figuring out who everyone is.
  - bsullivan01 13y ago
    Sure you can, if you have a few million dollars under your mattress for lawyer fees. And if you're squeaky clean because IRS and every alphabet agency might come after you. So you have rights. Maybe. Did they declare any BTC coin gains on their 1040? If not, case closed.
    - malandrew 13y ago
      If you only operated in 2013, you still have until April 2014 to file.
- xerula 13y ago
  Also arts and crafts, personalized poetry and short stories, foodstuffs, homemade clothing...
- camus 13y ago
  Yeah right, things people could sold on ebay or amazon or else easily ... Come on, you dont use SilkRoad to sell laptops or flash drives unless they are stolen.
- ihsw 13y ago
  Yes, that's part of their plan though. Not only will they be able to enrich themselves from unilaterally seizing the assets of Silk Road, but they are also deterring others from selling products on questionable marketplaces. It's quite insidious. Their argument is as such: You shouldn't have been selling legitimate products on Silk Road to begin with, since Silk Road is an illegitimate storefront.
aray 13y ago
> What if some of those Bitcoins are yours, not Ulbrichts? What if Silk Road is holding some of your Bitcoins as part of some transaction? Why, all you have to do is show up and make a claim for them — in a case in which the government is saying that all or substantially all of the transactions through Silk Road are federal crimes. Bring a toothbrush. Seems to answer the question of 'what happens to all the bitcoins' pretty readily. Interesting discussion of forfeiture law and "in rem" suits at the bottom, worth reading.
- drcode 13y ago
  It still doesn't answer the question as to whether they will enter back in circulation. Will the feds just sit on them, or auction them off? This will impact the exchange rate.
  - jessaustin 13y ago
    In general the Feds "forfeiture" all the assets they ever get their grimy paws on. The armored vehicles, machine guns, and posh LEO facilities aren't going to buy themselves. http://www.justice.gov/jmd/afp/ http://www.justice.gov/jmd/afp/ So, if the Feds have the wallet(s), the BTC will be back in circulation, eventually. If they don't, the BTC probably won't appear until the actual SR proprietor has access to a computer again. What would be really hilarious, would be if whoever has the wallet(s) waits until the currently accused is sentenced before spending again.
- llamataboot 13y ago
  You can't just say depositing money on a site is a crime, there were plenty of non-illegal things bought and sold at the Silk Road. Plus evidence of intending to one day maybe buy something illegal is not evidence of having bought something illegal. Tangentially related, in the cases where the USG seized offshore gambling sites, they returned deposits to the players, even though playing there was ostensibly illegal. Granted offshore gambling is a little murkier than buying heroin in terms of legality, but see paragraph #1. Having funds at/on TSR is not a crime.
  - 13y ago
eck 13y ago
Question for someone who understands BTC better than I: This seems to be the first case where a massive number of BTC were seized by police. Since BTC is a consensus algorithm, what would happen if 51% of BTC users wanted to take those BTC away from the FBI and give them to someone else (or perhaps nobody, just remove them from existence and deflate the BTC) how feasible would that be?
- bigdubs 13y ago
  The "consensus" isn't fungeable like that; it's derived from block chain length (i.e. the size of the chain of previous transaction blocks)
- MacsHeadroom 13y ago
  The only thing consensus can do is use hashing power to vote on using a chain made of blocks which is has already been determined to be mathematically consistent by enormous amounts of hashing power OR to roll back that chain and continue it from an old spot. The only way to pull that money back from the US Gov would be to roll back all transactions and block creation up to the point they took control of those bitcoins. But doing so would be catastrophic- so you would never get miners to agree on that.
  - taejo 13y ago
    Miners could simply refuse to process future blocks which contain spends of these bitcoins.
- yebyen 13y ago
  I am no expert, but if I had to put the pieces together, I'd say... Bitcoin is not just a consensus algorithm, but a public key cryptography system. Bitcoin clients obtain consensus on what transactions have occurred by building a blockchain where basically, the longest chain that meets the requirements set by the difficulty and other hardcoded client demands is the "winning" blockchain. So, start with 51% of mining power, which is the first requirement. Next, pick the transaction to erase and count up the number of blocks that are "on top" of that. Each block represents some realized investment from the continued expense of hash-power. Those will have to go as well; if we wanted to erase a transaction, it's best to have made up our minds as soon as possible to do it, since the longer that passes, the harder it will be to convince everyone who's minted a block since then to part with it. But we started with already having convinced more than 50% of everyone, so let's ignore that difficulty. Still, in reality it's just that much harder every day. If the "hot wallet" private keys are not in our hands, we can't just "give" the seized bitcoins to someone else. They are currently protected with a cryptographic signature that says "these are mine, spend them to the FBI." With DPR's hot-wallet keys, either stolen from the FBI or obtained from a backup owned by DPR, having erased the transaction we can now spend them somewhere else. But now we've also erased all of the _other_ transactions that have happened since then. We will want to read those out of the now defunct chain and put them back into new blocks as soon as possible, too. (Won't we? Fortunately we don't all have to agree about the validity of those transactions, as long as 51% haven't also conspired to block some of them, we still have the signatures and they can be re-broadcasted to the network and again eventually make it into the winning chain. But for a window of time, there's now a chance that those coins are spent another way too.) Only, that newly continuing chain shows that those timestamped blocks from before the seizure were the last to be generated. Now we're far behind target, of generating 2016 blocks every two weeks. In fact more than 10 days have passed and we have the appearance that no valid blocks have been generated in that time. We've got some serious catching up to do. Now we've got a situation where the next difficulty retarget is going to push the difficulty _down_ for the first time in a LONG time, because the two week target has been missed by a longshot. We've either got to find substantial _extra_ hashpower that was not there before (that's probably well over 100% of the network) or otherwise basically convince pretty much everyone to set their clocks back at the same time. Or we can just let the difficulty plummet. That's another hard sell either way.
fennecfoxen 13y ago
Background information: The real awesome part of forfeiture is when the government wants to seize your hotel and sell it because sometimes drug dealers might have used it. http://reason.com/blog/2013/01/28/motel-caswell-owners-defeat-federal-forf http://reason.com/blog/2013/01/28/motel-caswell-owners-defea... Other victim classes include "driving while brown, with cash" - e.g. http://reason.com/archives/2010/01/26/the-forfeiture-racket http://reason.com/archives/2010/01/26/the-forfeiture-racket (Disclaimer. Links to politically motivated Libertarian magazine website, since I knew it would be easy to find there. Interested parties may conduct corroborating research on their own time.)
- ihsw 13y ago
  Keyword: might They don't even have to have provided any evidence that crimes occurred on the property in question, just that there is reasonable suspicion. There are a lot of penalties and procedures surrounding "just in case" solutions.

49 points by jstalin 13y ago

The IP addresses listed are interesting: Latvia, Romania, Iceland, and New York, USA.

>The forfeiture complaint is considerably more blunt about the feds' position that the entire Silk Road enterprise is inherently criminal What a bunch of horseshit on part of the feds, while the market was overwhelmingly populated with drugs I know for a fact that there were sellers who only sold things like laptops, flash drives pre-loaded with anonymity software, and DVDs of tails and such.

justinsb 13y ago
Edit: intslack has fixed the quotation :-) What are you quoting from?
- tjbiddle 13y ago
  I don't think it's a direct quote, I couldn't find it - but I'm assuming he's speaking of the fact that the feds are treating all transactions as criminal.
- deleted 13y ago
  [deleted]
joshmn 13y ago
Couldn't someone open up a suit against the feds to claim their stolen BTC if this was the case? Sure, they'd need a whole lot of evidence, but like you said, there were some 'legit' sellers.
- justinsb 13y ago
  I bet "the feds" will happily return the money of any seller that is willing to provide them the complete records of their customers, as it would probably give them a whole bunch of real-world identities that they could then use to start figuring out who everyone is.
- bsullivan01 13y ago
  Sure you can, if you have a few million dollars under your mattress for lawyer fees. And if you're squeaky clean because IRS and every alphabet agency might come after you. So you have rights. Maybe. Did they declare any BTC coin gains on their 1040? If not, case closed.
  - malandrew 13y ago
    If you only operated in 2013, you still have until April 2014 to file.
xerula 13y ago
Also arts and crafts, personalized poetry and short stories, foodstuffs, homemade clothing...
camus 13y ago
Yeah right, things people could sold on ebay or amazon or else easily ... Come on, you dont use SilkRoad to sell laptops or flash drives unless they are stolen.
ihsw 13y ago
Yes, that's part of their plan though. Not only will they be able to enrich themselves from unilaterally seizing the assets of Silk Road, but they are also deterring others from selling products on questionable marketplaces. It's quite insidious. Their argument is as such: You shouldn't have been selling legitimate products on Silk Road to begin with, since Silk Road is an illegitimate storefront.

aray 13y ago

> What if some of those Bitcoins are yours, not Ulbrichts? What if Silk Road is holding some of your Bitcoins as part of some transaction? Why, all you have to do is show up and make a claim for them — in a case in which the government is saying that all or substantially all of the transactions through Silk Road are federal crimes. Bring a toothbrush. Seems to answer the question of 'what happens to all the bitcoins' pretty readily. Interesting discussion of forfeiture law and "in rem" suits at the bottom, worth reading.

drcode 13y ago
It still doesn't answer the question as to whether they will enter back in circulation. Will the feds just sit on them, or auction them off? This will impact the exchange rate.
- jessaustin 13y ago
  In general the Feds "forfeiture" all the assets they ever get their grimy paws on. The armored vehicles, machine guns, and posh LEO facilities aren't going to buy themselves. http://www.justice.gov/jmd/afp/ http://www.justice.gov/jmd/afp/ So, if the Feds have the wallet(s), the BTC will be back in circulation, eventually. If they don't, the BTC probably won't appear until the actual SR proprietor has access to a computer again. What would be really hilarious, would be if whoever has the wallet(s) waits until the currently accused is sentenced before spending again.
llamataboot 13y ago
You can't just say depositing money on a site is a crime, there were plenty of non-illegal things bought and sold at the Silk Road. Plus evidence of intending to one day maybe buy something illegal is not evidence of having bought something illegal. Tangentially related, in the cases where the USG seized offshore gambling sites, they returned deposits to the players, even though playing there was ostensibly illegal. Granted offshore gambling is a little murkier than buying heroin in terms of legality, but see paragraph #1. Having funds at/on TSR is not a crime.
- 13y ago

eck 13y ago

Question for someone who understands BTC better than I: This seems to be the first case where a massive number of BTC were seized by police. Since BTC is a consensus algorithm, what would happen if 51% of BTC users wanted to take those BTC away from the FBI and give them to someone else (or perhaps nobody, just remove them from existence and deflate the BTC) how feasible would that be?

bigdubs 13y ago
The "consensus" isn't fungeable like that; it's derived from block chain length (i.e. the size of the chain of previous transaction blocks)
MacsHeadroom 13y ago
The only thing consensus can do is use hashing power to vote on using a chain made of blocks which is has already been determined to be mathematically consistent by enormous amounts of hashing power OR to roll back that chain and continue it from an old spot. The only way to pull that money back from the US Gov would be to roll back all transactions and block creation up to the point they took control of those bitcoins. But doing so would be catastrophic- so you would never get miners to agree on that.
- taejo 13y ago
  Miners could simply refuse to process future blocks which contain spends of these bitcoins.
yebyen 13y ago
I am no expert, but if I had to put the pieces together, I'd say... Bitcoin is not just a consensus algorithm, but a public key cryptography system. Bitcoin clients obtain consensus on what transactions have occurred by building a blockchain where basically, the longest chain that meets the requirements set by the difficulty and other hardcoded client demands is the "winning" blockchain. So, start with 51% of mining power, which is the first requirement. Next, pick the transaction to erase and count up the number of blocks that are "on top" of that. Each block represents some realized investment from the continued expense of hash-power. Those will have to go as well; if we wanted to erase a transaction, it's best to have made up our minds as soon as possible to do it, since the longer that passes, the harder it will be to convince everyone who's minted a block since then to part with it. But we started with already having convinced more than 50% of everyone, so let's ignore that difficulty. Still, in reality it's just that much harder every day. If the "hot wallet" private keys are not in our hands, we can't just "give" the seized bitcoins to someone else. They are currently protected with a cryptographic signature that says "these are mine, spend them to the FBI." With DPR's hot-wallet keys, either stolen from the FBI or obtained from a backup owned by DPR, having erased the transaction we can now spend them somewhere else. But now we've also erased all of the _other_ transactions that have happened since then. We will want to read those out of the now defunct chain and put them back into new blocks as soon as possible, too. (Won't we? Fortunately we don't all have to agree about the validity of those transactions, as long as 51% haven't also conspired to block some of them, we still have the signatures and they can be re-broadcasted to the network and again eventually make it into the winning chain. But for a window of time, there's now a chance that those coins are spent another way too.) Only, that newly continuing chain shows that those timestamped blocks from before the seizure were the last to be generated. Now we're far behind target, of generating 2016 blocks every two weeks. In fact more than 10 days have passed and we have the appearance that no valid blocks have been generated in that time. We've got some serious catching up to do. Now we've got a situation where the next difficulty retarget is going to push the difficulty _down_ for the first time in a LONG time, because the two week target has been missed by a longshot. We've either got to find substantial _extra_ hashpower that was not there before (that's probably well over 100% of the network) or otherwise basically convince pretty much everyone to set their clocks back at the same time. Or we can just let the difficulty plummet. That's another hard sell either way.

fennecfoxen 13y ago

Background information: The real awesome part of forfeiture is when the government wants to seize your hotel and sell it because sometimes drug dealers might have used it. http://reason.com/blog/2013/01/28/motel-caswell-owners-defeat-federal-forf http://reason.com/blog/2013/01/28/motel-caswell-owners-defea... Other victim classes include "driving while brown, with cash" - e.g. http://reason.com/archives/2010/01/26/the-forfeiture-racket http://reason.com/archives/2010/01/26/the-forfeiture-racket (Disclaimer. Links to politically motivated Libertarian magazine website, since I knew it would be easy to find there. Interested parties may conduct corroborating research on their own time.)

ihsw 13y ago
Keyword: might They don't even have to have provided any evidence that crimes occurred on the property in question, just that there is reasonable suspicion. There are a lot of penalties and procedures surrounding "just in case" solutions.