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Silk Road: Undercover agent admits stealing Bitcoin

156 points by jbrooksuk 11y ago

DaveWalk 11y ago
I had wondered what would happen to the DEA agent mentioned in the big Wired stories[0][1]. As a Bitcoin novice, I was left wondering: is it a common misconception that Bitcoin is anonymous? Or rather, just how easy is it to trace someone's transactions if you know their wallet ID? [0] http://www.wired.com/2015/04/silk-road-1/ http://www.wired.com/2015/04/silk-road-1/ [1] http://www.wired.com/2015/05/silk-road-2/ http://www.wired.com/2015/05/silk-road-2/
- kilovoltaire 11y ago
  Bitcoin transactions are stored in the public Blockchain, so if you know a wallet ID then you can see every transaction it's ever been involved in. So if you want anonymity you have to be careful that no one can connect you to a wallet ID.
  - Vexs 11y ago
    You can also use a tumbler, which is basically where you and several other people all run your coins into one wallet, and then withdraw random amounts up to the amount you put in. Obviously the issue there is someone needs to keep track of who has how much in the tumbler, but I imagine there's services out there.
    - glomph 11y ago
      That would be a bad tumbler design. A better design pays you out in bitcoins that have no connection to the bitcoins you paid in. Say you pay into wallet A and someone else pays into wallet B then you could get paid entierly out of wallet B. Then the only person who could follow the path would be the owner of wallets A and B.
      - DaveWalk 11y ago
        I see -- I think the above argument is that the tumbling service, i.e. owner of wallets A and B, has the evidence of laundering. Concentrated in one place it's easier to protect, and easier to attack, I guess?
        kerkeslager 11y ago
        No, it has nothing to do with where it's concentrated; I don't know of any tumbler designs that aren't concentrated in one place. It has to do with that if Alice gets a Bitcoin by selling uncensored newspapers in China, transfers it to wallet A in the tumbler, and then the tumbler transfers that to Alice's Coinbase account, Alice is going to jail. The transaction record tells us that Alice's Bitcoin came from the uncensored newspaper through an intermediary. The Chinese government can then arrest Alice on suspicion of selling illegal newspapers. At that point Alice must either prove somehow that wallet A in the tumbler is owned by the person who really sold the newspapers (which will be impossible), or admit that she sold the newspapers and used a (bad) tumbler in an attempt to hide her transaction. That is to say, if there's a chain of transactions connecting Alice to the newspaper sale, the tumbler has provided Alice no anonymity. Contrast this with a more realistic tumbler design: the tumbler owner (let's call him Troy) deposits a bitcoin from Coinbase in wallet A. Alice is the first user of the tumbler, so she gets a bitcoin selling uncensored newspapers in China and deposits it in wallet B. The tumbler owner then forwards the coin from wallet A (minus a fee) into Alice's Coinbase account. Now Bob, as the second user of the tumbler, comes along and deposits a coin he got from selling LSD on the Silk Road into wallet C. Troy then sends the coin Alice got from selling uncensored newspapers (minus a fee) to Bob's Coinbase account. Alice now has a coin from Coinbase, Bob has a coin from Alice's sale of an uncensored newspaper in China, and Troy the tumbler operator has a coin sitting in wallet C waiting for the next person to use the tumbler. The Chinese government has no way to track the transactions to Alice. IF Bob lives in China the Chinese government could come and accuse him of selling uncensored newspapers, but the accusation would make no sense; he has alibis for some of the days newspapers were sold, he's not educated enough to write, etc., because he didn't sell the newspapers. Bob can even say he used a tumbler, but he used it because he purchased a lot of bondage pornography: embarrassing, but not illegal. But more likely than not, Bob won't even be accused of Alice's crimes, either because he lives in a different country or because the accusations won't make any sense. Both Alice and Bob's anonymity has been protected.
    - tedunangst 11y ago
      Sounds like Mt. Gox. You deposited your coins, then withdrew a "random" amount.
      - jerf 11y ago
        It seems to be a very popular de facto design in the BitCoin world, yes.
  - jnbiche 11y ago
    There is no concept of "wallet ID" in Bitcoin transactions as transmitted over the wire. There are only input and output values in transactions (which do have an ID number). If you know someone is connected to a given input, then you can trace them through any outputs to other parties. So it's not quite as simple as a "wallet ID". The transactions in given Bitcoin wallet software may be connected to each other (by the mechanism I describe above), but are not necessarily connected, particularly if you generate a new address for each transaction for which you are the receiving party (and/or take additional precautionary measures). It's entirely possible to have a wallet full of untraceable transactions.
- danielbln 11y ago
  The bitcoin blockchain is a public ledger. Unless a mixing service is involved, you can trace back each transaction to an origin easily. If that origin can be linked to a person (e.g. through a trade service that knows bank details and other personal data) then you are no longer anonymous. Moving coins around a few times to different wallets/addresses makes plausible deniability easier and the trace harder, but if you are a high profile target, you probably want to be more thorough with obfuscating and/or outright disrupting the path through the blockchain that eventually leads back to you. A mixing service will basically perform money laundering for you, disrupting the direct path back to your initial transaction. tl;dr: It can be anonymous, but by default it's not really.
  - DaveWalk 11y ago
    Thanks for the detailed followup. Is there any case precedent for prosecuting money laundering like this? It seems to me that the path can still be rebuilt. I guess the criminality depends on the crime and the jurisdiction? (And the law. Obviously I'm not a lawyer, lol.)
    - itake 11y ago
      don't know about the legal side, but from a technical side, the laundering services pool all of their client's money together in one churning pot. Which makes it very difficult to see whose money is actually going where.
  - emergentcypher 11y ago
    Especially if you move your coins through different wallets a few times to obfuscate, and then consolidate them back into the same wallet where you attempt to convert it into cash... obfuscating the intermediary wallets isn't going to do you much good if it can be shown you control the starting and ending wallets. headdesk
- navait 11y ago
  bitcoin is pseudo-anynomous, since the blockchain is a public ledger of all transactions. Mixing services exist to help anonymize transactions, for example. For a technical solution on bitcoin privacy and providing anonymous bitcoin transactions, see: http://zerocoin.org/ http://zerocoin.org/
- drzaiusapelord 11y ago
  > is it a common misconception that Bitcoin is anonymous? On a practical level its anonymous. Its trivial to move coins around to various exchanges that makes it difficult or impossible to trace. Jurisdictions come into play here as well. If I steal some coins in the US and move them to a Latvian exchange, then a Russian one, then a Swiss one, then finally cash out in a Chinese one, who will be even able to track me down? Who will respect all these warrants? A real life example is what's going on with cryptolocker-like malware. People are paying hundreds of dollars in bitcoins to these ransomwares for almost two years now, yet there have been zero arrests. I imagine laundering bitcoins is easy to do as well by trading value in a shared pot. Hell, you could just trade one 'hot' wallet for another and again and again. Now the path is even more obfuscated.
  - DaveWalk 11y ago
    That cryptolocker-like malware was particularly terrifying...is it still around? I wonder why it hasn't become more or less famous? Reminds me of ATM skimmers, also particularly terrifying. I imagine they are kept at a certain degree of popularity for the same reasons.
    - drzaiusapelord 11y ago
      Yes, I read /r/sysadmin, Brian Krebs, /r/netsec, etc everyday (Sysadmining and securing our environment is one of my job responsibilities) and its not only out there, its gotten bigger. I see it blocked on my firewall, filtered out in our mail, etc. More players have entered the market (there are several active variants now) and the malware is smarter. The malware uses new tricks to infect (html file in a zip file that just does a redirect to a exe hosted on the web), bundled with 'crimepacks' that perform multiple exploits at once (java, flash, etc), running as a word macro, running fully in memory to avoid disk write restrictions, etc. We've shored up our defenses significantly but unless we move to a whitelisted-only executable environment, then it will probably get through eventually. One of my chief complaints about Windows 10 is that it does absolutely nothing to solve the "download invoice.pdf.exe" problem Windows suffers from. At least in Linux that file needs to be given a +x and in OSX non-Apple signed executable need to be approved in the system settings. Windows is still the wild west. Its a shame MS didn't use Win10 as a way to lock things down to address today's threats. Signature based AV cannot move faster than a certain speed and malware like Cryptovariants move much, much faster than that. Heuristics are terrible for some reason on popular AV's and everyone is constantly getting infected. Yeah, leave exceptions for power users and enterprise, but by default it should not allow untrusted unsigned content to run by default. I told myself that if I ever start my own company that actually allows me to quit my dayjob it would be 100% OSX environment on the client-side. MS just doesn't take security very seriously, its targeted badly, and even the pro-netsec people at MS that want to be better with security are knocked down by the other politics of having 20-30 years of legacy support for ancient apps and not breaking anything. Its just not able to keep up with modern threats. Its a shame Win10 isn't shipping with a Windows store only policy for installs and some kind of OSX-like exception in the control panel for whitelisting. Devs would hate, IT departments would lose their shit, but in a few months we'd all be used to it and the internet would be much safer.
- joering2 11y ago
  This entire story was very weird, if you give Wired 100% credibility. It felt to me like Feds wanted to do everything in their power to put him down for lifetime, and I wouldn't be surprise if more skeletons come to the light. Namely, the part about him hiring a hit man was very fishy. First it was his coworker that agreed to helped Feds to play dead, but then you had some bikers performing multiple hits (supposedly all successful) on people Ross wanted dead. Uhm, so basically a motorbike gang agreed to play along with Feds, plus many "victims" agreed to disappear and play dead for months so that Ross is convinced all that money he paid the gang were for successful hits. Maybe in a Grisham book, but in real life things like that don't line up this good. Then Feds didn't hesitate to tell judge about all this, but then they decided not to use "evidence" of Ross ordering hits, and focus only on his drug business. So basically you have a judge that looks at a person that supposedly order multiple hits, who also created website to exchange some drugs. No wonder he got lifetime behind bars. I don't think drug dealers go to jail for lifetime. Another thing that struck me was allowing testimony of parents of a teen that drug himself to dead. Seriously? Sure, had not SR, he probably would have never found access to drugs somewhere else.. NOT. How about looking into the quality of their parenthood? Environment he lived in? His school and friends problems? etc etc. But no! Just exactly when was the last time you seen a family trying to shut down Ford car company and put the CEO behind bars because their two young children burnt to death in a car accident caused by a Ford vehicle?? EDIT: my point about Ford was that when did you see last time a car company CEO being found guilty and put in jail for lifetime because his company's vehicles are responsible for tens of thousands of deaths, including young children. (never)
  - tedunangst 11y ago
    People sue Ford and other car companies on a somewhat regular basis.
  - emodendroket 11y ago
    > Just exactly when was the last time you seen a family trying to shut down Ford car company and put the CEO behind bars because their two young children burnt to death in a car accident caused by a Ford vehicle?? Are you joking?
  - 11y ago
- jimbobimbo 11y ago
  There's a conclusion of that story: http://www.wired.com/2015/05/silk-road-2/ http://www.wired.com/2015/05/silk-road-2/
  - DaveWalk 11y ago
    Oh yes -- weird it's not prominent on the initial story. I've edited myself.
- chejazi 11y ago
  A Bitcoin transaction between two parties is itself pretty obscure. As others have said, "mixing" techniques like CoinJoin [0] allow for much greater obscurity. The big misunderstanding is with services that use Bitcoin; for example, the agreement to send $50k in Bitcoin was probably in a message log in a Silk Road database. [0] https://en.wikipedia.org/wiki/CoinJoin https://en.wikipedia.org/wiki/CoinJoin
  - ocb 11y ago
    As far as I know, all dark net markets (including Silk Road when it was around) strongly recommend that you encrypt all text containing sensitive information using PGP. They don't force you to, though.
    - chejazi 11y ago
      If PGP was used, I wonder with what security each party guarded their PGP key. I could imagine DPR's PGP key getting compromised following his arrest. This would reveal half of the conversation -- likely enough to spawn an investigation of the DEA agent.
- granfalloon 11y ago
  At the time his transactions may have been difficult to trace, but now we have tools like Wallet Explorer, which make his wrongdoing pretty clear: https://www.walletexplorer.com/wallet/08363b86122e340c https://www.walletexplorer.com/wallet/08363b86122e340c (That's the 770 BTC payment references in this article: http://motherboard.vice.com/read/how-a-two-timing-dea-agent-got-busted-for-making-money-off-the-silk-road http://motherboard.vice.com/read/how-a-two-timing-dea-agent-...)
deadmik3 11y ago
I will say that I'd like to see a movie about the investigation, if it's done well. I'm a sucker for all these new tech-bio-pic movies.
- fnordfnordfnord 11y ago
  They could get the folks who did Zero Dark Thirty to make it!
- sopooneo 11y ago
  I'm with you. And now that eventual movie will have to include the parts about the planning of an initial movie for which payments to the DEA agent went unreported.
- sopooneo 11y ago
  I'm with you. And now that eventual movie will have to include the parts about the planning of an initial movie for which payments to the DEA agent went unreported.
Ensorceled 11y ago
I'm amazed at how often the defence story in these cases, "He had a stellar, 15-year career with the DEA except for this one blip.", is accepted at face value. I imagine a smart, experienced, undercover DEA agent would be very difficult to catch breaking the law.
- Zigurd 11y ago
  What are the odds that he decides his first and last heist is multiple hundreds of thousands of dollars of bitcoin? I'd bet anyone dinner this asshole has been stealing from drug busts routinely for years.
  - ars 11y ago
    If he's smart the odds are pretty good. The "best" type of crime you do just once and never again, and if you do a crime once you might as well make it a lucrative one.
    - Zigurd 11y ago
      How many such "unicorn" crimes exist in the real world? Many more criminals started small time and got bigger.
      - ars 11y ago
        Very few. That's exactly why it's so hard to catch, which is why I called it the "best" type. The smarter the criminal the more likely he is to engage in this type. Most criminals are pretty stupid.
- tedunangst 11y ago
  There are only two kinds of criminals. The "long history of violence and trouble" type and the "honors student with a lapse in judgement" type. Same thing whenever somebody goes on a shooting rampage. All the neighbors either say "I always knew there was something strange with that boy" or they say "I can't believe it, he was such a sweet kid".
at-fates-hands 11y ago
He didn't just steal bitcoins either: Among the crimes he confessed to, Force said he had agreed to a contract with 21st Century Fox last year to help make a film about the Silk Road investigation, without the permission of his supervisors. That deal called for him to be paid up to $240,000. Force also invested in a company that brokered Bitcoin and served as its chief compliance officer while still with the DEA. During his time with the company, Force used his position to seize $300,000 from a customer and transfer it to his private account, authorities said. This guy was dirty, probably from the get go. It really makes you wonder if this will give Ulbricht more life in a new trial. I mean, this guy did stuff that was flat out against the law, and really compromises his integrity with regards to the trial. There's no telling what other sketchy stuff he did to get this conviction. And he's not the only dirty cop who was on the case either: http://www.coindesk.com/secret-service-plead-guilty-silk-road/ http://www.coindesk.com/secret-service-plead-guilty-silk-roa... US Secret Service special agent Shaun Bridges will plead guilty to charges of money laundering and wire fraud stemming from the government investigation into the illicit online black market Silk Road. This case is rife with corruption
- tedunangst 11y ago
  > I mean, this guy did stuff that was flat out against the law, and really compromises his integrity with regards to the trial. There's no telling what other sketchy stuff he did to get this conviction. What did Force say at Ulbricht's trial?
- tptacek 11y ago
  Can you be specific about how this compromises the Ulbricht trial? Start from the indictment, make a list of the facts that the prosecution had to establish, and find the places where they relied on Force. From what I can tell, this case was over as soon as they managed to get Ulbricht's unlocked laptop.
  - fnordfnordfnord 11y ago
    In sentencing, prosecutors submitted a number of comments alluding to Ulbricht's alleged but not proven in trial murder for hire plots. The assumed motive for these alleged murder plots was the actual theft of bitcoins which we now learn was perpetrated by government agents and witnesses against Ulbricht.
tiatia 11y ago
I am not a lawyer but I wonder about the legal basis behind it. Bitcoins are not a legal currency. If you copy a software it is also not "stealing" but has to do with copyright and special laws (in the codified law systems) had to be made up for this. I am curious if we have a lawyer here who can comment on this from a legal perspective. Again, Common Law and codified law may be very different here.
- jrochkind1 11y ago
  It may not be currency, but I think it's legally property. The IRS taxes it as income.
- ikeboy 11y ago
  If I social engineer you to transfer money from your bank account to mine, did I do anything illegal? Only bits moved around in the bank database. Same here.
  - tiatia 11y ago
    You obviously know nothing about law, at least codified law.
    - ikeboy 11y ago
      In case it wasn't clear, I think that is illegal, and that it disproves the argument "bits therefore legal".
fnordfnordfnord 11y ago
Is this grounds to give Ulbricht a new trial?
- deleted 11y ago
  [deleted]
- DaveWalk 11y ago
  IANAL, but from what I remember of the Wired reporting the evidence and involvement of this officer was left out of the prosecution.
  - fnordfnordfnord 11y ago
    There was an earlier plea for a new trial and claims of a Brady violation (withholding this? evidence) that was denied. But the prosecutors' letter to the judge for sentencing was peppered with comments alluding to the alleged murder plots, which are directly related to the work done on the case by agents Force and Bridges. http://cryptome.org/2015/05/ulbricht-256.pdf http://cryptome.org/2015/05/ulbricht-256.pdf
- gamblor956 11y ago
  No. Ulbricht was charged in multiple jurisdictions for multiple crimes. Force was not involved in the trial in which Ulbricht was convicted, and the murder-for-hire charges were not brought up during the trial. The murder-for-hire charges were brought up during the sentencing phase (after guilt was adjudicated). Normally, judges generally use the Federal Sentencing Guidelines to determine the length of a federal prison sentence, so that sentences are "normalized" across crimes and defendants. (The Guidelines are no longer mandatory, after the 2005 Booker case.) Judges will also consider evidence calling for a reduced (or extended) sentence than the Guidelines would impose. In this case, the Guidelines called for life imprisonment. The murder-for-hire charges were introduced at the sentencing hearings to counter evidence provided of Ulbricht's good character. Even if the murder-for-hire charges had not been brought up at sentencing, Ulbricht still faced life in prison. Bringing them up in sentencing merely sealed his fate.
sarciszewski 11y ago
Elephant in the room question: Is anyone really surprised by this turn of events? I thought it was common knowledge that the DOJ is irredeemably corrupt, that they don't care about the rights of their citizens (let alone human rights outside our borders) and that they cannot be trusted with anything. I always thought everyone knew that neither the FBI/NSA with their massive domestic spying campaigns, the DEA with its fallacious war on drugs, nor local police with their rampant violence (esp. towards minorities) can or should ever be trusted. Did people really not expect this outcome? Civil forfeiture really should have made the case that law enforcement is nothing but crooks and scoundrels. https://www.youtube.com/watch?v=3kEpZWGgJks https://www.youtube.com/watch?v=3kEpZWGgJks http://www.copblock.org/ http://www.copblock.org/
- rhino369 11y ago
  >I thought it was common knowledge that the DOJ is irredeemably corrupt, That is essentially the opposite of the common knowledge of the DOJ. In the legal world, they are seen as very good lawyers who only take on cases they can win. They are also civicly minded because they could make WAY more money in private practice. Sounds like you are treating people who disagree with you on some issues as irredeemably evil.
  - sarciszewski 11y ago
    > They are also civicly minded because they could make WAY more money in private practice. What's more addicting: money, or the ability to ruin the lives of people you personally despise?
    - tedunangst 11y ago
      Is that what happened to Ulbricht? How did the US Attorney even know who Ulbricht was to personally despise him?
      - sarciszewski 11y ago
        No, Ulbricht screwed himself when he decided to document, in excruciating detail, every event of his life (including all of his crimes). I'm talking more abstract: Police brutality against anyone poor or black, the FBI's war on hackers by exploiting the vagueness of the CFAA, etc. Sometimes the DOJ dogs (including federal prosecutors) direct this incredible destructive capability at people who, arguably, deserve it. But not always. My question wasn't about Ulbricht. It was simply, "Is anyone really surprised that Force (and other agents involved in this case) turned out to be corrupt?" I'm only surprised they're being prosecuted for it. :P
im3w1l 11y ago
He has been charged with money laundering. Is using a bitcoin tumbler illegal?
- yuncun 11y ago
  It's the laundering money part that's illegal. Like toothpicks aren't inherently illegal but if you use one to kill someone, then that's illegal.
B4CKlash 11y ago
This is a slight exaggeration but.... I've always secretly wanted the death penalty (insert other serve punishment) for cases like these. This type of corruption & abuse of power systematically reduces our overall faith in the government and should be treated as a high crime (i.e. Treason). We commonly use deterrence as a means to justify strict punishments when convicting drug crimes, but politicians\law enforcement\etc seem to avoid these dragnets. Why can't we hold them to a higher standard? I mean... there's something 'bone chillingly' wrong about an oath-taking public servant poisoning the well. /rant
- fnordfnordfnord 11y ago
  Agree with the sentiment but I think the death penalty is increasingly problematic when it concerns government corruption (like have your political opponents executed problematic). >Why can't we hold them to a higher standard? Because we trust them to police themselves, their peers.
  - CodeCube 11y ago
    the age old question of, who watches the watchers
- tedunangst 11y ago
  It would be interesting to compile an analysis of exactly such sentences. It wouldn't surprise me to learn that judges do hand down harsher sentences precisely because law enforcement officers should know better. I think there are many impediments to prosecuting corruption, but once it gets to sentencing, my gut instinct is that it's not easy on the guilty.
- prawn 11y ago
  And for significant corporate crimes too. Often government employees don't get paid like corporate executives so I think it'd be unfair if they alone were held to a higher standard.
nkurz 11y ago
I want to remind international readers that confessions by a defendant in an American often have little to do with truth, but with calculated odds. One should not assume that just because a defendant "admits" to having done any particular act, that they actually did so. While the confession provides some evidence that the defendant is guilty of something (to the extent that this makes them more likely to be found guilty by a jury of a particular set of charges) the exact details of a confession should be trusted less than the details that result from a full trial. The confession is a charade, usually coordinated in advance with the prosecution. Almost never is the confession made because the defendant suddenly realizes that wrongness of their actions, and simply wants to avoid burdening everyone with the effort of a lengthy trial. Instead, the defendant is threatened with a terrible punishment, and told that unless they cooperate the chances are high (regardless of their actual guilt) that this punishment will occur. They are offered (or offer on their own) a "plea bargain", where if they confess to a subset of the crimes with which they are charged, they can willingly accept a smaller (though often substantial) punishment. The contents of the admission are a negotiation between the defendant and the prosecutor. If the prosecutor demands that you confess to being a witch, and that if you don't confess to being a witch there is a high likelihood that you will spend the rest of your life in jail being raped by unpleasant men, you don't quibble about whether or not you are actually a witch. You weigh the chances of a potentially unjust conviction with a horrible outcome against the chances that your lawyer will convince a jury that the charges are false, and if the odds are against you, you confess to being a witch in all the detail the prosecutor requests. The harsher the punishment the defendant willingly accepts in the "plea bargain", the more likely the admission was made under the duress of an even more severe punishment. The accuracy of the details of the confession are equivalent to a confession under torture. In torture, the punishment begins and in agony you are willing to confess to anything in hope that the punishment will stop. In the plea bargaining system, you are threatened with a terrible punishment and confess to anything in hopes that the punishment will not start. In neither case should the details of the confession be treated as true. So while I presume this agent did lots of bad things, and probably stole the bitcoins in question, realize that the details of the admission are a just a plausible story written by someone wielding great power, signed under duress by a defendant justifiably scared of this power. In the absence of outside evidence, the exact details should no more be treated as "true" than the dying confessions of a man broken on the wheel.
fredgrott 11y ago
you guys are missing the point.. Should the US prosecutor be allowed to withhold evidence of this crime when the SilkRoad founder was tried and sentenced..I say no as oges towards the idea of entrapment, etcf
- meepmorp 11y ago
  Can you expand on how this would relate to entrapment? The story doesn't seem to indicate that the scam induced DPR to commit a crime he otherwise might not have engaged in.
  - dopamean 11y ago
    People throw around the word entrapment a lot without really understanding what it means.
    - meepmorp 11y ago
      That's kinda what I was guessing, but I'm willing to consider an argument.
  - Zigurd 11y ago
    He was enticed into a the murder for hire scheme by the agent who was stealing from the evidence, by pinning the theft on the object of the murder for hire plot. Doesn't get much dirtier than that.
    - meepmorp 11y ago
      Is there any evidence for that?
      - Zigurd 11y ago
        Yes. In the case against Mark Force.

156 points by jbrooksuk 11y ago

I had wondered what would happen to the DEA agent mentioned in the big Wired stories[0][1]. As a Bitcoin novice, I was left wondering: is it a common misconception that Bitcoin is anonymous? Or rather, just how easy is it to trace someone's transactions if you know their wallet ID? [0] http://www.wired.com/2015/04/silk-road-1/ http://www.wired.com/2015/04/silk-road-1/ [1] http://www.wired.com/2015/05/silk-road-2/ http://www.wired.com/2015/05/silk-road-2/

kilovoltaire 11y ago
Bitcoin transactions are stored in the public Blockchain, so if you know a wallet ID then you can see every transaction it's ever been involved in. So if you want anonymity you have to be careful that no one can connect you to a wallet ID.
- Vexs 11y ago
  You can also use a tumbler, which is basically where you and several other people all run your coins into one wallet, and then withdraw random amounts up to the amount you put in. Obviously the issue there is someone needs to keep track of who has how much in the tumbler, but I imagine there's services out there.
  - glomph 11y ago
    That would be a bad tumbler design. A better design pays you out in bitcoins that have no connection to the bitcoins you paid in. Say you pay into wallet A and someone else pays into wallet B then you could get paid entierly out of wallet B. Then the only person who could follow the path would be the owner of wallets A and B.
    - DaveWalk 11y ago
      I see -- I think the above argument is that the tumbling service, i.e. owner of wallets A and B, has the evidence of laundering. Concentrated in one place it's easier to protect, and easier to attack, I guess?
      - kerkeslager 11y ago
        No, it has nothing to do with where it's concentrated; I don't know of any tumbler designs that aren't concentrated in one place. It has to do with that if Alice gets a Bitcoin by selling uncensored newspapers in China, transfers it to wallet A in the tumbler, and then the tumbler transfers that to Alice's Coinbase account, Alice is going to jail. The transaction record tells us that Alice's Bitcoin came from the uncensored newspaper through an intermediary. The Chinese government can then arrest Alice on suspicion of selling illegal newspapers. At that point Alice must either prove somehow that wallet A in the tumbler is owned by the person who really sold the newspapers (which will be impossible), or admit that she sold the newspapers and used a (bad) tumbler in an attempt to hide her transaction. That is to say, if there's a chain of transactions connecting Alice to the newspaper sale, the tumbler has provided Alice no anonymity. Contrast this with a more realistic tumbler design: the tumbler owner (let's call him Troy) deposits a bitcoin from Coinbase in wallet A. Alice is the first user of the tumbler, so she gets a bitcoin selling uncensored newspapers in China and deposits it in wallet B. The tumbler owner then forwards the coin from wallet A (minus a fee) into Alice's Coinbase account. Now Bob, as the second user of the tumbler, comes along and deposits a coin he got from selling LSD on the Silk Road into wallet C. Troy then sends the coin Alice got from selling uncensored newspapers (minus a fee) to Bob's Coinbase account. Alice now has a coin from Coinbase, Bob has a coin from Alice's sale of an uncensored newspaper in China, and Troy the tumbler operator has a coin sitting in wallet C waiting for the next person to use the tumbler. The Chinese government has no way to track the transactions to Alice. IF Bob lives in China the Chinese government could come and accuse him of selling uncensored newspapers, but the accusation would make no sense; he has alibis for some of the days newspapers were sold, he's not educated enough to write, etc., because he didn't sell the newspapers. Bob can even say he used a tumbler, but he used it because he purchased a lot of bondage pornography: embarrassing, but not illegal. But more likely than not, Bob won't even be accused of Alice's crimes, either because he lives in a different country or because the accusations won't make any sense. Both Alice and Bob's anonymity has been protected.
  - tedunangst 11y ago
    Sounds like Mt. Gox. You deposited your coins, then withdrew a "random" amount.
    - jerf 11y ago
      It seems to be a very popular de facto design in the BitCoin world, yes.
- jnbiche 11y ago
  There is no concept of "wallet ID" in Bitcoin transactions as transmitted over the wire. There are only input and output values in transactions (which do have an ID number). If you know someone is connected to a given input, then you can trace them through any outputs to other parties. So it's not quite as simple as a "wallet ID". The transactions in given Bitcoin wallet software may be connected to each other (by the mechanism I describe above), but are not necessarily connected, particularly if you generate a new address for each transaction for which you are the receiving party (and/or take additional precautionary measures). It's entirely possible to have a wallet full of untraceable transactions.
danielbln 11y ago
The bitcoin blockchain is a public ledger. Unless a mixing service is involved, you can trace back each transaction to an origin easily. If that origin can be linked to a person (e.g. through a trade service that knows bank details and other personal data) then you are no longer anonymous. Moving coins around a few times to different wallets/addresses makes plausible deniability easier and the trace harder, but if you are a high profile target, you probably want to be more thorough with obfuscating and/or outright disrupting the path through the blockchain that eventually leads back to you. A mixing service will basically perform money laundering for you, disrupting the direct path back to your initial transaction. tl;dr: It can be anonymous, but by default it's not really.
- DaveWalk 11y ago
  Thanks for the detailed followup. Is there any case precedent for prosecuting money laundering like this? It seems to me that the path can still be rebuilt. I guess the criminality depends on the crime and the jurisdiction? (And the law. Obviously I'm not a lawyer, lol.)
  - itake 11y ago
    don't know about the legal side, but from a technical side, the laundering services pool all of their client's money together in one churning pot. Which makes it very difficult to see whose money is actually going where.
- emergentcypher 11y ago
  Especially if you move your coins through different wallets a few times to obfuscate, and then consolidate them back into the same wallet where you attempt to convert it into cash... obfuscating the intermediary wallets isn't going to do you much good if it can be shown you control the starting and ending wallets. headdesk
navait 11y ago
bitcoin is pseudo-anynomous, since the blockchain is a public ledger of all transactions. Mixing services exist to help anonymize transactions, for example. For a technical solution on bitcoin privacy and providing anonymous bitcoin transactions, see: http://zerocoin.org/ http://zerocoin.org/
drzaiusapelord 11y ago
> is it a common misconception that Bitcoin is anonymous? On a practical level its anonymous. Its trivial to move coins around to various exchanges that makes it difficult or impossible to trace. Jurisdictions come into play here as well. If I steal some coins in the US and move them to a Latvian exchange, then a Russian one, then a Swiss one, then finally cash out in a Chinese one, who will be even able to track me down? Who will respect all these warrants? A real life example is what's going on with cryptolocker-like malware. People are paying hundreds of dollars in bitcoins to these ransomwares for almost two years now, yet there have been zero arrests. I imagine laundering bitcoins is easy to do as well by trading value in a shared pot. Hell, you could just trade one 'hot' wallet for another and again and again. Now the path is even more obfuscated.
- DaveWalk 11y ago
  That cryptolocker-like malware was particularly terrifying...is it still around? I wonder why it hasn't become more or less famous? Reminds me of ATM skimmers, also particularly terrifying. I imagine they are kept at a certain degree of popularity for the same reasons.
  - drzaiusapelord 11y ago
    Yes, I read /r/sysadmin, Brian Krebs, /r/netsec, etc everyday (Sysadmining and securing our environment is one of my job responsibilities) and its not only out there, its gotten bigger. I see it blocked on my firewall, filtered out in our mail, etc. More players have entered the market (there are several active variants now) and the malware is smarter. The malware uses new tricks to infect (html file in a zip file that just does a redirect to a exe hosted on the web), bundled with 'crimepacks' that perform multiple exploits at once (java, flash, etc), running as a word macro, running fully in memory to avoid disk write restrictions, etc. We've shored up our defenses significantly but unless we move to a whitelisted-only executable environment, then it will probably get through eventually. One of my chief complaints about Windows 10 is that it does absolutely nothing to solve the "download invoice.pdf.exe" problem Windows suffers from. At least in Linux that file needs to be given a +x and in OSX non-Apple signed executable need to be approved in the system settings. Windows is still the wild west. Its a shame MS didn't use Win10 as a way to lock things down to address today's threats. Signature based AV cannot move faster than a certain speed and malware like Cryptovariants move much, much faster than that. Heuristics are terrible for some reason on popular AV's and everyone is constantly getting infected. Yeah, leave exceptions for power users and enterprise, but by default it should not allow untrusted unsigned content to run by default. I told myself that if I ever start my own company that actually allows me to quit my dayjob it would be 100% OSX environment on the client-side. MS just doesn't take security very seriously, its targeted badly, and even the pro-netsec people at MS that want to be better with security are knocked down by the other politics of having 20-30 years of legacy support for ancient apps and not breaking anything. Its just not able to keep up with modern threats. Its a shame Win10 isn't shipping with a Windows store only policy for installs and some kind of OSX-like exception in the control panel for whitelisting. Devs would hate, IT departments would lose their shit, but in a few months we'd all be used to it and the internet would be much safer.
joering2 11y ago
This entire story was very weird, if you give Wired 100% credibility. It felt to me like Feds wanted to do everything in their power to put him down for lifetime, and I wouldn't be surprise if more skeletons come to the light. Namely, the part about him hiring a hit man was very fishy. First it was his coworker that agreed to helped Feds to play dead, but then you had some bikers performing multiple hits (supposedly all successful) on people Ross wanted dead. Uhm, so basically a motorbike gang agreed to play along with Feds, plus many "victims" agreed to disappear and play dead for months so that Ross is convinced all that money he paid the gang were for successful hits. Maybe in a Grisham book, but in real life things like that don't line up this good. Then Feds didn't hesitate to tell judge about all this, but then they decided not to use "evidence" of Ross ordering hits, and focus only on his drug business. So basically you have a judge that looks at a person that supposedly order multiple hits, who also created website to exchange some drugs. No wonder he got lifetime behind bars. I don't think drug dealers go to jail for lifetime. Another thing that struck me was allowing testimony of parents of a teen that drug himself to dead. Seriously? Sure, had not SR, he probably would have never found access to drugs somewhere else.. NOT. How about looking into the quality of their parenthood? Environment he lived in? His school and friends problems? etc etc. But no! Just exactly when was the last time you seen a family trying to shut down Ford car company and put the CEO behind bars because their two young children burnt to death in a car accident caused by a Ford vehicle?? EDIT: my point about Ford was that when did you see last time a car company CEO being found guilty and put in jail for lifetime because his company's vehicles are responsible for tens of thousands of deaths, including young children. (never)
- tedunangst 11y ago
  People sue Ford and other car companies on a somewhat regular basis.
- emodendroket 11y ago
  > Just exactly when was the last time you seen a family trying to shut down Ford car company and put the CEO behind bars because their two young children burnt to death in a car accident caused by a Ford vehicle?? Are you joking?
- 11y ago
jimbobimbo 11y ago
There's a conclusion of that story: http://www.wired.com/2015/05/silk-road-2/ http://www.wired.com/2015/05/silk-road-2/
- DaveWalk 11y ago
  Oh yes -- weird it's not prominent on the initial story. I've edited myself.
chejazi 11y ago
A Bitcoin transaction between two parties is itself pretty obscure. As others have said, "mixing" techniques like CoinJoin [0] allow for much greater obscurity. The big misunderstanding is with services that use Bitcoin; for example, the agreement to send $50k in Bitcoin was probably in a message log in a Silk Road database. [0] https://en.wikipedia.org/wiki/CoinJoin https://en.wikipedia.org/wiki/CoinJoin
- ocb 11y ago
  As far as I know, all dark net markets (including Silk Road when it was around) strongly recommend that you encrypt all text containing sensitive information using PGP. They don't force you to, though.
  - chejazi 11y ago
    If PGP was used, I wonder with what security each party guarded their PGP key. I could imagine DPR's PGP key getting compromised following his arrest. This would reveal half of the conversation -- likely enough to spawn an investigation of the DEA agent.
granfalloon 11y ago
At the time his transactions may have been difficult to trace, but now we have tools like Wallet Explorer, which make his wrongdoing pretty clear: https://www.walletexplorer.com/wallet/08363b86122e340c https://www.walletexplorer.com/wallet/08363b86122e340c (That's the 770 BTC payment references in this article: http://motherboard.vice.com/read/how-a-two-timing-dea-agent-got-busted-for-making-money-off-the-silk-road http://motherboard.vice.com/read/how-a-two-timing-dea-agent-...)

deadmik3 11y ago

I will say that I'd like to see a movie about the investigation, if it's done well. I'm a sucker for all these new tech-bio-pic movies.

fnordfnordfnord 11y ago
They could get the folks who did Zero Dark Thirty to make it!
sopooneo 11y ago
I'm with you. And now that eventual movie will have to include the parts about the planning of an initial movie for which payments to the DEA agent went unreported.
sopooneo 11y ago
I'm with you. And now that eventual movie will have to include the parts about the planning of an initial movie for which payments to the DEA agent went unreported.

Ensorceled 11y ago

I'm amazed at how often the defence story in these cases, "He had a stellar, 15-year career with the DEA except for this one blip.", is accepted at face value. I imagine a smart, experienced, undercover DEA agent would be very difficult to catch breaking the law.

Zigurd 11y ago
What are the odds that he decides his first and last heist is multiple hundreds of thousands of dollars of bitcoin? I'd bet anyone dinner this asshole has been stealing from drug busts routinely for years.
- ars 11y ago
  If he's smart the odds are pretty good. The "best" type of crime you do just once and never again, and if you do a crime once you might as well make it a lucrative one.
  - Zigurd 11y ago
    How many such "unicorn" crimes exist in the real world? Many more criminals started small time and got bigger.
    - ars 11y ago
      Very few. That's exactly why it's so hard to catch, which is why I called it the "best" type. The smarter the criminal the more likely he is to engage in this type. Most criminals are pretty stupid.
tedunangst 11y ago
There are only two kinds of criminals. The "long history of violence and trouble" type and the "honors student with a lapse in judgement" type. Same thing whenever somebody goes on a shooting rampage. All the neighbors either say "I always knew there was something strange with that boy" or they say "I can't believe it, he was such a sweet kid".

at-fates-hands 11y ago

He didn't just steal bitcoins either: Among the crimes he confessed to, Force said he had agreed to a contract with 21st Century Fox last year to help make a film about the Silk Road investigation, without the permission of his supervisors. That deal called for him to be paid up to $240,000. Force also invested in a company that brokered Bitcoin and served as its chief compliance officer while still with the DEA. During his time with the company, Force used his position to seize $300,000 from a customer and transfer it to his private account, authorities said. This guy was dirty, probably from the get go. It really makes you wonder if this will give Ulbricht more life in a new trial. I mean, this guy did stuff that was flat out against the law, and really compromises his integrity with regards to the trial. There's no telling what other sketchy stuff he did to get this conviction. And he's not the only dirty cop who was on the case either: http://www.coindesk.com/secret-service-plead-guilty-silk-road/ http://www.coindesk.com/secret-service-plead-guilty-silk-roa... US Secret Service special agent Shaun Bridges will plead guilty to charges of money laundering and wire fraud stemming from the government investigation into the illicit online black market Silk Road. This case is rife with corruption

tedunangst 11y ago
> I mean, this guy did stuff that was flat out against the law, and really compromises his integrity with regards to the trial. There's no telling what other sketchy stuff he did to get this conviction. What did Force say at Ulbricht's trial?
tptacek 11y ago
Can you be specific about how this compromises the Ulbricht trial? Start from the indictment, make a list of the facts that the prosecution had to establish, and find the places where they relied on Force. From what I can tell, this case was over as soon as they managed to get Ulbricht's unlocked laptop.
- fnordfnordfnord 11y ago
  In sentencing, prosecutors submitted a number of comments alluding to Ulbricht's alleged but not proven in trial murder for hire plots. The assumed motive for these alleged murder plots was the actual theft of bitcoins which we now learn was perpetrated by government agents and witnesses against Ulbricht.

tiatia 11y ago

I am not a lawyer but I wonder about the legal basis behind it. Bitcoins are not a legal currency. If you copy a software it is also not "stealing" but has to do with copyright and special laws (in the codified law systems) had to be made up for this. I am curious if we have a lawyer here who can comment on this from a legal perspective. Again, Common Law and codified law may be very different here.

jrochkind1 11y ago
It may not be currency, but I think it's legally property. The IRS taxes it as income.
ikeboy 11y ago
If I social engineer you to transfer money from your bank account to mine, did I do anything illegal? Only bits moved around in the bank database. Same here.
- tiatia 11y ago
  You obviously know nothing about law, at least codified law.
  - ikeboy 11y ago
    In case it wasn't clear, I think that is illegal, and that it disproves the argument "bits therefore legal".

fnordfnordfnord 11y ago

Is this grounds to give Ulbricht a new trial?

deleted 11y ago
[deleted]
DaveWalk 11y ago
IANAL, but from what I remember of the Wired reporting the evidence and involvement of this officer was left out of the prosecution.
- fnordfnordfnord 11y ago
  There was an earlier plea for a new trial and claims of a Brady violation (withholding this? evidence) that was denied. But the prosecutors' letter to the judge for sentencing was peppered with comments alluding to the alleged murder plots, which are directly related to the work done on the case by agents Force and Bridges. http://cryptome.org/2015/05/ulbricht-256.pdf http://cryptome.org/2015/05/ulbricht-256.pdf
gamblor956 11y ago
No. Ulbricht was charged in multiple jurisdictions for multiple crimes. Force was not involved in the trial in which Ulbricht was convicted, and the murder-for-hire charges were not brought up during the trial. The murder-for-hire charges were brought up during the sentencing phase (after guilt was adjudicated). Normally, judges generally use the Federal Sentencing Guidelines to determine the length of a federal prison sentence, so that sentences are "normalized" across crimes and defendants. (The Guidelines are no longer mandatory, after the 2005 Booker case.) Judges will also consider evidence calling for a reduced (or extended) sentence than the Guidelines would impose. In this case, the Guidelines called for life imprisonment. The murder-for-hire charges were introduced at the sentencing hearings to counter evidence provided of Ulbricht's good character. Even if the murder-for-hire charges had not been brought up at sentencing, Ulbricht still faced life in prison. Bringing them up in sentencing merely sealed his fate.

sarciszewski 11y ago

Elephant in the room question: Is anyone really surprised by this turn of events? I thought it was common knowledge that the DOJ is irredeemably corrupt, that they don't care about the rights of their citizens (let alone human rights outside our borders) and that they cannot be trusted with anything. I always thought everyone knew that neither the FBI/NSA with their massive domestic spying campaigns, the DEA with its fallacious war on drugs, nor local police with their rampant violence (esp. towards minorities) can or should ever be trusted. Did people really not expect this outcome? Civil forfeiture really should have made the case that law enforcement is nothing but crooks and scoundrels. https://www.youtube.com/watch?v=3kEpZWGgJks https://www.youtube.com/watch?v=3kEpZWGgJks http://www.copblock.org/ http://www.copblock.org/

rhino369 11y ago
>I thought it was common knowledge that the DOJ is irredeemably corrupt, That is essentially the opposite of the common knowledge of the DOJ. In the legal world, they are seen as very good lawyers who only take on cases they can win. They are also civicly minded because they could make WAY more money in private practice. Sounds like you are treating people who disagree with you on some issues as irredeemably evil.
- sarciszewski 11y ago
  > They are also civicly minded because they could make WAY more money in private practice. What's more addicting: money, or the ability to ruin the lives of people you personally despise?
  - tedunangst 11y ago
    Is that what happened to Ulbricht? How did the US Attorney even know who Ulbricht was to personally despise him?
    - sarciszewski 11y ago
      No, Ulbricht screwed himself when he decided to document, in excruciating detail, every event of his life (including all of his crimes). I'm talking more abstract: Police brutality against anyone poor or black, the FBI's war on hackers by exploiting the vagueness of the CFAA, etc. Sometimes the DOJ dogs (including federal prosecutors) direct this incredible destructive capability at people who, arguably, deserve it. But not always. My question wasn't about Ulbricht. It was simply, "Is anyone really surprised that Force (and other agents involved in this case) turned out to be corrupt?" I'm only surprised they're being prosecuted for it. :P

im3w1l 11y ago

He has been charged with money laundering. Is using a bitcoin tumbler illegal?

yuncun 11y ago
It's the laundering money part that's illegal. Like toothpicks aren't inherently illegal but if you use one to kill someone, then that's illegal.

B4CKlash 11y ago

This is a slight exaggeration but.... I've always secretly wanted the death penalty (insert other serve punishment) for cases like these. This type of corruption & abuse of power systematically reduces our overall faith in the government and should be treated as a high crime (i.e. Treason). We commonly use deterrence as a means to justify strict punishments when convicting drug crimes, but politicians\law enforcement\etc seem to avoid these dragnets. Why can't we hold them to a higher standard? I mean... there's something 'bone chillingly' wrong about an oath-taking public servant poisoning the well. /rant

fnordfnordfnord 11y ago
Agree with the sentiment but I think the death penalty is increasingly problematic when it concerns government corruption (like have your political opponents executed problematic). >Why can't we hold them to a higher standard? Because we trust them to police themselves, their peers.
- CodeCube 11y ago
  the age old question of, who watches the watchers
tedunangst 11y ago
It would be interesting to compile an analysis of exactly such sentences. It wouldn't surprise me to learn that judges do hand down harsher sentences precisely because law enforcement officers should know better. I think there are many impediments to prosecuting corruption, but once it gets to sentencing, my gut instinct is that it's not easy on the guilty.
prawn 11y ago
And for significant corporate crimes too. Often government employees don't get paid like corporate executives so I think it'd be unfair if they alone were held to a higher standard.

nkurz 11y ago

I want to remind international readers that confessions by a defendant in an American often have little to do with truth, but with calculated odds. One should not assume that just because a defendant "admits" to having done any particular act, that they actually did so. While the confession provides some evidence that the defendant is guilty of something (to the extent that this makes them more likely to be found guilty by a jury of a particular set of charges) the exact details of a confession should be trusted less than the details that result from a full trial. The confession is a charade, usually coordinated in advance with the prosecution. Almost never is the confession made because the defendant suddenly realizes that wrongness of their actions, and simply wants to avoid burdening everyone with the effort of a lengthy trial. Instead, the defendant is threatened with a terrible punishment, and told that unless they cooperate the chances are high (regardless of their actual guilt) that this punishment will occur. They are offered (or offer on their own) a "plea bargain", where if they confess to a subset of the crimes with which they are charged, they can willingly accept a smaller (though often substantial) punishment. The contents of the admission are a negotiation between the defendant and the prosecutor. If the prosecutor demands that you confess to being a witch, and that if you don't confess to being a witch there is a high likelihood that you will spend the rest of your life in jail being raped by unpleasant men, you don't quibble about whether or not you are actually a witch. You weigh the chances of a potentially unjust conviction with a horrible outcome against the chances that your lawyer will convince a jury that the charges are false, and if the odds are against you, you confess to being a witch in all the detail the prosecutor requests. The harsher the punishment the defendant willingly accepts in the "plea bargain", the more likely the admission was made under the duress of an even more severe punishment. The accuracy of the details of the confession are equivalent to a confession under torture. In torture, the punishment begins and in agony you are willing to confess to anything in hope that the punishment will stop. In the plea bargaining system, you are threatened with a terrible punishment and confess to anything in hopes that the punishment will not start. In neither case should the details of the confession be treated as true. So while I presume this agent did lots of bad things, and probably stole the bitcoins in question, realize that the details of the admission are a just a plausible story written by someone wielding great power, signed under duress by a defendant justifiably scared of this power. In the absence of outside evidence, the exact details should no more be treated as "true" than the dying confessions of a man broken on the wheel.

fredgrott 11y ago

you guys are missing the point.. Should the US prosecutor be allowed to withhold evidence of this crime when the SilkRoad founder was tried and sentenced..I say no as oges towards the idea of entrapment, etcf

meepmorp 11y ago
Can you expand on how this would relate to entrapment? The story doesn't seem to indicate that the scam induced DPR to commit a crime he otherwise might not have engaged in.
- dopamean 11y ago
  People throw around the word entrapment a lot without really understanding what it means.
  - meepmorp 11y ago
    That's kinda what I was guessing, but I'm willing to consider an argument.
- Zigurd 11y ago
  He was enticed into a the murder for hire scheme by the agent who was stealing from the evidence, by pinning the theft on the object of the murder for hire plot. Doesn't get much dirtier than that.
  - meepmorp 11y ago
    Is there any evidence for that?
    - Zigurd 11y ago
      Yes. In the case against Mark Force.