Shocking revelations came out this week that two US Agents who were heavily involved with the Silk Road case are being charged with extortion, fraud, and embezzlement. The criminal complaint against former DEA agent Carl Mark Force IV and former Secret Service agent Shaun Bridges alleges money laundering, wire fraud, theft of government property, and more. The agents appear to have threatened and extorted the head of the Silk Road, Ross Ulbricht, using multiple aliases. Furthermore, DEA Agent Force was working as the defacto Compliance Officer and investor for a Bitcoin Exchange called COINMKT, an obvious conflict of interest as they were investigating the largest Bitcoin Exchange at the time, Mt. Gox. Emails released by former Mt Gox CEO, Mark Karpeles, show one of the agents offering him his connections and services, but Karpeles didn't respond. Shortly thereafter, the US Govt seized 5M of Gox funds located in American bank accounts, and the same DEA agent emailed Karpeles and told him that he should have taken him up on his earlier offer.
Emails to Karpeles
Here's the kicker: When he was first arrested, Ross Ulbricht was accused of ordering a hit on an alleged thief who stole bitcoin from the Silk Road servers. The claim was important because it was championed by the US Govt as proof that Ulbricht was a hardened violent criminal. He has yet to be charged with that crime but it now turns out that the thief was Secret Service agent Shaun Bridges and the hitman was DEA agent Carl Mark Force IV.
The agents were caught after trying to cash out some of their stolen bitcoin on Bitstamp which flagged their existing Anti-Money Laundering policies. Bitstamp then contacted the IRS who used the block chain to easily trace all the transactions to their sources. Although tools exist to make block chain analysis much more difficult, if not impossible, it appears that neither agent used any of those tools or tactics. This leads us to believe that both agents were operating under the assumption that bitcoin is anonymous rather than pseudonymous. It also shows how Bitcoin's decentralized ledger, and the transparency it provides, offers law enforcement the ability to trace transactions in a way that wouldn't be possible if cash were used. This case shows that money laundering is actually easier with cash than Bitcoin, and that existing regulations and law enforcement strategies are effective against criminals using Bitcoin.
There are a ton of intricate details to this case, and it reads like a fiction novel so I will now just direct you to further reading rather than try and dissect it all myself:
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