Ross Ulbricht’s sentencing is fear for bitcoin – Bitcoin Magazine
This is an opinion editorial by Aaron Daniel, an appellate attorney and author of “The Bitcoin Brief,” and William D. Mueller, an appellate attorney with a nationwide practice.
After a multi-week trial in Manhattan’s United States District Court for the Southern District of New York, Ross Ulbricht, the creator and operator of Silk Road – one of the first marketplaces that exclusively used bitcoin – was sentenced to die in prison. The jury deliberated for just three and a half hours before convicting Ulbricht of the seven counts charged by the US government: distribution of narcotics, distribution of narcotics by means of the Internet, conspiracy to distribute narcotics, engaging in a continuing criminal enterprise , conspiring to commit computer hacking, conspiring to trade with false identity documents and conspiring to commit money laundering.
For these convictions, Ulbricht was sentenced to five different sentences:
- One for 20 years,
- One for 15 years,
- One for five, and
- two for life.
Ulbricht is serving the sentences concurrently, without the possibility of parole.
The sentence handed down by the district court judge – two life sentences plus forty years – sent shock waves through the financial technology community, where many believed the sentence was disproportionate to the crime. After all, not one of Ulbricht’s seven convictions included charges of violent conduct.
Looking back on it a decade later, it appears that the harsh judgment requested by the US government was driven, at least in part, by a desire to stop the US dollar. Indeed, fiat is supported by the state’s monopoly on violence, which in Ulbricht’s case manifested itself through extreme prosecutorial power.
Using Bitcoin, Mixing and Tor
First, it is worth taking a look at what factors played a role in Ulbricht’s sentencing. Under current U.S. sentencing guidelines, a mandatory minimum sentence of 20 years was required for three of Ulbricht’s convictions, and a maximum sentence of seven years for two others. As the sentences can be served concurrently, Ulbricht could in theory have been sentenced to only a 20-year term. Still, in the U.S. government’s sentencing brief, the U.S. Attorney for the Southern District of New York asked the court to “impose a lengthy sentence, one substantially above the mandatory minimum of 20 years.”
Why? In the wake of Ulbricht’s sentencing, the U.S. Attorney for the Southern District of New York maintained that the prosecution stemmed from Ulbricht’s involvement with drugs and narcotics: “Make no mistake: Ulbricht was a drug dealer and criminal profiteer who exploited people’s addictions and contributed to the deaths of at least six young people.”
But the US attorney also made a point to highlight Ulbricht’s use of Bitcoin as the payment method that promotes the anonymity provided by Silk Road:
“Ulbricht deliberately operated Silk Road as an online criminal marketplace to enable its users to buy and sell drugs and other illegal goods and services anonymously and beyond the reach of law enforcement… Ulbricht designed Silk Road to include a Bitcoin-based payment system which served to facilitate the illegal trade conducted on the website, including by concealing the identity and location of the users transferring and receiving funds through the website.”
How much of a role did Ulbricht’s decision to implement bitcoin, and a bitcoin mixer (or tumbler), play in his sentence? It is hard to say.
Ulbricht’s sentence was supposed to be steep from the start given that the criminal laws Ulbricht was sentenced under were used to make him responsible for Total quantity of drugs and drugs exchanged through the Silk Road. The more drugs trafficked, the higher the recommended initial sentence. But it should be noted that this loose interpretation of conspiracy has been criticized as a misapplication of the statute.
In a standard conspiracy, all conspirators are aware of each other and agree to commit the crime multilaterally. With the Silk Road, there was not one big multilateral agreement, but many separate and distinct bilateral agreements between the website and each individual seller, many separate conspiracies, in other words. Leaving aside this malpractice, by bundling the agreements between each user and the site into one massive criminal conspiracy, Ulbricht was charged with aiding and abetting the transfer of 60,720 kilos of cocaine, heroin and meth.
From this starting point, the sentencing judge applied several sentencing enhancements—aggravating factors that increase the recommended prison sentence in the U.S. Sentencing Guidelines, including those stemming from allegations that Ulbricht paid for murder-for-hire in connection with the Silk Road (the sentencing). judge ruled that “there is ample and unequivocal evidence that Ulbricht ordered five murders as part of his efforts to protect his criminal enterprise and that he paid for these murders.”). These allegations were not fully presented or proven during the conviction phase of the New York prosecution, and because of this, Ulbricht’s lawyers could have challenged their admission at the sentencing phase. But the defense refused to do so, and thus the murder evidence was admitted and became a key aggravating factor.
And Bitcoin itself was categorized as an aggravating factor. Ulbricht’s hacking was enhanced due to his use of “sophisticated means.” The judge cited “the use of Tor that required a degree of sophistication, the bitcoin tumbler of course, [and] the use of stealth entries’ as the basis for the improvement.
These enhancements increased Ulbricht’s proposed prison sentence under the federal sentencing guidelines to the maximum amount: life in prison, twice over.
Competition with the dollar
Many of Ulbricht’s supporters have cited the prison sentence as disproportionate to the crime. They may have a point. Ulbricht’s sentence far exceeded the average federal sentence for drug offenders — about six years. As a first-time offender of a non-violent crime, Ulbricht’s sentence was eight times more severe than the sentence given to former Minneapolis police officer Derek Chauvin for fatally kneeling on George Floyd’s neck for nine and a half minutes. His double life sentence is more in line with convictions handed down to serial killers, serial rapists and child abusers.
Thus, by examining prosecutorial statements, the judge’s rulings, the federal sentencing guidelines, and average sentences for other, more reprehensible crimes, it appears that Ulbricht’s extreme sentence is, at least in part, due to the U.S. government’s concern over Ulbricht’s use of bitcoin as the exclusive, the pseudonymous payment system for the Silk Road.
That the US government liberally used its prosecutorial authority against Ulbricht and the Silk Road to deter competition against the dollar becomes clearer when placed in context with other aggressive prosecutions of users and promoters of alternative currencies.
Take Bernard von NotHaus, the founder of the National Organization for the Repeal of the Federal Reserve Act (NORFED). The NotHaus organization created the Liberty Dollar, a private exchange system of coins and notes backed by specific weights of gold and silver. In 2009, NotHaus was arrested and charged with conspiracy and forgery, despite marketing the Liberty Dollar as a competitor to the US dollar, not the genuine article. Prosecutors sought a sentence of 14 to 17 years for the septuagenarian (essentially a life sentence), and issued a press release outlining the private ransom as “a unique form of domestic terrorism.” Fortunately for NotHaus, cooler heads prevailed and he was sentenced by the judge to a reasonable six months of house arrest.
And just last month, Mark Hopkins, a Bitcoin educator known as “Doctor Bitcoin,” pleaded guilty to charges of selling bitcoin peer-to-peer without a “money transmitter license,” in violation of Financial Crimes Enforcement Network (FinCEN) regulations . Hopkins, who is now serving six to fifteen months in federal prison, claimed that prosecutors forced him into the plea deal by threatening to charge his wife alongside him if he did not cooperate.
These cases, including Ulbricht’s, indicate that the US government is quick to use heavy-handed prosecutorial tactics for non-violent offenses against its currency. One can only imagine the fate that would have awaited Satoshi Nakamoto, had they not been pseudonymous.
This is a guest post by Aaron Daniel and William D. Mueller. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
