A $ 3 Billion Silk Road Seizure Will Erase Ross Ulbricht’s Debt

The strange series of events that ultimately led to Ulbricht’s restitution windfall first came to light in November 2020, when the Justice Department announced that it had seized nearly 70,000 bitcoins from someone it referred to only as Individual X. That unnamed individual, according to an IRS criminal investigations affidavit, had stolen the bitcoin fortune from the Silk Road while it was still online by exploiting a security vulnerability in the site. Ulbricht, according to the affidavit, went so far as to threaten Individual X personally in an attempt to persuade them to return the money. But instead, Individual X held onto the hoard of coins for more than seven years as the cryptocurrency appreciated massively in value. An IRS criminal investigation was able to trace the funds, identify Individual X, and persuade them to forfeit the stolen drug money to avoid criminal prosecution.

By the time nearly nearly 70,000 bitcoins were seized, they had grown to more than $ 1 billion in value — at the time, the largest ever criminal seizure ever carried out by the Justice Department. (That record has since been broken by the seizure of $ 3.6 billion from a New York couple accused of laundering the proceeds of the hack of the cryptocurrency exchange Bitfinex.)

In the time since that seizure, however, court records show that the Justice Department has fought off a series of seemingly frivolous claims to the bitcoins, which prevented it from immediately selling off the coins as it does with other seized cryptocurrency. That resulted in the bitcoins appreciating even more, to nearly $ 3 billion at current exchange rates. When the coins are eventually sold and that sum is added to the US treasury, it will easily cover Ulbricht’s restitution, with billions of dollars to spare.

Ulbricht’s mother, Lyn Ulbricht, who has championed her son’s defense and the case for a pardon since his arrest, wrote in a statement to WIRED that the repayment of his restitution represents a significant victory. “We are very pleased that the financial penalty that was wrongly imposed on Ross has been reversed, just as other false charges against him were dropped in federal court after trial,” Ulbricht’s mother writes, referring to a separate murder-for-hire charge. in the District of Maryland that was dropped after Ulbricht’s life sentence. “This is just another reminder that the case against Ross has always been misrepresented and weak, and we look forward to the day when Ross’ unjust sentence is corrected and he returns to the free world where he can contribute to society.”

She notes, however, that like any prisoner, her son cannot hold any financial assets in prison beyond a commissary account for basic needs. Recent sales of NFTs based on Ulbricht’s artwork, for instance, raised more than $ 6 millionbut the funds went into a trust earmarked for Ulbricht’s defense, she says, as well as charitable contributions to other prisoners and their families.

The restitution repayment does not mean much for Ulbricht’s hopes of a pardon or a change to his sentence, argues Berkeley’s Weaver. But it does do away with a restitution order that Weaver has always considered a misguided “blood from a stone” attempt to squeeze Ulbricht for more bitcoins.

“Somebody involved in the early days of Silk Road is no longer the subject of the fed’s ire, the fed’s got their restitution, and Ross no longer has that stupidity hanging over him,” Weaver concludes. “Seems like a win-win-win for all involved.”

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