US Justice Department charges two former officials with stealing bitcoins during Silk Road investigation
Government agents allegedly siphoned off vast sums of the digital currency during investigation
PUBLISHED : Wednesday, 01 April, 2015, 4:07am
UPDATED : Wednesday, 01 April, 2015, 4:07am
The Washington Post
US Justice Department charges two former officials with stealing bitcoins during Silk Road investigation
The US Justice Department has charged two former federal officials with stealing hundreds of thousands of dollars in bitcoins during an investigation into a digital black market, according to court documents.
The two former officials - an agent at the Drug Enforcement Administration and a member of the US Secret Service - were told to build a case against the market, known as Silk Road, and its owner, who went by the online nickname "Dread Pirate Roberts". But while the agents conducted the probe, they secretly siphoned off vast sums of the digital currency that belonged to the investigation, the Justice Department alleges in documents unsealed on Monday.
The Secret Service agent, Shaun Bridges, was a computer forensics expert. Bridges allegedly stole US$800,000 worth of bitcoins, according to the government's complaint, and kept the illicit funds in a Tokyo-based Bitcoin exchange known as Mt Gox. Mt Gox infamously imploded last year after it admitted it had lost track of millions of dollars' worth of bitcoins.
The DEA official, Carl Force, was "the lead undercover agent in communication" with "Roberts" - a role that gave him the power to extort. Using a series of private, fictitious accounts on Silk Road, Force allegedly told "Roberts" he would bury evidence related to the case if "Roberts" paid him US$250,000.
In another instance, Force allegedly used a fake account named "French Maid" to sell "Roberts" confidential information related to the federal investigation. "Roberts" paid US$100,000 for the information, according to the complaint.
"Force and Bridges abused their positions as federal agents and engaged in a scheme to defraud a variety of third-parties, the public, and the government, all for their own financial enrichment," the complaint reads.
Steve Levin, a lawyer representing Bridges, said Bridges "maintains his innocence and will answer the charges at the appropriate time".
A lawyer representing Force did not immediately respond to a request for comment. Force was arrested on Friday; his detention hearing takes place tomorrow. Bridges turned himself in on Monday; his next court date is May 5, according to Levin.
In February, a federal jury convicted 30-year-old Ross Ulbricht of running Silk Road as Dread Pirate Roberts; Ulbricht's site allowed buyers and sellers of illicit drugs to contact one another anonymously.
Force pocketed much of the bitcoin that he secured from "Roberts" as part of the undercover operation, the Justice Department said in its complaint. Some funds were allegedly wired to a bank account in Panama, "all in an effort to launder and conceal the true source of the ill-gotten proceeds."
When Force's account on Venmo, an online payments service, was frozen due to "suspicious activity", Force allegedly forged an official subpoena and sent it to the company without his supervisor's permission.
"Force then sought to conceal evidence of his improper use of an official subpoena," the complaint alleges. The complaint also implies Bridges may have been involved in a massive break-in at Silk Road on January 25, 2013 - one that saw "a sizeable theft of bitcoins" transferred to Mt Gox.
Bridges and Force are being charged with money laundering, wire fraud, theft of government property and conflict of interest.
