This is an editorial opinion by Aaron Daniel, an appellate attorney and author of “The Bitcoin Brief,” and William D. Mueller, an appellate attorney with a nationwide practice.
Following 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 the Silk Road — one of the first marketplaces to exclusively utilize bitcoin — was sentenced to die in prison. The jury deliberated for a mere three and half hours before convicting Ulbricht of the seven counts charged by the US government: distributing narcotics, distributing narcotics by means of the internet, conspiring to distribute narcotics, engaging in a continuing criminal enterprise, conspiring to commit computer hacking, conspiring to traffic in false identity documents and conspiring to commit money laundering.
For those convictions, Ulbricht was handed five different sentences:
- One for 20 years,
- One for 15 years,
- One for five, and
- two for life.
Ulbricht is serving the sentences concurrently, with no chance of parole.
The sentence handed down by the district court judge — two life sentences plus forty years — sent shockwaves through the financial-tech community, wherein many thought the sentence was disproportionate to the crime. Afterall, not one of Ulbricht’s seven convictions included accusations of violent conduct.
Looking back at it a decade later, it appears that the severe sentence requested by the US government was, at least in part, driven by a desire to backstop the US dollar. Indeed, fiat is backed by the state’s monopoly on violence, which, in Ulbricht’s case, manifested through extreme prosecutorial power.
Use Of Bitcoin, Mixing And Tor
First, it’s worth taking a look at what factors played a role in Ulbricht’s sentencing. According to the applicable US sentencing guidelines, a 20-year mandatory minimum sentence was required for three of Ulbricht’s convictions, and a seven-year maximum sentence for two others. As the sentences can be served concurrently, Ulbricht could have, in theory, been sentenced to just a 20-year stint. Yet, in the US government’s sentencing submission, prosecutors in the Southern District of New York requested the court to “impose a lengthy sentence, one substantially above the 20-year mandatory minimum.”
why? In the aftermath of Ulbricht’s sentencing, the US Attorney for the Southern District of New York maintained that the pursuit 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 it a point to highlight Ulbricht’s use of Bitcoin as the payment method fueling the anonymity provided by the Silk Road:
“Ulbricht deliberately operated Silk Road as an online criminal marketplace intended to enable its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement… Ulbricht designed Silk Road to include to Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.”
How much of a role did Ulbricht’s decision to implement bitcoin, and a bitcoin mixer (or tumbler), play in his sentence? It’s difficult to say.
Ulbricht’s sentence was due to be steep from the start given that the criminal laws Ulbricht was convicted under were applied to make him responsible for the total amount of drugs and narcotics 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 large multilateral agreement, but many separate and distinct bilateral agreements between the website and each individual seller, many separate conspiracies, in other words. Leaving this misapplication aside, by aggregating the agreements between each user and the website into one massive criminal conspiracy, Ulbricht was charged with aiding in the transfer of over 60,720 kilos of cocaine, heroin, and meth.
From that starting point, the sentencing judge applied several sentencing enhancements — aggravating factors that raise the recommended prison sentence in the US sentencing guidelines’ chart, including those stemming from allegations that Ulbricht paid for murders for hire in connection with the Silk Road (the sentencing judge determined that “there is ample and unambiguous evidence that Ulbricht commissioned 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 in the New York prosecution, and because of this, Ulbricht’s attorneys could have challenged their admission of him at the sentencing phase. But the defense declined to do so, and thus the murder-for-hire evidence was admitted and became a key aggravating factor.
And Bitcoin itself was categorized as an aggravating factor. Ulbricht’s computer-hacking charges were enhanced due to his use of “sophisticated means.” The judge cited the “use of Tor which required some amount of sophistication, the bitcoin tumbler of course, [and] the use of stealth listings,” as grounds for the enhancement.
These enhancements increased Ulbricht’s suggested 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 length for drug offenders — about six years. As a first-time offender of a nonviolent crime, Ulbricht’s sentence was eight times more severe than the sentence handed down 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 on par with convictions handed to serial killers, serial rapists and child molesters.
By examining the prosecutor’s statements, the judge’s rulings, the federal sentencing guidelines and average sentences for other, more reprehensible crimes, it thus appears that Ulbricht’s extreme sentence is owed, at least in part, to the US government’s concern over Ulbricht’s use of bitcoin as the exclusive, pseudonymous payment system for the Silk Road.
That the US government liberally applied its prosecutorial power against Ulbricht and the Silk Road to deter competition to the dollar becomes clearer when put in the context of other aggressive prosecutions of alternative currency users and promoters.
Take Bernard von NotHaus, the founder of the National Organization for the Repeal of the Federal Reserve Act (NORFED). NotHaus’s organization created the Liberty Dollar, a private barter money system of coins and bills backed by specific weights of gold and silver. In 2009, NotHaus was arrested and charged with conspiracy and counterfeiting, despite marketing the Liberty Dollar as a competitor to the US dollar, not the genuine article. The prosecutors sought a sentence of 14 to 17 years for the septuagenarian (essentially a life sentence), and issued a press release lambasting the private barter money 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 home detention.
And just last month, Mark Hopkins, a Bitcoin educator known as “Doctor Bitcoin,” pled guilty to charges of selling bitcoin peer-to-peer without a “money transmitter’s license,” in violation of the Financial Crimes Enforcement Network’s (FinCEN) regulations . Hopkins, now serving six to fifteen months in federal prison, claimed that prosecutors coerced him into the plea deal by threatening to charge his wife alongside him if he did n’t cooperate.
These cases, including Ulbricht’s, indicate the US government is quick to use heavy-handed prosecutorial tactics for nonviolent offenses against its currency. One can only imagine the fate that would have awaited Satoshi Nakamoto, had they not remained pseudonymous.
This is a guest post by Aaron Daniel and William D Mueller. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.