What people should be more concerned with is the fact that the government is selling off someone elses property before they have even been convicted of a crime. Dread pirate roberts plead not guilty and has still not had a trial yet. He has not been convicted of any crime so if these are his coins they are selling them before the trial is even finished
Disclaimer: I think civil forfeiture laws are applied without sufficient discretion in drug cases. And it's troubling that they apply not just to illegally-obtained assets, but those that are "instrumentality of a crime." That said, there's an important wrinkle here that you're glossing over, and that is usually glossed over in discussions about civil forfeiture.
Civil forfeiture is not confiscation of your property as punishment for committing a crime. It's a determination that the property was never yours to begin with, because it was obtained in an illegal transaction.[1] That's why the standard for civil forfeiture isn't whether the person is guilty "beyond a reasonable doubt" but rather whether the property is the fruits of a crime by the "preponderance of the evidence." Any civil dispute over the rightful ownership of property is evaluated according to a preponderance of the evidence standard, and the dispute about the status of the property can be resolved without resolving the issue of criminal guilt.
The very important distinction to make here is that the issue of whether Ulbricht is guilty is distinct from whether the money is the proceeds of illegal activity. Maybe Ulbricht gets acquitted because he creates enough reasonable doubt that he isn't DPR, as he claims. Or because he succeeds in getting key evidence excluded because of a procedural failure by the feds. His acquittal doesn't mean that the money wasn't the product of illegal activity. Indeed, he has tremendous incentive to try and prove that he never owned these Bitcoins, because that goes to proving he isn't DPR!
How do they determine the property is the result of illegal activity if the owner of the property has yet to be convicted of illegal activity?
That way of thinking opens up our current problems of police seizing everything within grasp during an arrest or traffic stop claiming the property is the result of illegal activity. "Hello, I pulled you over because it's late at night and I'm wondering if you're okay. Oh, you happen to have $10,000 in cash on hand? Drug money, I'll take that."
If this is the way the law is being interpreted then we gave up property rights a long time ago.
Are you asking how the government can prove that the money in Silk Road's accounts are the proceeds of illegal activity? They have digital records all over the place to prove that. The magic of Bitcoin and the internet--where all activity is neatly recorded in server logs with timestamps. They can prove that without proving that Ulbricht is the one that engaged in the illegal activity. Indeed, Ulbricht's contention is precisely that.
Does a fee collected for helping with illegal transaction is by itself illegaly obtained money?
If you are a cab driver and you have a client that you know is riding your cab to perform illegal trade. Does the police have right to seize your fare?
The courts do decide this. They have decided this.
For assets to be forfeited the government literally sues the property[1] and is required to show the item is subject to forfeiture. If the asset is eligible for forfeiture the owner can claim that they are innocent[2] and prevent the property from being forfeited.
In this case DPR is not claiming that the wallet is his. Because if he did he'd likely harm the criminal case against himself.
Note how the government filed suit against "all assets of Silk Road" - not DPR.
This isn't some secret thing that only the government knows about. You can go to http://www.forfeiture.gov right now and read required notices of forfeiture for all sorts of assets.
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[1] This is how we get court cases with fun names like "United States v. $124,700 in U.S. Currency" and "United States v. Forty Barrels and Twenty Kegs of Coca-Cola"
That said, my understanding is yes, if you know that the purpose of the travel is illegal, then you are aiding and abetting. If they can show it to a "preponderance of evidence" standard, they have the power (not "right") to seize your fare. If they can show it beyond a reasonable doubt, they have the power to punish you as well.
As rayiner mentioned previously, the preponderance of evidence standard is actually not terribly out of place here, being that disputes about ownership of property are generally settled that way.
And yes, it is something for a court to determine.
A hotel owned by someone who has no criminal record or charges is being seized because some of its guests have used it to commit their crimes.
Edit: Seems like the Judge ended up dismissing this specific attempt but the key to take away from this is that the government will try and also sometimes win such cases.
Well, to a degree. That was a bigger grab, since (at least as far as I can see in the article) they did not allege - much less demonstrate - that he had knowledge of any specific instances of criminal behavior.
In some circumstances, it's legitimate - "Yeah, I'll be getaway driver for your heist for $X..."
The allegation there was that he knew about these activities and was turning a blind eye to profit from it. And as you note, the government didn't win there.
Material goods are neither innocent nor guilty. Like rayiner explained, the phrase doesn't apply here. The bitcoins are not on trial and can't be convicted and sent to jail.
You realize that DPR/Ulbricht is specifically disavowing ownership of that wallet, right?
And the government has said, "Hey, if you own this wallet, which we have tied multiple controlled buys to, you're more than welcome to claim it, or we'll sell it. We might want to have a little chat to you about it, though."
Ross said "Nope. Not mine." He relinquished all claim to it, so his innocence or conviction is irrelevant.
Ideally, if you can convince a court there's a reasonable chance that the property was legally obtained (using income you legally earned), and that it wasn't purchased with the intent to primarily use it for illegal activities.
Proof beyond reasonable doubt doesn't mean you're definitely guilty. But if it seems reasonably likely (to the judge, or better the jury) that something was legitimately purchased for legitimate reasons, it should be yours.
Campervan fitted out as a mobile meth lab? That should get seized. The house your kid sold drugs from, but is your primary place of residence, and you paid for it with legally obtained money? That should be yours.
The problem is, US police forces seem to want to seize anything that's remotely connected with illegal activities, to raise revenue.
In general, civil forfeiture abuse is rampant and blooming in the US, especially given the financial incentive to perpetrate it and the lack of proper safeguards. That way of thinking you describe is already open and that's exactly what happens if the police suspects you are not going to give them a good fight (i.e. is poor or alien or live far away or something of that nature) and/or the money or the property would be worth less to you than the cost of the fight, and they have chance to keep the money (in some jurisdictions, they do not). This is exactly the way the law is interpreted right now. Just google the numerous cases of civil forfeiture abuse and despair.
However, in the case of SR they actually may have a pretty good case that those are money intended to buy drugs, etc. - it's not like SR ever hidden what they're selling and the buyers hid what they are buying, and looks like the law enforcement has these records. So since under the current law drug trade is a crime, and they would have absolutely no trouble proving the money is actually the drug money, in this case it is hard to classify this as abuse, at least without venturing into the whole topic of drug legalization and so on, which is beyond the point.
Honestly, I think we should just burn (the value of) the assets seized (after trial, appeal, &c, of course).
Yes, it would mean stepping up and funding things currently funded with proceeds from seizures, but it would remove significant incentive to overreach.
Destroying resources just because criminal touched them seems pointless. Removing financial incentive for abuse seems reasonable, but that does not mean resources should be destroyed. They can be routed to the uses which have no connection with law enforcement and do not provide abuse initiative. US government has so many needs one can surely find one.
In case it wasn't clear, I don't mean physical destruction of real things. I mean auctioning the physical, and then destroying the received money electronically.
With a fiat currency, it's not actually destroying anything. I'd rather no one feel it as part of their bottom line, or there will be pressure. Certainly, moving it far from law enforcement would be an improvement, but I think destruction is better.
But why it is better if the same resource could be used to make something good - e.g. build a hospital for the poor or feed some starving people, etc.?
Because I don't want anyone looking at a spreadsheet and saying, "Oh shoot, we could actually meet our targets if only the police would seize another $10 million..."
Putting that person further away from the police probably improves things, as I said, but better that we just build such hospitals and fund such social programs as we actually need, and not rely on people doing bad things (either the people whose stuff is being confiscated, or the police confiscating property of innocents) to make it happen.
Note again that at this scale cash isn't really a resource - it's a claim on resources. Destroying it doesn't destroy those resources, it releases the claim which winds up sort of distributed over other dollars.
because incentives distort actions. if what is seized is destroyed of value, then there is no longer any motivation to view seized property as some sort of fund raising drive.
That's why separation of incentives from actions is important. If the police has no control over the money and can not benefit from it, they do not have incentive for abuse. The hospital which will get the money may have, but they won't have the means.
>THIS AUCTION DOES NOT INCLUDE THE BITCOINS CONTAINED IN WALLET FILES THAT RESIDED ON CERTAIN COMPUTER HARDWARE BELONGING TO ROSS WILLIAM ULBRICHT, THAT WERE SEIZED ON OR ABOUT OCTOBER 24, 2013 (“DPR SEIZED COINS”).
Seems to me that only BTC that are directly linked to SR that are sold.
If the coins were seized on Silk Road servers they didn't belong to anyone at the time but the Silk Road.
We can argue the merits of returning the coins to the last previously associated wallets; but I don't think the U.S. Gov has any intention of returning drug money to drug buyers the same way they wouldn't give gun money back to arms buyers.
An online shop selling clothing also happens to sell firearms illegally. Its assets are seized. What about money from pending orders for the clothing? It seems to me it's obvious in this case. Couldn't SR users start a class action lawsuit against gov for seizing their assets stored on SR servers? This is assuming not everything sold there was illegal (this might be wrong).
They could certainly petition the government for the return of money that couldn't be tied to anything illegal. But is the potential demand of return of money a hindrance for the government to auction of the Bitcoins? If anyone demands their money back, and the government agrees, or is forced by a court to pay it back, they can do so without holding BTC in the meantime.
Presumably they've made an assessment and come to the conclusion that either the percentage of assets held that belong to customers of SR that said customer may have a claim to is small enough that it's easier/cheaper to deal with that if/when anyone makes a demand than trying to sort it out before auctioning off the BTC.
Especially given that presumably very few customers of SR have only bought/sold legal goods, and so presumably most of them won't want to identify themselves.
there are times when analogies are very helpful.. this isn't one of them. instead of comparing it to that, let's talk about what it actually is. an illegal black market for drugs. you're either being greedy, disingenuous, or crazy if you think their money should be returned. if anything they are lucky the government doesn't pursue the users with legal action.
The moment I transfer a bitcoin to Silk Road, it's no longer my bitcoin. It's theirs. I've exchanged it for a promise from Silk Road to pass on the bitcoin to someone else or return it to me when I ask.
The government never seized my bitcoin. They seized Silk Road's bitcoin. This means Silk Road has more liabilities than assets. And since Silk Road hasn't given me a promissory note in exchange for my bitcoin, I'm an unsecured general creditor - and unsecured general creditors cannot establish standing to recover seized assets.
It's not illegal pre se, but if the website is engaged in illegal activity subject to seizure, you may lose your bitcoins, unless you can prove it is not connected to illegal activity.
The government would post a notice of the seized assets on www.forfeiture.gov. If you had a claim to some of those assets, for instance that you had already paid for them and they hadn't been delivered, you can submit a petition to get them back.
Once you've paid for an order it isn't your money any more (they're presumably not operating or licensed as a bank). In your clothing example your only recourse would be to sue the clothing store for failing to deliver your clothes (breach of contract or the like). In theory you could do the same thing with Silk Road, but the site operators being anonymous makes that rather difficult.
(Of course in practice what you'd do is a credit card chargeback - but bitcoin is specifically designed to make that impossible. If you choose to send an irreversible "currency" to an anonymous recipient, frankly you deserve what you get)
They were 'operating as a bank' in that you had a wallet on the site. The majority of the money seized was not in escrow for drug purchases but sitting in the accounts of the users.
Everybody who used Silk Road knew that the site was illegal, and everybody who used Silk Road willfully paid a commission to Ross. IANAL, but even if you only bought legal goods from Silk Road, you were still aiding and abetting a drug market.
I'm not sure that I like the sort of thinking that would put those two words together, ever.
It would appear as though you think it possible that a flea market should be responsible for the conduct of its buyers and sellers, or that a public bulletin board be responsible for all material posted there.
I dislike the idea that a government that nominally prohibits itself from abridging freedom of speech, or of the press, or peaceful assembly could ever declare an information service operating over the Internet to be "illegal", seize all of its assets, shut it down, and then sell off whatever it seized, all without ever establishing any crime or criminal intent to the public.
By the same reasoning that led to the seizure and shutdown of Silk Road, since some drug dealers arrange sales with mobile phones, the antennas and backhaul used by the likes of Verizon, Sprint, AT&T et al should be seized, the phone networks shut down, and the equipment auctioned off, all for facilitating prohibited activities.
Whether people knew they were committing crimes or not, the site itself was little more than a warehouse building filled with unmonitored flea market stalls, and a common cashier. While the intent of establishing the market was undoubtedly to facilitate commerce in crime and contraband, we still have some expectation that crimes be prosecuted to conviction prior to the application of punishments.
What, then, has Silk Road been convicted of? Maintaining a public nuisance?
In any sane society, the police would use Silk Road, posing as ordinary customers to collect evidence of crimes, and then prosecute the people that committed them individually. That probably would have eventually resulted in Silk Road becoming more like the semi-legit flea market of Bitcoin, like eBay is for PayPal. What they actually did showed that their actions were targeted at Bitcoin rather than at the drugs. At the time, they did not want Bitcoin to have a common marketplace for goods of any kind, whether contraband or not, and moved to destroy it utterly using the drugs as pretext.
If you only bought legal goods from Silk Road, you were not doing anything more than threatening dollar hegemony. And that is why you lost your Bitcoin. Innocent of any crime (except possibly something related to taxes), you suffered a loss, thanks to people trying to enforce one law by breaking another.
> It would appear as though you think it possible that a flea market should be responsible for the conduct of its buyers and sellers, or that a public bulletin board be responsible for all material posted there.
You don't find pounds and pounds of cocaine in flea markets. The site was illegal, to the extent that any site can be, because its owners were aware of the illegal activity and, rather than reporting it, acted to facilitate it. Flea market owners in the same position would be just as liable.
> What, then, has Silk Road been convicted of? Maintaining a public nuisance?
You don't find cocaine at a flea market because cocaine-sellers, not knowing that you are not a cop, do not show it to you. And even if they do show cocaine to pre-screened buyers, that guy could be an undercover cop or an informant. There is nothing inherent to the functioning of any market that makes it illegal.
Silk Road implemented some countermeasures aimed at preventing dragnet-style arrests and mass prosecutions based on casual scraping of the site and analysis of the blockchain, but it was still completely vulnerable to a buyer-informant attack. The real world metaphorical equivalent is that the flea market did not require shoppers to register their real names and addresses, and declare the serial numbers of any cash they might be using to make purchases. I do not know of any flea market that does this, or any that could even survive if it tried.
Was there anything inherent to Silk Road that prevented cops from using exactly the same buyer-informant model to prosecute contraband trafficking that they use for physical street-level buys? No.
And we are not the Stasi. We are not required to inform upon one another. Any duty to report is usually associated with exercising a privilege granted by the state. Actual misprision requires not only that the crime be a felony, the witness be aware that it is occurring, and that they take active steps to conceal it. Misprision itself is only a misdemeanor, and protection against self-incrimination still applies. If reporting the crime would implicate you in a crime, it is not a crime to not report the original crime.
You are suggesting that it is acceptable to seize a person's entire business and sell off its assets before they are duly convicted of their misdemeanor.
Thanks to the decreasing popularity of misprision among Common Law jurisdictions, it is usually only applied to actual agents of the state with some measure of public trust or responsibility. The flea market would likely only be liable for crimes committed by tenant-sellers if the conditions of their business license specified a duty to police and report and they did not.
Silk Road, as a business with no physical premises, could never be subject to such conditions, as there is no one with authority to license it to operate. The fact remains that even if there were tons of cocaine, Silk Road was not selling it, and had no particular interest in the details of the transaction beyond the amount of the commission.
It is very easy to say that Silk Road was a den of criminals, but we expect them to be sleazy and untrustworthy. The cops that we throw at them in the pursuit of law and order must themselves be lawful and orderly. When they steal from suspects, and establish by their attitude that everyone is a suspect, they present an existential threat to the security of private property, independent of any other crimes that may be occurring.
This auction is a slap in the face to anyone at all concerned about police powers.
Most of the business there was drugs, obviously, but some amount of that money would have bought legitimate items. So what gives them the right to sell off that money?
Users sent bitcoins to SR to hold for them, in return for a promise to return them on demand. So SR's assets and liabilities both increased with each deposit. Then USG seized SR's assets (under what right? That SR was an illegal enterprise established to facilitate narcotics sales). SR still has liabilities to its users, but now it can't meet them. Note that SR's liabilities are no concern of USG.
Come on guys, is it so hard to understand that if you exchange an asset for a security, you don't own the asset anymore?
> Come on guys, is it so hard to understand that if you exchange an asset for a security, you don't own the asset anymore?
In this case this fact is directly contrary to a worldview held by many at HN, so I suspect everyone pointing out how property law actually works is in for a long slog.
Also, if I understand it correctly, many of those coins were not preallocated to any sale. They were just sitting there to be used in the future. So whether they would be used for drugs or something legal is irrelevant.
Imagine you hand your local crack dealer a wad of cash to hold for you temporarily. The crack dealer adds it to his bigger wad of cash and promptly gets busted. The drugs and money he's holding are seized. That's what happened here. Would you expect the government to return your wad of cash?
Then you should've filed a claim with the court after:
1) the government filed "US v. A Wad of Cash Found in the Pocket of Danny Drugdealer"
2) the wad of cash was found to be subject to forfeiture
3) Danny Drugdealer didn't contest that he was innocent of drug dealin' or he attempted to and lost
4) The government posted that the wad of cash was subject to forfeiture at www.forfeiture.gov.
You'd then be entitled to make the case that ten dollars in Danny Drugdealer's wad of cash actually belonged to you and were not subject to forfeiture. You might've even won!
No one filed a claim to block forfeiture of all or part of the Silk Road bitcoins. Not even DPR. I think everyone knows why that is.
They did it because they had the capability. Civil forfeiture is an absolute perversion of the justice system, and is a direct contributor to police corruption. The damage it causes to the integrity of our rule of law is far greater than any deterrent effect it may have upon crimes.
This has nothing to do with the man accused of being DPR. This is like the police showing up to a drug deal and both the buyer and supplier scattering and miraculously getting away. The police then take the coccaine and cash onto a giant podium and ask "This belong to anyone? No? We're going to claim it if no one does." Now it is legitimately government property.
Except for that people are claiming ownership of some of the SR funds. There was an article posted here recently about a guy in the UK trying to recover his Silk Road funds.
Not according to the order of forfeiture. "WHEREAS, no claims or answers have been filed in this judicial forfeiture as to Silk Road Hidden Website and the Silk Road Server Bitcoins"
Bitcoin is pretty fungible, almost like cash. If it turns out that he's innocent, he can sue the government for the money. It's not like they're selling some unique piece of art, or his family seat.
Civil forfeiture. From wikipedia:
http://en.wikipedia.org/wiki/Civil_forfeiture#United_States
"In civil cases, the owner need not be judged guilty of any crime; it is possible for the Government to prevail by proving that someone other than the owner used the property to commit a crime. In contrast, criminal forfeiture is usually carried out in a sentence following a conviction and is a punitive act against the offender."
It's a regular occurrence that people who are probably innocent have property seized under forfeiture laws, and never get the property back. Some of them are never even charged. Others are charged but beat the charges.
It's worse, though. While it's possible to get the property back, you have to prove by a preponderance of the evidence that the property had no connection to a crime. That's a difficult thing to do.
Different standards of evidence, I guess. To be jailed for something, the standard of evidence is higher than to confiscate money gotten through that same thing.
This has been the way asset forfeiture has worked since the '80s. People complain about the war on terror, but it's a sideshow compared to the deep and long lasting erosion of civil liberties that has been happening as part of the war on drugs for decades and decades.
There's a lot of confusion around this. They are selling the Bitcoins that were on the Silk Road servers. There were other Bitcoins on his computers. He said he owned the ones on his computer, but not the ones on the Silk Road servers (because he denies being involved with Silk Road.) At that point, the DOJ posts a notice saying "hey, anyone who thinks they own these, come forward and make a claim." No one did, so they are now at the "sell them off" stage.
This has been proposed before in other situations. For example, the Mt. Gox coins were proposed to either be "destroyed" or sent back to their purchasers with a blockchain update.
This introduces serious problems with the question of "who is everyone" (when you say, agreed upon by everyone). In other words, is the community going to set up a centralized board to hear complaints and reverse transactions? Does this turn into "I bought a trinket on ebay and the guy didn't send me the thing, reverse the transaction"?
Part of the strength of bitcoin is a permanent historical record. There's been some suggestion that the true long-term benefit of bitcoin is not in the "money" part, but the blockchain itself. As soon as the blockchain becomes mutable, then this value becomes suspect, and the line for "how bad does it have to be before we edit the blockchain" might get weaker and weaker.
so it's perfectly fair to profit from selling drugs that kill people, but when the profits from illegal activity are seized, the public shouldn't be able to reuse them?
I can see how you would take it as hostile but it was not meant to be. However, trying to set a precedent on "Let's agree that this money should vanish because we all don't like where it currently is" turns into "I'm a core developer and my wife just left me so I'm just going to ruin her" in relatively few steps.
What you are suggesting would be a centralized backdoor in a decentralized protocol.
honestly, that would make me lose all trust in bitcoin as well. if they can just retroactively delete coins that certain people have. (not to mention for political reasons). imagine the implications of a government gaining tang type
of power.
Here's a constructive response: We come together as a society and agree on some rules. Some people break the rules, (and they also withhold money that rightly belong to the community), so the rules say that in that event we take their money and dispense it for the greater good.
