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Money? What money? Lawyer for accused Silk Road boss claims you can't launder Bitcoin

Wants all charges dismissed in New York case

Internet Security Threat Report 2014

An attorney for Ross Ulbricht, the man accused of masterminding the online drugs marketplace Silk Road, has asked that the money-laundering charges against his client be dropped on the basis that Bitcoin, Silk Road's preferred medium of exchange, doesn't count as money.

Ulbricht was arrested in San Francisco in October after a multi-agency federal investigation pegged him as "Dread Pirate Roberts," Silk Road's shadowy, pseudonymous operator.

Since his arrest, Ulbricht has denied any involvement with Silk Road. But his lawyer, Joshua Dratel, has also asked that a cache of some 173,000 Bitcoins that were seized by investigators – an amount currently worth around $83m – be returned to him, arguing that the virtual currency is "not subject to seizure" under federal forfeiture laws.

In a new motion [PDF] filed over the weekend, Dratel similarly argued that current law doesn't consider Bitcoins to be "funds" or "monetary instruments," which he says is an essential criterion for prosecution under money-laundering statutes.

In the filing, Dratel referred to recent guidance [PDF] from the US Internal Revenue Service, which stated that virtual currency like Bitcoin "does not have legal tender status in any jurisdiction," and that for tax purposes it should be treated as property, rather than currency.

If the government doesn't consider Bitcoin to be money, Dratel argued, then transactions conducted solely in Bitcoin don't fall under 18 U.S.C. §1956, the US money laundering statute, which includes specific language referring to "funds," "monetary instruments," and "financial institutions." For this reason, he said, the money-laundering charge against Ulbricht should be dismissed.

In the same 64-page filing, Dratel argued that the other charges against Ulbricht should be dropped, too, because they attempt to make Ulbricht responsible for the criminal behavior of Silk Road's users, even where he personally was not involved in their transactions.

"Analogously, no landlord has been prosecuted under the federal controlled substances statutes for renting an apartment to a know [sic] drug seller," Dratel wrote. "Nor has any internet service provider been prosecuted because users of the service engage in illegal transactions using the provider's internet service."

Ulbricht is currently being held without bail in a New York State prison pending trial on the five charges against him, more than one of which could land him a maximum sentence of life in prison.

Even if Dratel manages to have the narcotics and money laundering charges against Ulbricht dismissed in New York, however, his client still faces serious charges in Maryland.

In that separate case, Ulbricht is charged with arranging the contract killings of six people over disagreements related to Silk Road – although no actual murders took place, because the "hit man" with whom Ulbricht allegedly conspired was secretly an undercover agent.

If Dratel's motion to drop the New York charges is denied, that case is scheduled to go to trial in November, with the Maryland trial to follow once it concludes. ®

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