Silk Road, Bitcoin and the Secret Servicemen
Two Secret Service agents, both of whom were members of the Baltimore Silk Road Task Force charged with breaking Silk Road’s ring of illegal online activity (primarily drug sales), have pled guilty to money laundering and other charges. Shaun Bridges was sentenced on December 7 to 71 months behind bars, and ordered to forfeit $651,000 of the $820,000 he reportedly stole and laundered. Bridges’ colleague, Carl Force, was convicted of a similar crime last October, sentenced to six and a half years in prison and ordered to pay $340,000 in compensation.
Two members of a task force ordered to bring down an online black market, become criminals themselves; how does this happen? The answer is fairly simple, but also somewhat complex. It’s simple because these two men were investigating Silk Road and had access to millions of dollars’ worth of Bitcoins — they simply couldn’t resist the temptation to steal. It’s complicated because it involves two members of the Secret Service, an organization Americans inherently trust. In fact, we entrust the Secret Service to protect our most important citizen, the President. Trying to make sense of where this agency is headed and how not one, but two of its agents operating on the same case suddenly became grand thieves is at best, complicated.
The Money Laundering Formula
Although this scenario has a unique twist involving Bitcoin, at the core, it is still old fashioned money laundering that began with account takeover and proceeded to follow this formula — placement, layering and integration:
- A criminal makes money illegally by selling drugs, etc.,
- Said criminal introduces that money into the legitimate financial system by placing it into a retail operation, for example.
- That money is then layered with legitimate income and then integrated into the flow of all other money being exchanged through additional transactions. Often the money is moved around during the layering process to create confusion.
The Case of the Secret Service Launderers
The Secret Service case deviates a bit from the traditional model, mostly because of convenience, but still uses the placement, layering and integration strategy.
The Timeline: From 2012 to 2014 Bridges was tasked with conducting forensic computer investigations of Silk Road in an effort to locate, identify and prosecute known targets, including Ross Ulbricht, Silk Road’s founder who is currently serving a life sentence without the possibility of parole.
- January 2013: In court, Bridges testified to using account information that he obtained during the January 2013 search and arrest of Curtis Green, a customer support representative who worked for Silk Road, to reset the passwords and personal ID numbers of various accounts on Silk Road. The agent then moved approximately 20,000 Bitcoin, which at the time was worth approximately $350,000, from those accounts into a bitcoin “wallet” that he controlled.
- Between March and May 2015: Bridges told the court that he then moved the stolen Bitcoin (placement) into an account at Mt. Gox, a former online digital currency exchange, and that between March and May 2015, he liquidated the bitcoin into $820,000 U.S. dollars, transferring the funds to a personal investment account based in the U.S (layering).
- June 2014: By the summer of 2014 Bridges transferred the money from the investment account into a personal bank account that he shared with another person. But then he got busted before he could actually integrate the money.
Though this story involves Internet properties, rather than brick and mortar businesses, as you can see the suspects followed the traditional money laundering strategy. At Alacer Group we make it our business to not only understand the tactics money launderers use, but to stay one step ahead of them for our banking clients. As new threats emerge in places like Silk Road, however, we find those innovative participants relying on tactics that have actually been around for years.
