For those criminal defense lawyers whose attitude toward pre-trial motions is to make sure they change all the names before submitting their pro forma papers, take the time out of your empty life to read the memorandum in support filed by Josh Dratel on behalf of his client, Ross Ulbricht.
Ulbricht was the man behind Silk Road, alleged to be
an “underground website” allegedly “designed to enable users across the world to buy and sell illegal drugs and other illicit goods and services anonymously and outside the reach of law enforcement.”
It’s terribly evil, because all the reports about it when the crypto-challenged learned of its existence from the media following Ulbricht’s arrest said so. A kinder description would be the eBay for those with mad computer skilz outside the control of government.
What was sold on it was whatever anybody wanted to sell. Not having been an aficionado of Silk Road, I have no clue what was sold there, but if someone wanted to sell narcotics in a marketplace, this would be an excellent place to do so.
Payment was made with the Tinkerbell of currency, Bitcoin, which has the virtue of being non-existent except to those whose faith in crypto-currency was greater than the desire to hear the sound of coins jingling in the pockets of their Levis.
What the motions reveal, perhaps more so than any case that’s come before it, is the inadequacy of existing law to understand, define or stay apace with technology. Like the Weev case, it raises issues of “unauthorized access” under the Computer Fraud and Abuse Act, the 1984 congressional brainstorm that was brought about in response to the cool movie, War Games. Unlike the Weev case, there has been no rush of support for Ulbricht, either from the crypto crowd or academia, despite deep-seated personality flaws that made Weev an unpleasant dinner guest for polite company.
Josh’s papers raise the hoary problems that stem from the confluence of absurdly inadequate law applied to conduct unimaginable at the time it was enacted.
The House Judiciary Committee, in recommending enactment of 18 U.S.C. §1030, explained that the newfound ability of “hackers” to use personal computers to circumvent “identification code/password system[s]” had enabled a “recent flurry of electronic trespassing incidents.” 1984 U.S.C.C.A.N. at 3696 (describing the hacker threat by reference to the film WAR GAMES (1983), “show[ing] a realistic representation of the … access capabilities of the personal computer”). Targeting this conduct, the Committee added, “the conduct prohibited is analogous to that of ‘breaking and entering’ rather than using a computer (similar to the use of a gun) in committing the offense.” 1984 U.S.C.C.A.N. at 3706.
Read that paragraph in a Dr. Evil voice, “ha-ack-ers,” and it’s great for a chuckle. Unfortunately, it’s not merely unfunny, but the law as it exists today, based on notions that were laughably unsophisticated when it was enacted. And in case you missed it, that was in 1984, a mere 30 years ago. Not much has changed since then, right?
Then there’s trying to shoehorn Ulbricht into some transferred intent that would hold him culpable for the conduct of those who set up shop in his marketplace, whether they were selling drugs or anything else that offends the government. A fascinating argument stems from the policy behind 47 U.S.C. §230:
In order to qualify for §230’s immunity, one need merely demonstrate that he provides or uses an interactive computer service, and that the information contained thereon was provided by a third-party for use on the Internet or other interactive computer service.
While §230’s immunity is civil, and doesn’t preclude application of any criminal law to conduct, the indictment of Ulbricht relies on the same theory of transferred intent that §230 exists to prevent. And so it’s clear, the government’s theory of culpability is as inexplicably distant from criminal law as §230, except the former represents nothing more than a prosecutor’s effort to leap the gap while the latter reflects Congress’ deliberate decision to protect the host for the poor table manners of his guests.
As Josh properly notes, an old concept of statutory construction, the Rule of Lenity, has proven to transcend the ages by rearing its beloved head on behalf of the defendant. For those of you who blinked in crim law class, the Rule provides that ambiguity in a law is construed in favor of the defendant. When it comes to ambiguity, there is nothing less clear than how laws constructed for the physical world apply to the virtual world. Unless you’re just a huge fan of analogies and like to squint a lot.
And then there is the Bitcoin problem, which may or may not be a problem for very long given its existence depends entirely upon the willingness of hipsters to believe in a Supreme Being made of shiny metal.
As noted by the Congressional Research Service (hereinafter “CRS”) in its cogent history and explanation of Bitcoin, Bitcoin is a decentralized, pseudonymous, digital crypto-currency – it is not backed by any nation or central bank, it can be used without the user revealing to the other party his or her identity, it exists in the virtual and not corporeal world, and is based on a cryptographic formula that is designed to facilitate a public record of all Bitcoin transactions and thereby thwart duplication and fraud.
This raises a troubling question: Can one launder something that doesn’t exist? If it doesn’t exist, how can it get dirty? Or more seriously, if it doesn’t exist, how do you prove it in court? As Josh argues, there can be no proper count against Ulbricht for laundering something that isn’t currency, a “monetary instrument” as the law defines it. The IRS says it’s just nonsense, and it lacks any of the indicia of what the government recognizes to be currency. But then, that was before they had a defendant to prosecute.
[T]he IRS confirmed that virtual currency “does not have legal tender status in any jurisdiction.” Also, in a “Frequently Asked Questions” section of the Notice, the IRS announced its policy position that (1) “virtual currency is treated as property.” and (2) “virtual currency is not treated as currency . . .” The IRS would not, however, adopt a position as to what type of property Bitcoin constituted, stating only that “[t]he character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer.”
As a means of exchange, the Bitcoin may well exist to the extent that someone is willing to give something to another person and accept Bitcoin in return, just as Atticus Finch took a chicken for his efforts, but that doesn’t make it currency.
Should it be? Beats me. That’s for Congress to decide, but it better be damn sure it wants to open that Pandora’s box before letting prosecutors rush ahead in their righteous zeal to get the evil Ulbricht and consider all the ramifications of the United States of America embracing Bitcoins as the coin of the digital realm.
If they do, perhaps Ulbricht goes down, but then they’ve just ended the hegemony of the almighty dollar in favor of an international currency beyond the government’s control, and fundamentally altered the relative economy forever. Is Ulbricht worth that? Are they ready to blindly dive into crypto-currency? I mean, there isn’t even a movie about it yet, so how can Congress be sure?
Most importantly, the motions on behalf of Ulbricht are a stark reminder of two critical things for all criminal defense lawyers. The first is the inadequacy of the laws created for corporeal crime as applied to allegations of wrongdoing in a digital world, and the second is the importance of thinking long and hard, crafting imaginative and challenging motions, to stop the simplistic use of dubiously applicable laws to conduct to which they just don’t really apply.
It will be very interesting to see how Judge Katherine B. Forrest deals with these motions. Will the government play the dumb card, as they did in Weev, claiming “he had to do all of these things I don’t even understand”? Will Judge Forrest reject the idea that ignorance is a good enough basis to uphold an indictment?
And for those who think sitting on the sidelines in Ulbricht is a popcorn opportunity, this is still the birth of the future of law as applied to our digital future. Watch it as a spectator at your peril.
Update: As it turns out, Lee Pacchia did a Mimesis video with NYLS prawf Houman Shadab a day ago explaining the impact of the IRS position on Bitcoins.