Anyone who has been following the real-life criminal drama swirling around the online drug marketplace Silk Road had their mind blown this week when San Francisco prosecutors announced charges against two federal agents involved in the investigation. DEA agent Carl Mark Force IV and Secret Service agent Shawn Bridges were allegedly helping themselves to copious amounts of Bitcoin through theft, deception and fraud, using the inside information and technical access they had to Silk Road operations as federal investigators.
The complaint is an astonishing, and frankly amusing, tale of two bumbling agents who seemed to think that virtual currencies were confounding enough to the government that it would never figure out what they were up to. Force allegedly messed up in many ways, including signing his real name, "Carl," to an unencrypted email from one of his monikers, "French Maid." According to the government, Force blackmailed a suspect he was investigating, stole nearly a million dollars worth of bitcoin, and sold information about the investigation to Silk Road operator Dread Pirate Roberts for his own personal gain. That's all pretty bad. But what is also shocking is the damage Force, a DEA agent of 15 years, tried to—and did—wreak on innocent companies and individuals who got in his way. It offers a disturbing glimpse into how much damage a rogue federal agent can do:
1. Force tried to shut down payments start-up Venmo (which Paypal later acquired).
According to the complaint, once Force started transferring Bitcoin from Silk Road and its founder into his accounts, he had to figure out how to turn it into cash, which involved opening accounts with many payment platforms, including virtual currency ones like Bitstamp and BTC-e, and normal ones all of us use, like Venmo. Last year, some of Force's activity looked suspicious to Venmo, so the start-up froze his account. Force tried to get Venmo to unfreeze his account by "flashing his DEA badge" in an e-mail sent from his personal account. After they ignored it, Force sent them a fake subpoena from the DEA, again from his personal account. Venmo thought that all of this looked a wee bit suspicious, so they reported it to Force's superiors at the DEA. Force then e-mailed Venmo, telling the company to ignore the fake subpoena he'd sent. At the same time, in March of 2014, Force emailed another agent saying that Venmo was a "suspicious money remitter" and that they should do a background check to see if the company was properly registered. According to the complaint:
"If not, I want to seize their bank accounts," Force wrote, referring to what the agency had recently done to Bitcoin platform Mt. Gox. According to the government complaint, "Force appears to have been targeting Venmo for seizure after the company rebuffed his attempts to use a subpoena for a personal matter."
Six months later, Braintree, which owns Venmo, was acquired by Paypal for $800 million. If Force's scheme had worked, and the company had been subject to a federal investigation, who knows if that deal would have gone through?
2. Force implied to Mt Gox's founder that he had helped the U.S. Department of Homeland Security take down the popular Bitcoin exchange.
In April of 2013, Force attempted to connect with Mt. Gox CEO Mark Karpeles via LinkedIn, according to screenshots of e-mails Karpeles has posted online, in which Force tells Karpeles he is "exploring work opportunities." A month later, in May of 2013, the feds seized the accounts of Mt. Gox, the then-leading Tokyo-based platform for Bitcoin traders. It was the first big blow to the now-defunct company. The Secret Service agent who provided the evidence to justify the Mt. Gox search warrant was Shawn Bridges, Force's alleged conspirator. After the Mt. Gox seizure, Force e-mailed Karpeles saying, "Told you [you] should have partnered with me!" with a smiley face as a subject line. Even if that was simply braggadocio, it was certainly not an email a federal agent should be sending to the CEO of a company under investigation.
3. Force got a job at a Bitcoin start-up, then allegedly robbed a California man who was a customer of that start-up.
Force used his knowledge of Bitcoin to become a compliance officer for a Bitcoin trading platform called CoinMKT. A self-employed actor listed only as R.P. in the complaint had an account with CoinMKT that contained $37,000 in cash and nearly $300,000 in virtual currencies. One day, R.P. decided to withdraw $30,000 from his account in three $10,000 increments. The withdrawal was flagged by CoinMKT's systems as needing review, because it looked like R.P. was trying to keep his withdrawals under reporting limits, so the CoinMKT folks alerted their compliance officer, Force.
In fact, there was a glitch in CoinMKT's system which wouldn't let users withdraw over $10,000 at a time, but Force already had already begun to rob R.P. According to the complaint, Force told his CoinMKT colleagues that R.P. had a "mental condition" and then instructed the company to freeze his account because the DEA was going to seize his assets. Ultimately, the virtual currency funds were transferred to Force's personal Bitstamp account, and the cash went back to the DEA. In other words, R.P.—which might now stand for "Really Pissed"— got robbed of a quarter million dollars in illegally seized funds.
(R.P., if you read this, we hope you got your money back. Send us an email!)
4. Once Force knew he'd messed up, he tried to force a Bitcoin company to erase the evidence.
Bitstamp, a Slovenia-based Bitcoin exchange, flagged Force's activity as suspicious several times, but each time, Force explained that he was a DEA agent and flashed his badge (via a scanned image). One thing that looked suspicious to Bitstamp was Force accessing their website using the identity-masking web browser Tor. "Don't particularly want NSA looking over my shoulder :)," he explained by email.
According to the complaint, Force allegedly sent many of his ill-gotten Bitcoin to his Bitstamp account. At the beginning of May, the same month Force was questioned by the San Francisco-based prosecutors, he "emailed Bitstamp request[ing] they delete all transaction history associated with his account," according to the complaint. (The complaint doesn't say whether Bitstamp complied.)
5. Force and Bridges used information from an interview of a Silk Road administrator to rob the site.
After identifying a Silk Road administrator, Force and Bridges interviewed him about the technical aspects of how the site worked. According to the complaint, the Silk Road employee basically gave the agents the digital keys to the kingdom. In one of the craziest allegations in the complaint, after the interview, the keys were used to rob Silk Road of a "sizable" amount of Bitcoin. It appears the stolen Bitcoin was transferred to accounts in control of Force and Bridges. (The offline equivalent would be if two DEA agents found out where a drug cartel was stashing its cash and stole it for themselves.)
None of this malfeasance wound up coming out during the trial of Ross Ulbricht, who was found guilty of running the Silk Road, because it was the conduct of the Maryland task force, rather than the New York task force, which was running its own investigation. Ulbricht's lawyer Joshua Dratel says it's "scandalous" that this couldn't be introduced during his client's trial.
Given the nature of Silk Road—an online drug marketplace that conducted its operations online and in virtual currency—Force's trail of destruction was documented digitally along the way. E-mail records and Bitcoin's blockchain played a significant role in his undoing. But not before he allegedly wound his way into the heart of the Bitcoin economy, and used his position to get in on the action.