A $3 Billion Silk Road Seizure Will Erase Ross Ulbricht’s Debt

Ross Ulbricht, the convicted creator of the legendary Silk Road dark web market for drugs, has never gotten much mercy from the US legal system. In 2015, he was sentenced to life in prison without parole. His appeal was denied, as was the pardon he sought from President Trump. But a little over a year ago, it appears Ulbricht finally got a break of a different kind: The nine-figure debt he owed to the US government as part of his sentence will be erased—all thanks to the fortuitous hoarding of a hacker who’d stolen a massive trove of bitcoins from his market.

Last year, prosecutors quietly signed an agreement with Ulbricht stipulating that a portion of a newfound trove of Silk Road bitcoins, seized from an unnamed hacker, will be used to cancel out the more than $183 million in restitution Ulbricht was ordered to pay as part of his 2015 sentence, a number calculated from the total illegal sales of the Silk Road based on exchange rates at the time of each transaction. Despite the fact that the more recently unearthed stash of bitcoins—now worth billions of dollars—was itself criminal proceeds, the Justice Department appears to have made a deal with Ulbricht to avoid any claim he might have made to the money: In exchange for Ulbricht’s agreement to waive any ownership he might have of the bitcoins, a portion of them will be used to pay off his restitution in its entirety.

“The parties agree that the net proceeds realized from the sale of the [bitcoins] forfeited pursuant to this agreement shall be credited toward any unpaid balance of the Money Judgment,” reads a court filing from last year, using the phrase “money judgment” to refer to Ulbricht’s 2015 restitution order. The document, filed in February of 2021, is signed by both Ulbricht and David Countryman, a prosecutor in the asset forfeiture unit of the US Attorney’s office for the Northern District of California. The Department of Justice didn’t respond to WIRED’s request for comment.

Ulbricht, of course, still faces life in prison. He has already served eight years of that sentence at jails in New York and penitentiaries in Colorado and Arizona. But the repayment of his restitution could mean that he’s able to earn money in prison to share with family or friends without it being seized or garnished to pay his debts—or even keep any previously unknown caches of bitcoins that he may possess, so long as they aren’t tied to the Silk Road or other criminal sources. And if his sentence is eventually commuted, as his supporters and a years-long Free Ross campaign have petitioned for since even before his sentencing, he would reenter the world as a free man without hundreds of millions of dollars in debt. (Ulbricht is pursuing a “habeas petition” in federal court that would cancel his 2015 sentence based on an argument that he received ineffective representation from his attorneys.)

In a bizarre twist, the agreement to erase Ulbricht’s restitution payments appears to have been made without the involvement—or even the knowledge—of prosecutors in the Southern District of New York, the Justice Department attorneys who handled Ulbricht’s case. “This resolution was not coordinated with SDNY,” one former Justice Department staffer told WIRED. “To not coordinate with the prosecuting authority that obtained the judgement is extremely unorthodox.”

The surprise deal to cancel Ulbricht’s restitution may have been made simply to smooth out any impediment to the government’s massive financial seizure, says Nick Weaver, a researcher and computer scientist at UC Berkeley. Weaver has closely followed Ulbricht’s case for years and even proved Ulbricht’s bitcoins could be traced to the Silk Road during his trial. “This was a way for the government not to have to deal with pointless legal hassles during the forfeiture process,” Weaver says, arguing that Ulbricht could have found an attorney to fight against and delay the seizure in return for a fraction of any potential reward. “I’m certain Ross Ulbricht could have gotten a lawyer on a contingency basis to challenge the forfeiture, simply because a 2 percent chance of winning would still be a multi-hundred-million-dollar payout for the attorney.”