Silk Road investigators charged with bitcoin theft

The allure of bitcoin was too great for two former United States government agents who were part of the investigation into the Silk Road online underground marketplace.

The agents, former US Drug Enforcement Agency (DEA) special agent Carl Mark Force, and former US Secret Service special agent Shaun W Bridges, are facing charges for allegedly stealing hundreds of thousands of dollars worth of the cryptocurrency.

According to an affidavit (PDF) unsealed by the United States District Court for the Northern District of California, both Force and Bridges allegedly used their membership of the Baltimore Silk Road Task Force to illegally obtain bitcoin and other funds.

According to the affidavit, with a testimony by special agent Tigran Gambaryan of the Internal Revenue Service's Criminal Investigations, Force was the lead undercover agent in communication with the Dread Pirate Roberts (DPR), the moniker allegedly used by suspected Silk Road mastermind Ross Ulbricht. Bridges was the computer forensics expert serving on the Baltimore task force.

In February, Ulbricht was convicted by a jury in Federal Court in Manhattan of drug and conspiracy counts, in his capacity as alleged owner and operator of the dark web's Silk Road, which prosecutors said had facilitated at least $180 million in sales of illegal drugs on its platform.

"Force and Bridges abused their positions as federal agents and engaged in a scheme to defraud a variety of third parties, the public, and the government, all for their own financial enrichment," the newly unsealed affidavit said.

According to the affidavit, Force allegedly created fictitious personas to communicate with DPR, one of which he used to extort the Silk Road operator by seeking a monetary payment of $250,000 in exchange for not passing on "certain information" to the government.

Additionally, Force allegedly created a fictitious persona named "French Maid", and used that pseudonym to fraudulently represent certain information to DPR regarding "French Maid's" true identity, along with offers of information about the government's investigation into the dark web marketplace.

Force allegedly stole and converted a "sizeable" amount of bitcoin he received from DPR, in his capacity as an official undercover agent, for his personal use rather than turning the funds over to the government.

The affidavit alleges that Force worked to conceal the source of funds he received by engaging in a series of complex transactions between various bitcoin accounts, his personal bank accounts, and his personal digital currency accounts, including a $235,000 wire transfer to an overseas account in Panama.

Force also allegedly used his official position as a DEA agent to illegally run criminal history checks on individuals for the benefit of third-party digital currency exchange company CoinMKT, in which he had personally invested $110,000 worth of bitcoin.

For his part, Bridges was a member of the Baltimore Silk Road Task Force when it gained access to a Silk Road website administrator account in late January 2013 as a result of the arrest of a former Silk Road employee, according to the affidavit.

On January 25, 2013, the Silk Road website suffered a "sizeable" theft of bitcoin -- "bitcoins which were moved into Mt Gox, a digital currency exchange based in Japan", the affidavit said.

On February 12, 2013, Bridges allegedly formed and registered a personal limited liability company called Quantum International Investments, LLC, and on February 22, opened an account at Fidelity Investments in the name of Quantum.

According to Fidelity Investments records, Bridges allegedly funded his Quantum account exclusively with wire deposits from Mt Gox, in the form of nine wire transfers from the bitcoin exchange.

Just days after allegedly accumulating the approximate total of $820,000 from Mt Gox, Bridges served as the affiant -- the person who signs an affidavit, swearing to its truth -- on a multimillion-dollar seizure warrant for Mt Gox and its owners' bank accounts.

When Bridges learned of the government's criminal investigations into the Baltimore Silk Road Task Force, and after interviews by the Federal Bureau of Investigations, he allegedly transferred $250,000 out of his Quantum Fidelity account into another bank account held by himself and a third party.

Tokyo-based Mt Gox shut down without warning in February last year. The bitcoin exchange, once one of the most popular platforms online, filed for bankruptcy later in the same month.

At the time, $500 million worth of bitcoin, belonging both to the exchange and users, vanished.

It was later revealed in Ulbricht's trial that Mt Gox CEO Mark Karpeles had previously been investigated by the United States Department of Homeland Security (DHS) under suspicion of being behind the Silk Road marketplace.