Bitcoin Weekly 2015 February 11: How did The Silk Road Trial change perception of Bitcoin?

Bitcoin Weekly 2015 February 11: How did The Silk Road Trial change perception of Bitcoin?

Bitcoin Weekly with SiliconANGLELast week saw the end of the trial of Ross Ulbricht, accused of being the proprietor of The Silk Road under the romantic moniker of the Dread Pirate Roberts. Bitcoin featured in the trial as the de facto currency of the underground, dark web marketplace. So, we ask: How did the trial and its proceedings affect the perception of Bitcoin as it was connected to an apparent “criminal enterprise” that included drug trafficking and murder-for-hire?

Also in the news this week another scam site, MyCoin, crumbled and took almost $390 million with it. And, in good news for the African market for bitcoin, BitPesa raised $1.1 million in investment funding.

How did “The Silk Road Trial” affect Bitcoin?

 

The trial of Ross Ulbricht is over, save for his sentencing in May, after he was found guilty on seven criminal counts last week. After only three hours of deliberation, the jury convicted Ulbricht of running the deep web, black market website Silk Road making him “The Pirate Roberts,” administrator and proprietor in charge of what prosecutors charged was a “criminal enterprise.”

The Bitcoin community has been curiously watching the proceedings because The Silk Road as a dark web marketplace used the currency as the de facto trading medium. The connection of Bitcoin to the charges against Ulbricht which included drug trafficking, money laundering, and fraud resonate with numerous articles in the popular culture that have painted Bitcoin for its potential exploitation by criminals.

However, as it turns out, Bitcoin played a very small role in the Ulbricht trail.

SiliconAngle contacted legal expert Marcus Asner, a partner at Arnold & Porter in New York, and former chief of the Major Crimes Unit, Southern District of New York, to ask about how he saw the portrayal of Bitcoin in the Ross Ulbricht trial.

bitcoin-logo“I think that bitcoin made the trial more sexy,” he says. “If you strip away the evidence about bitcoin and the cyber context, this case doesn’t really involve much more than a flea market allegedly set up to buy and sell contraband and illegal services.”

Instead of adding shadier mystique to the currency, Asner says, the Silk Road Trial helped dispel some of the myth surrounding bitcoin as an easy mode for criminals to avoid being caught.

The mythology about bitcoins being a criminal’s friend arises from the supposed perfect anonymity that Bitcoin provides to its users. Asner argues that this concern is highly overblown because every bitcoin transaction is recorded in its own global ledger, the blockchain. This makes bitcoin exchanges inherently traceable.

“More fundamentally, the concern about ‘anonymity’ is a problem that law enforcement faces in many other areas, ranging from email messages to telephone calls to letters sent through US Mail,” Asner adds.  “My feeling is that law enforcement agents today will adapt to bitcoin, and learn how investigate virtual currency cases, just like their predecessors learned how to investigate cases involving email accounts, telephone calls and letters sent through the mail.”

Trial of Alleged Silk Road Founder

Courtroom illustration by Susie Cagle via Forbes

After all, part of Ross Ulbricht’s guilt in the Silk Road Trial was predicated on evidence derived from bitcoin wallets discovered on his laptop and under his control. Once law enforcement had access to the wallets it became trivial to connect the laptop to payments made involved in a murder-for-hire case. Ulbricht is still facing charges for the alleged murder-for-hire plot in Baltimore, Maryland.

Asner harkens back to old-school terminology for a detective describing how authorities put together the pieces by describing it as “solid and clever gumshoe work.”

To date, the government recovered approximately bitcoins during the investigation, including 144,336 from Ulbricht’s computer. The total current worth of all the currency amounts to $38.2 million USD at the current exchange rate (although it was much higher at the time it was confiscated.)

Ross Ulbricht faces life in prison for his conviction at his sentencing hearing set for May 15, 2015.

MyBitcoin collapses and takes $387 million with it

 

Hong Kong-based bitcoin marketplace MyBitcoin appears to have folded up and vanished taking an estimated $387 million with it. The marketplace appears to be a not-so-veiled scam, reports SiliconAngle’s Duncan Riley, involving a Ponzi scheme and, to make matters worse, investors received no paperwork confirming investments.

This follows another apparent inside job in January when Bitcoin processor EgoPay ceased trading and stopped communicating in December last year. The company has since claimed a hack by a potential insider. And, if that wasn’t enough the saga of EgoPay’s now former CEO Tadas Kasputis, and his related Bitcoin companies, makes for interesting reading related to the that still evolving scandal.

bitpesa-logoBitPesa raises $1.1 million in second investment round

 

In brighter news, Kenya-based BitPesa raised $1.1 million in a second investment round. This round is led by hedge-fund Pantera Capital. With this round and other investments, BitPesa has raised over $1.7 million in investments.

The BitPesa service allows users in Kenya and Ghana to send funds to popular mobile money wallets and exchange bitcoin for Kenyan Shillings. The service takes part in a potentially lucrative market in Africa, which has a weak central banking system coupled a high volume of mobile payments.