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Feds cuffed for allegedly pocketing Silk Road drug souk’s Bitcoins

The US Department of Justice has accused two federal agents of stealing hundreds of thousands of dollars in Bitcoins during the Silk Road investigation.

Former Drug Enforcement Administration (DEA) agent Carl Force and former Secret Service agent Shaun Bridges have been charged with theft of government property; wire fraud; money laundering; and a conflict of interest, according to legal papers filed in the San Francisco US District Court.

Both Force and Bridges worked on the Silk Road investigation that culminated in the conviction of Ross Ulbricht, who was found guilty of running the underground marketplace under the moniker Dread Pirate Roberts (DPR).

The agents allegedly fell foul of the law in 2013 during which time they were trying to find and snare DPR. Bridges allegedly stole $820,000 in BTC, while Force is accused of pocketing at least $235,000.

Force, while working undercover, created an account on Silk Road that his superiors were aware of. However, according to Monday’s DoJ complaint [PDF], he secretly created other identities not authorized by the DEA, and used them to pocket BTC from Ulbricht.

Officially, Force worked undercover as “Nob,” a pretend drug smuggler and organized crime figure. According to prosecutors, in mid-2013 Nob told DPR he could get the Silk Road boss fake ID for 400 BTC (then worth $40k) and insider information for 525 BTC (then worth $50k) from a fictitious corrupt agent who worked at the DEA.

It’s claimed Ulbricht gave Force the 925 Bitcoins, which the agent transferred to a personal wallet. However, Force wrote in his official report that the money for the inside information was not received, it’s claimed. Force also swapped emails with Ulbricht using PGP encryption, but did not hand over his private key, leading investigators to believe the agent was deliberately hiding the 525 BTC transaction from his bosses.

As well as the Nob account, Force is also said to have set up two more profiles on the marketplace: “French Maid” and “Death from Above.”

Ooh-la-la

According to the DoJ, French Maid took a $100,000 payment in BTC from DPR in exchange for the name of an alleged Silk Road administrator given by Mt Gox CEO Mark Karpeles to the authorities. DPR wanted to know if investigators were closing in on him and his associates, and was willing to pay for French Maid’s information.

It is not clear whether French Maid actually passed on any details, but it’s claimed Force received a 770 BTC payment. At one point, French Maid signed off an email to DPR with the name “Carl,” we’re told.

“Death from Above” made an unsuccessful attempt to extort $250,000 from DPR with threats of violence, it’s alleged. Death from Above threatened to kill the drug souk boss unless the money was paid, and claimed to know who DPR really was, prosecutors say. However, Force was way off base: he thought another suspect – someone who isn’t Ross Ulbricht – was Dread Pirate Roberts, and when Death from Above revealed this wrong identity to Ulbricht, the marketplace boss knew he himself was safe, it’s claimed.

DPR never paid the money, and Force leaked sensitive case information to an outside source, the DoJ alleges.

The alleged shenanigans don’t end there: Force is said to have used his role at the DEA to become chief compliance officer of the CoinMKT exchange – and then used that position to freeze and take control of a wallet containing $297,000 in BTC, which he then emptied into his own wallet. Force is also said to have forged a DoJ subpoena to convince payment company Venmo to unfreeze his personal wallet, and solicited another agent to cover up the incident.

Bridges, meanwhile, is accused of taking $820,000 in Bitcoins from wallets belonging to Silk Road sellers, converting the sum into dollars, and transferring them to his own shell company. The funds were gathered when an accomplice of DPR was apprehended in a drugs sting, and turned over access to his Silk Road administrator account – granting Bridges access to the sellers’ wallets.

That seized administrator account was referred to as “CG”, and used to move funds from a number of Silk Road sellers to another wallet, believed to have been controlled by Bridges.

After learning of the theft, DPR allegedly asked Nob to have CG killed – CG’s disappearance was referenced by Force in Death from Above’s failed extortion attempt, it’s claimed.

Force was arrested on Friday, while Bridges turned himself in to authorities on Monday. Both appeared before a judge earlier today. Bridges resigned from the Secret Service earlier this month, and Force quit in May last year. ®

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Article source: http://go.theregister.com/feed/www.theregister.co.uk/2015/03/30/feds_silk_road_bitcoins/

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