Silk Road Shutdown: The Applicability of Conspiracy Law to “Ebay-like” Websites

Posted by Cyberbear on April 28, 2015 in Computer Crimes, Internet, Litigation |

Posted by: Stephen Mostrom

April 18, 2015

 

Silk_Road_SeizedConspiracy is a staple of the United States judicial system. The term “conspiracy,” in the legal sense, means an agreement between two or more people to commit an illegal act. In essence, a conspiracy is a meeting of the minds with a sinister purpose, and it is this small, yet important, area of criminal law that keeps many criminals from going unpunished.

Consider, for example, the getaway driver for a high-stakes bank robbery. The driver is involved in the planning of the heist. He is integral in the act of the heist. And yet, did he walk into the bank with a gun himself? No. But it still seems fair that the getaway driver share in the punishment of the other robbers. That is where conspiracy law comes in—reaching those criminals who were integral to the action of a crime, but did not commit the action themselves.

There are countless other examples of conspiracy law hard at work in the real world—drug cartels, organized crime, embezzlement. But while application of conspiracy principles is relatively straightforward in most areas, courts have struggle much more in the area of online marketplaces. Enter the Silk Road case.

U.S. v. Ulbricht was a 2014 case where the New York District Court had to decide the applicability of conspiracy law to the chief architect and administrator of the Silk Road website, Ross Ulbricht. The website—often referred to as the “Amazon of Drugs” or an “Ebay-like website”—facilitated the sale of illegal drugs, with Ulbricht running the site through the moniker Dread Pirate Roberts. Using TOR programming and Bitcoin payments, the Silk Road was able to keep user identifications and purchases anonymous. The site operated for three years and completed thousands of transactions before being shut down in 2013.

The government charged Ulbricht with conspiracy in conjunction with his work on the website, but as the court analyzed the legality of the charges, key questions about conspiracy law—specifically in the context of “Ebay-like websites—began to arise. The remainder of this post will look at four distinct and novel questions the court considered in the area of transactional websites and how they addressed each one.

Question One: Can there be a legally cognizable “agreement” between Ulbricht and one or more coconspirators to engage in narcotics trafficking, computer hacking, and money laundering by virtue of his and their conduct in relation to Silk Road? If so, what is the difference between what Ulbricht is alleged to have done and the conduct of designers and administrators of legitimate online marketplaces through which illegal transactions may nevertheless occur?

In layman’s terms: Did Ulbricht reach an agreement with the drug dealers that used his website? If so, how does his website differ from other online marketplaces?

In Question One, the court considered whether Ulbricht, as his attorney’s argued, was merely a facilitator and that his website functioned much like an Ebay or Amazon. In considering this, the court noted that it was Ulbricht’s intent that was the key factor.

“[T]here is no legal prohibition against such criminal conspiracy charges provided that the defendant possesses (as the Indictment alleges here) the requisite intent to join with others in unlawful activity.”

The court went further to address the main argument of the defendant: that his website served the same function as Amazon or Ebay, where criminal transactions take place, unknown to the host, from time-to-time. The court again looked at intent.

“It is certainly true that the principles set forth in this Opinion would apply to other third parties that engaged in conduct similar to that alleged here; but it is also true that the essential elements for (by way of example) a narcotics conspiracy would be absent if a website operator did not intend to join with another to distribute (for instance) narcotics.”

In sum, when determining the agreement underlying a conspiracy, i.e. the “meeting of the minds,” the Ulbricht court looked to the intent of the website.

Question Two: As a matter of law, who are Ulbricht’s alleged coconspirators and potential coconspirators? That is, whose “minds” can have “met” with Ulbricht’s in a conspiratorial agreement? What sort of conspiratorial structure frames the allegations: one large, single conspiracy or multiple smaller ones?

In layman’s terms: Does it matter that the court doesn’t know the identity of the individuals Ulbricht conspired with?

In Question Two, the court addressed the other side of the agreement—who was Ulbricht agreeing with. The court did not decide this issue, “as the proof comes in at trial,” but they did provide guidance as to establishing the conspiracy.

First, the court looked at a single conspiracy—Ulbricht conspiring with each drug dealer. This, again, was a question of intent, and one the Government would have to prove.

Second, the court proposed two other types of conspiracy that the Government could attempt to prove: chain and hub-and-spoke. The chain conspiracy is designed to cover those situations where criminals act independently of each other, but toward a single purpose. Similarly, the hub-and-spoke conspiracy is a situation where a central member (the hub) orchestrates the activities of the other members (the spokes). Either conspiracy could be proved.

But in the end, the court passed on the specifics, choosing instead to focuse on the application to Ulbricht. “[U]ltimately, the form of the conspiracy is not as important as a determination that at least one other person joined in the alleged conspiratorial agreement with Ulbricht.”

Question Three: As a matter of law, when could any particular agreement have occurred between Ulbricht and his alleged coconspirators? Need each coconspirator’s mind have met simultaneously with Ulbricht’s? With the minds of the other coconspirators? That is, if Ulbricht launched Silk Road on Day 1, can he be said, as a matter of law, to have entered into an agreement with the user who joins on Day 300? Did Ulbricht, simply by designing and launching Silk Road, make an enduring showing of intent?

In layman’s terms: At what point in time did the conspiracy take place between Ulbricht and the drug dealers?

In Question Three, the court addressed the timing issue—when, exactly, did Ulbricht form the agreement with the drug dealers? In explaining the applicable law, the court made two analogies, pulling from contract and conspiracy law.

First, the court described the agreement as an offer and acceptance. Ulbricht, the court said, had made an offer for users to access his website. Then, when each user accepts the offer, he becomes a co-conspirator.

“It is as though the defendant allegedly posted a sign on a (worldwide) bulletin board that said: ‘I have created an anonymous, untraceable way to traffic narcotics, unlawfully access computers, and launder money. You can use the platform as much as you would like, provided you pay me a percentage of your profits and adhere to my other terms of service.’ Each time someone ‘signs up’ and agrees to Ulbricht’s standing offer, it is possible that, as a matter of law, he or she may become a coconspirator.”

Second, the court looked at existing conspiracy cases, which allow for conspiracy charges even where there is a lapse in time.

“A lapse in time—in particular in a narcotics chain conspiracy, where a manufacturer creates a substance months prior to a wholesale or retailer selling it, not knowing (and perhaps never knowing) who, precisely, will ultimately distribute it—does not ipso facto render the alleged conspiracy defective as a matter of law.”

In sum, timing was not an issue so long as the other elements of the conspiracy were firmly in place. The offer of criminal activity could be open-ended.

Question Four: As a matter of law, is it legally necessary, or factually possible, to pinpoint how the agreement between Ulbricht and his coconspirators was made? In this regard, does the law recognize a conspiratorial agreement effected by an end user interacting with computer software, or do two human minds need to be simultaneously involved at the moment of agreement?

In layman’s terms: Does it matter that Ulbricht never interacted with most of the drug dealers, even online?

In Question Four, the court addressed the question of conspiracy where the majority of the workings were “automated, pre-programmed processes.”

“This is not a situation in which Ulbricht is alleged to have himself approved or had a hand in each individual transaction that occurred on Silk Road during the nearly three-year period covered by the Indictment. Instead, he wrote (or had others write) certain code that automated the transaction.”

Again, the court dismissed Ulbricht’s arguments, stating that “[t]hough automation may enable a particular transaction to take place, it is the individuals behind the transaction that take the necessary affirmative steps to utilize that automation.”

The court went further to describe a situation where an automated telephone line offered narcotics trafficking opportunities by pressing “1.” This, the court said, would be “powerful evidence” of a conspiracy.

Automation, the court concluded, “is effected through a human design; here, Ulbricht is alleged to have been the designer of Silk Road, and as a matter of law, that is sufficient.”

Eight months after the decision of the New York District Court, Ross Ulbricht was convicted by a jury of 7 criminal counts, including conspiracy to launder money. The sentence was 30 years to life.

With this conviction, U.S. courts took a strong stance in the area of online conspiracies. With it, administrators of “Ebay-like” websites should know that the intent of their transactions can be called in question, and they should take every step to make clear that their website has a lawful purpose. Distance, timing, and automation—the courts have said—will not remove the defendant from the conspiracy.

 

 

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