Long before the Department of Homeland Security set its sights on a 29-year-old named Ross Ulbricht, the agency had another surprising suspect in mind as the possible creator and administrator of the Silk Road’s massive online drug market: Mark Karpeles, the chief executive of the then-world’s-biggest bitcoin exchange, Mt. Gox.
In response to cross examination by the defense in Ulbricht’s trial today, DHS special agent Jared Deryeghiayan revealed that in 2012 and 2013 he had pursued Karpeles as the suspected owner and operator of the Silk Road, as well as Karpeles’ Mt. Gox associate Ashley Barr as the voice of the Dread Pirate Roberts, the Silk Road’s pseudonymous figurehead. Deryeghiayan confirmed he had even gone so far as to seek a warrant to search Karpeles’ Gmail account based on “probable cause” that the Mt. Gox owner had secretly administered the Silk Road in a bid to boost the price of bitcoin, and with it his own substantial cryptocurrency fortune.
In an August 2013 affidavit written by Deryeghiayan and read aloud by Ulbricht’s defense attorney Joshua Dratel, the agent cited evidence that included Karpeles’ purported control of the website silkroadmarket.org, information received from a federal informant working with Karpeles, and Karpeles’ profile as a programmer and bitcoin mogul. “I believe this evidence shows Karpeles controlled silkroadmarket.org and the tuxtele.com website and hosted them both at IP addresses he controlled,” Deryeghiayan wrote. He went on to cite Karpeles’ Linkedin page, and to argue that Tokyo-based Karpeles was “well suited to [create] an e-commerce website such as the Silk Road underground website.”
In his affidavit, Deryeghiayan also cited an interview I conducted with the Dread Pirate Roberts in July of 2013. “That sounds very much like Karpeles,” Deryeghiayan wrote.
Karpeles didn’t immediately respond to WIRED’s request for comment.
According to Deryeghiayan, his suspicion of Karpeles began when he started to analyze bitcoin accounts in April 2012. By July of that year, he “believed he had a good target” in Karpeles.
While Karpeles’ English skills didn’t match the public writings of the Dread Pirate Roberts, Deryeghiayan confirmed in response to Dratel’s questions that he suspected Karpeles’ Mt. Gox staffer Ashley Barr had served as something like Karpeles’ ghostwriter, “a person who shared some of the same viewpoints…who was working for him.”
In an internal email to other DHS staffers at the time, Deryeghiayan says he wrote that “We’ve built up quite a large list of information to lead us to this.” By August 2012, Deryeghiayan believed strongly enough that Karpeles was involved in the Silk Road that he advised DHS officials not to visit any of the websites controlled by Karpeles for fear of tipping him off to his investigation. At some point he also began receiving information from a confidential informant close to Karpeles, though Deryeghiayan didn’t offer more details about that source in court.
By raising Karpeles as an alternative suspect, it’s not yet clear if Ulbricht’s defense is seeking to convince the jury that Karpeles was in fact Silk Road’s owner, or simply seeking to raise doubts about the DHS’s investigative abilities in the jury’s mind. Dratel spent the first half of the day forcing Deryeghiayan to admit uncertainties in the prosecution’s evidence linking Ross Ulbricht to the Dread Pirate Roberts persona, such as the possibility that the PGP private key Silk Road’s owner used to “sign” private messages had been shared among multiple people. Dratel also cited an internal email Deryeghiayan sent in which he posited that the author of the Dread Pirate Roberts’ writing had changed in April 2012.
Shortly after the defense raised the issue of Deryeghiayan’s affidavit, prosecutor Serrin Turner objected to the line of questioning as “hearsay,” leading to the jury eventually being removed from the courtroom so that judge Katherine Forrest and both teams of lawyers could debate the issue. “The defense is trying to argue this other target is the real Dread Pirate Roberts,” Turner protested.
But judge Forrest responded that the defense was merely trying to present “certain facts” to allow the jury to “draw inferences.”
“The defense has been [trying to show] that Karpeles was at least arguably ‘a’ Dread Pirate Roberts,” she said. “They’re trying to raise reasonable doubts.”
Developing story, check back for updates.
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