Silk Road's `Dread Pirate' Loses Appeal Over Life Sentence

(Bloomberg) -- The former Eagle Scout known as Dread Pirate Roberts must serve a life sentence for running the multimillion-dollar Silk Road online drug bazaar, a federal appeals court said even as it questioned the usefulness of such harsh penalties.

Ross William Ulbricht, who was found guilty of operating a site where people anonymously used bitcoins to buy drugs, hacking tools and fake identification, lost his appeal of his conviction and sentence on Wednesday.

He was convicted by a jury in February 2015 of seven criminal counts including conspiracy and drug trafficking, in a case that exposed the criminal potential of the Internet's vast underbelly.

A three-judge panel of the Manhattan-based appeals court rejected Ulbricht's claims that the government illegally obtained evidence without a warrant and that his trial wasn't fair because he couldn't tell jurors about two former federal agents who stole money from online accounts while investigating Silk Road. The panel also showed empathy for his claim that the sentence is too harsh, but said that it must follow the laws as passed by Congress.

“People may and do disagree about the social utility of harsh sentences for the distribution of controlled substances,” Circuit Judge Gerard Lynch wrote in a 139-page opinion. “It is very possible that, at some future point, we will come to regard these policies as tragic mistakes.”

At this point though, the existing laws must be enforced, the judge said.

“The democratically elected representatives of the people have opted for a policy of prohibition, backed by severe punishment,” Lynch wrote.

Silk Road Mastermind Handed Life in Prison for Drug Bazaar

Because parole was eliminated from the federal system in 1987, a life sentence leaves Ulbricht with little hope he'll ever leave prison.

As to Ulbricht's other claims, the panel ruled that agents were permitted to monitor Internet Protocol address traffic to his home router and computers without a warrant and that the agents' misconduct was irrelevant.

"The agents' corruption has nothing to do with whether Ulbricht operated the site as Dread Pirate Roberts," Lynch wrote. "Ulbricht has not raised any credible doubts about the reliability of the evidence that the government presented at trial, nor has he explained why the agents' illegal actions relate to his guilt."

The former agents, from the Drug Enforcement Administration and Secret Service, pleaded guilty and were sentenced to prison.

Ulbricht, 33, has been serving his sentence at a federal lockup in Manhattan. His lawyer, Joshua Dratel, declined to comment on the appeals court's ruling.

‘Life's Work'

At Ulbricht's sentencing, prosecutors warned that Silk Road had been used as a blueprint for other online criminals. Defense lawyers, parents and friends painted Ulbricht as an idealistic, naive young man who set up the online marketplace and quickly found himself in over his head. Ulbricht admitted he founded Silk Road, but said he later turned the site over to others who developed it into a criminal enterprise, a defense that was rejected by jurors and by U.S. District Judge Katherine Forrest in sentencing Ulbricht.

“It was a carefully planned life's work,” Forrest said at his sentencing. “You wanted it to be your legacy. And it is.”

Ulbricht's online name was taken from the "The Princess Bride." In the film, released in 1987, Dread Pirate Roberts is used by a series of captains who pass the title to their successor when they retire. Prosecutors said Ulbricht used the name to deflect suspicion from himself.

Forrest considered evidence that Ulbricht paid $650,000 to try to arrange the murders of five people who threatened Silk Road's anonymity. Forrest said there was “ample and unambiguous evidence” of the plots, though both prosecutors and the defense agreed no murders were carried out. Prosecutors also presented Forrest with evidence of six Silk Road users whose deaths were related to drug use.

More: The Seven Habits of Highly Effective Drug Dealers

Silk Road operated on the Tor network, which allows users to access sites anonymously. The use of bitcoins also helped shield the identity of suppliers and purchasers as well as Ulbricht and Silk Road employees, who used pseudonyms online.

When the U.S. government shut the site down in October 2013, there were 13,802 listings for illegal drugs including LSD, cyanide, methamphetamines, cocaine, heroin, hallucinogenic mushrooms and marijuana. Users bought about $183 million worth of drugs and other illegal items on the site from 2011 to 2013, according to the government.

The case is U.S. v. Ulbricht, 15-1815, Second U.S. Circuit Court of Appeals (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider, Paul Cox