Jan 31 2014, 9:05pm CST | by Forbes
Somewhere in the $164 million worth of bitcoins held by the U.S. government, there’s a chunk of the cryptocurrency that until very recently belonged to Peter Ward, a British self-described “cybertechnohippy” and dealer in drug paraphernalia like bongs, marijuana seeds, and rolling papers. Now Ward wants his bitcoins back, and he’s willing to create a thorny legal mess to get them.
On Thursday, Ward began the process of retaining a lawyer to file a claim for what he says were 100 bitcoins–worth around $95,000 at current exchange rates–seized by the FBI in the takedown of the Silk Road online black market for drugs last October. Unlike most of Silk Road’s sellers, Ward says he earned his bitcoins through entirely legal means, offering the same merchandise that he advertises on the public Internet from his head shop Planet Pluto in Devon, England.
“I’m probably in a unique position in that I can prove my coins came from selling legal items,” says Ward, who argues his wares included only drug accessories and UK-legal substances like salvia and the morphine-like kratom. “I sold on Silk Road because it had a large user base that matched my target customers. Where better to sell king-size rolling papers?”
Earlier this month the Manhattan District Attorney’s office announced that a judge had signed off on a forfeiture order that will allow it to sell around 29,000 of the seized Silk Road’s bitcoins–the other 144,000 taken by the government are still being claimed by Ross Ulbricht, the alleged creator of the now-defunct black market.
But Ward, who describes himself on his Twitter feed as an “aging psychonaut” who “enjoys exposing hypocrisy and bullshit and taking back the interweb from the suits,” says the FBI failed to consider his claim on a small fraction of the market’s 29,000 coins. And he hopes to use that claim to delay the sell-off of the government’s stash until he’s been charged and brought to trial. “I think they forgot about little old me,” he writes to me in an email. “It will be cool if an old hippy can throw a spanner in the big FBI machine.”
On October 2nd–also Ward’s 52nd birthday–he says British agents broke down his unlocked door, arrested him, and seized all of his electronic devices, as well as a collection of his drug-related merchandise. (They took his personal stash of cocaine and marijuana, too, he admits. “The coke was on the mirror ready for my birthday line when I returned from the post office,” Ward writes.)
In the questioning that followed, Ward says he told agents of the UK’s National Crime Agency that despite his active presence on the Silk Road, his bitcoins were earned legally. He says he was then released on bail and has yet to be charged with anything.
All of that means the FBI, who were in communication with the NCA, should have considered Ward’s claim to some of the Silk Road bitcoins, according to Steven L. Kessler, an asset forfeiture lawyer who Ward is in the process of retaining. “The statute requires that if the government of the United States has knowledge of an individual with an asset subject to forfeiture, the owner has to get notice,” says Kessler. “Clearly after you’ve arrested a person, you have direct knowledge.”
Just because most of the items listed for sale on the Silk Road were contraband doesn’t mean Ward should be painted with the same brush, Kessler argues. He uses an analogy familiar to fans of the show “Breaking Bad.” ”Laundromats that are fronts for illegal activities still have washers and dryers,” he says. “The operation of the washing and drying machines, barring another argument, isn’t illegal. Whirlpool isn’t going to be charged with illegal activity because they’re supplying the equipment.”
I’ve contacted the FBI for comment on whether it failed to consider Ward’s claim for his bitcoins, and I’ll update this post if I hear back.
In the mean time, Ward says he’s asking for Bitcoin donations to fund his legal battle , and says he hopes it ends with the return of what he claims are his legal earnings. But if his efforts result instead in a protracted showdown that delays the sale of the Silk Road’s bitcoins, he tells me he’d be just as happy. “They are my coins and I don’t want the FBI to use them for their nefarious purposes,” he says. “But who wouldn’t want to stick it to the man if they had the chance?”
With reporting contributed by Runa Sandvik in Washington, DC.
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