The founder of online drug marketplace Silk Road could claw back the $6.5billion worth of Bitcoin seized from the platform after being pardoned by Donald Trump and freed from a life sentence behind bars.
Ross Ulbricht, who was sentenced in 2015, could mount a legal challenge to reclaim the money in what pardon experts said would add ‘insult to injury’ for law enforcement, DailyMail.com can reveal.
Ulbricht’s case would hinge on whether the money is in the custody of a court or whether it has been deposited with the Treasury.
If it is still under the jurisdiction of a court then he may have a case, said Samuel Morrison, a lawyer focused on clemency who spent 13 years in the Justice Department’s Office of the Pardon Attorney.
Should Ulbricht go after the money, however, it could spark a protracted legal dispute that could drag on for years.
But with widespread support from the crypto industry and beyond, his efforts to reclaim the funds could become another cause célèbre, just like his imprisonment.
Ulbricht, 40, was released on January 22, just two days after Trump’s inauguration, after serving nearly a decade in prison for his role in Silk Road, which was described as an Amazon-like website for illegal drugs.
Prosecutors claimed at least six people died as a result of taking drugs they bought on the site, which made Ulbricht $200million and used Bitcoin as its currency.
Trump, however, had hailed Ulbricht as a hero of ‘the Libertarian Movement’ and called prosecutors ‘scum’ for upholding the law.
In his announcement, Trump said: ‘The scum that worked to convict him (Ulbricht) were some of the same lunatics who were involved in the modern day weaponization of the government against me’.
The case that could make Ulbricht a fortune was filed in 2020 at a federal court in California and relates to a person referred to as ‘Individual X’ who hacked the Bitcoin from Silk Road.
The complaint states that in November that year, Individual X agreed to hand over the currency but various legal challenges have held the case up.
In December, a judge gave the go ahead for $6.5billion on Bitcoin to be sold off.
Morrison told DailyMail.com: ‘If it’s been remitted to the US Treasury, if the US has title to it, it’s too late for Ulbricht because of the appropriations clause.
‘That would be tantamount to the President authorizing disbursement of funds from the treasury. Only Congress can do that’.
Morrison said the ‘wrinkly bit’ is the status of the Bitcoins.
‘If Ulbricht were granted a pardon and the money was still in the jurisdiction of the court, his lawyers have an argument that he gets it back.
‘It depends on the legal status of those accounts.
‘It’s possible if nobody thought about this and technically he can still get it back which would be an insult to injury as far as law enforcement is concerned.
‘I suspect it’s too late. On the other hand it’s so much money it might be worth litigating’.
Morrison said that the only comparable example he could think of was aggressive use of pardons after the Civil War to prevent slave owners from having their property taken away from them.
In thousands of cases the property that had been seized by Union soldiers was not disposed of, meaning it was ‘up for grabs’.
‘But this is nothing like that,’ Morrison said. ‘This is billions of dollars’.
Margaret Love, who served as United States Pardon Attorney in the Justice Department from 1990 to 1997, told DailyMail.com that the question of whether Ulbricht gets the money back is ‘a bit complicated’.
She said: ‘It depends upon whether the funds have been deposited in the Treasury at this point.
‘Any funds “covered into the treasury” can only be returned via a congressional appropriation’.
Separately, it is unclear if the government still has any of the Bitcoin that it seized in 2013 from Ulbricht which at the time was a record $33.6million.
Had the Treasury held onto all 173,991 Bitcoins it seized from Ulbricht back then, they would now be worth a staggering $18,175,099,860 or $18 billion.
The government has been selling off Bitcoin it seized through cryptocurrency cases through its own wallet with Coinbase, an online crypto exchange.
But it has been cautious about dumping too much at one time because large sales spook the market.
When the government moved $2billion worth of Bitcoin into its wallet in December, it caused the price to tumble.
Trump has vowed to take a more relaxed approach to crypto regulation while in the Oval Office and even launched his own coin after winning the Presidency.
The token, branded $TRUMP, soared about $10billion in value after its launch but tanked after First Lady Melania Trump launched her own.
DailyMail.com has contacted the Department of Justice, The Department of Treasury and federal prosecutors in New York, where Ulbricht was put on trial, and California.
We have also reached out to Ulbricht’s lawyers for comment.