But a little over a year ago, it appears Ulbricht finally got a break of a different kind: The nine-figure debt he owed to the US government as part of his sentence will be erased—all thanks to the fortuitous hoarding of a hacker who’d stolen a massive trove of bitcoins from his market.
Last year, prosecutors quietly signed an agreement with Ulbricht stipulating that a portion of a newfound trove of Silk Road bitcoins, seized from an unnamed hacker, will be used to cancel out the more than $183 million in restitution Ulbricht was ordered to pay as part of his 2015 sentence, a number calculated from the total illegal sales of the Silk Road based on exchange rates at the time of each transaction.
“The parties agree that the net proceeds realized from the sale of the forfeited pursuant to this agreement shall be credited toward any unpaid balance of the Money Judgment,” reads a court filing from last year, using the phrase “money judgment” to refer to Ulbricht’s 2015 restitution order.
But the repayment of his restitution could mean that he’s able to earn money in prison to share with family or friends without it being seized or garnished to pay his debts—or even keep any previously unknown caches of bitcoins that he may possess, so long as they aren’t tied to the Silk Road or other criminal sources.
In a bizarre twist, the agreement to erase Ulbricht’s restitution payments appears to have been made without the involvement—or even the knowledge—of prosecutors in the Southern District of New York, the Justice Department attorneys who handled Ulbricht’s case.
“This was a way for the government not to have to deal with pointless legal hassles during the forfeiture process,” Weaver says, arguing that Ulbricht could have found an attorney to fight against and delay the seizure in return for a fraction of any potential reward.
The strange series of events that ultimately led to Ulbricht’s restitution windfall first came to light in November 2020, when the Justice Department announced that it had seized nearly 70,000 bitcoins from someone it referred to only as Individual X.
In the time since that seizure, however, court records show that the Justice Department has fought off a series of seemingly frivolous claims to the bitcoins, which prevented it from immediately selling off the coins as it does with other seized cryptocurrency.
Ulbricht’s mother, Lyn Ulbricht, who has championed her son’s defense and the case for a pardon since his arrest, wrote in a statement to WIRED that the repayment of his restitution represents a significant victory.
She notes, however, that like any prisoner, her son can’t hold any financial assets in prison beyond a commissary account for basic needs.
The restitution repayment doesn’t mean much for Ulbricht’s hopes of a pardon or a change to his sentence, argues Berkeley’s Weaver.
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