Follow The Silk Road

The United States District Court for the District of Columbia (Judge Howell) declined an effort to disclose the identity of a hacker of Silk Road

In 2020, federal law enforcement officers conducting further investigations of Silk Road discovered that an individual, identified only as Individual X, had, in 2012, hacked into Silk Road and stolen over 70,000 Bitcoins. 69,370 Bitcoin, 2022 WL 888655, at *2; see also Compl. ¶ 10. The stolen Bitcoins were first kept in two separate Bitcoin addresses, abbreviated as 1BAD and 1BBq, and later almost all were transferred to a third Bitcoin address, abbreviated as 1HQ3. 69,370 Bitcoin, 2022 WL 888655, at *2. “[N]early 70,000 Bitcoin remained at 1HQ3” from 2013 until the government seized that address and the Bitcoin held there in late 2020, id., during which period the value of the Bitcoin at 1HQ3 increased from approximately $14 million to over $3 billion, id.; Compl. ¶ 9. Law enforcement officers investigating this theft also discovered that, before his arrest and conviction, Silk Road creator Ross Ulbricht “became aware of Individual X’s online identity and threatened Individual X for return of the cryptocurrency to Ulbricht.” 69,370 Bitcoin, 2022 WL 888655, at *1–2. Despite this threat, the Bitcoin was not returned to Ulbricht. Id. at *2.

In November 2020, “Individual X signed a Consent and Agreement to Forfeiture with the U.S. Attorney’s Office, Northern District of California”—the document and signature sought by Battle Born in this case—consenting to the forfeiture of the Bitcoin stored at the 1HQ3 address. Id.; see also Compl. ¶ 7. The government took custody of that Bitcoin the same day the Consent Agreement was signed, 69,370 Bitcoin, 2022 WL 888655, at *2, and shortly thereafter filed a civil forfeiture action in tthe United States District Court for the Northern District of California to
formally take ownership of the forfeited Bitcoin, Def.’s Mem. at 3.

Reasoning

The information sought by Battle Born implicates this categorical privacy interest, since disclosure of Individual X’s name would reveal, from a law enforcement record, the identity of the person, never publicly revealed before, see Hudgins Decl. ¶¶ 16, 18, 19, who was the subject of the law enforcement investigations and enforcement actions relating to the Bitcoin seized from the 1HQ3 address. The affidavit supplied by the government confirms that Individual X “was the subject of a law enforcement investigation,” Def.’s Mem. at 7 (citing Hudgins Decl. ¶ 14), and was the person who stole the Bitcoin in question “from addresses at Silk Road,” Hudgins Decl. ¶ 26; see also id. ¶ 25. This individual’s name has not been publicly released, see id. ¶¶ 16, 18, 19, even though facts about the investigation and Individual X’s status as a subject of the investigation have indisputably been publicly discussed and reported by numerous sources, including DOJ, courts, and media outlets.

Plaintiff’s connection

In March 2018, over two years before the government filed its forfeiture action against the Bitcoin held at the 1HQ3 address, Battle Born entered into an agreement to purchase the assets of the Chapter 7 bankruptcy estate of an individual named Raymond Ngan. Id. (citing United States v. Battle Born Invs. Co., LLC, No. 22-16348, 2023 WL 5319258, at *1 (9th Cir. Aug. 18, 2023)). When the United States brought its forfeiture action, Battle Born filed a claim in the case asserting that Individual X was Ngan or someone “associated with him,” and further claiming that Battle Born was the innocent owner of the nearly 70,000 Bitcoin from 1HQ3 due to its purchase of Ngan’s bankruptcy estate more than two years earlier. Id. (citing Battle Born Invs. Co., 2023 WL 5319258, at *1). Two other entities also filed claims contending that Individual X was Ngan or an associate of Ngan and asserting ownership of the Bitcoin as judgment creditors of Ngan.

Conclusion

DOJ has demonstrated, through sworn declarations and supporting arguments, that withholding Individual X’s name from disclosure, pursuant to FOIA Exemption 7(C), 5 U.S.C. §§ 552(7)(C), is proper. Summary judgment is therefore granted to DOJ, and Battle Born’s cross-motion for summary judgment is denied.

(Mike Frisch)