The former DEA agent who is accused of extorting Silk Road administrator Dread Pirate Roberts and stealing funds from the former online marketplace was also a compliance officer at bitcoin exchange CoinMKT during his time at the DEA. The criminal complaint against former DEA agent Carl Mark Force IV points out that these two roles could constitute a conflict of interest. Force also allegedly invested $110,000 worth of bitcoin into CoinMKT, making him one of the companies largest investors at the time. It is also alleged that Force stole customer funds during his time as the bitcoin exchange’s compliance officer.
A conflict of interest?
The criminal complaint against Force notes that the former DEA agent “engaged in negotiations with CoinMKT to become its Chief Compliance Officer” in late 2013. CoinMKT CEO and Co-founder Travis Skweres quickly began asking Force if there was the possibility of a conflict of interest due to his position at the DEA. In an email to Force, Skweres stated, “Just FYI if there’s a work conflict — I’m not interested in doing anything illegal, so if we have to wait until you’re not officially an employee [with DEA] or whatever, then let me know, you’re the best judge of that….”
Later in the that same month, Force allegedly told Skweres that he would have access to a specific criminal database that could be used to run queries of suspected bad actors at CoinMKT. The criminal complaint pointed out that this is “strictly forbidden if not for an official law enforcement purpose.” It went on to state, “In fact, misuse of a government database may violate federal law and expose the offender to potential criminal liability.” The report also claims Force explicitly stated — in an email to Skweres — that he would stay on at the DEA while simultaneously working with CoinMKT.
A suspicious CoinMKT user
Once Force had attained his role as the de facto compliance officer at CoinMKT, it appears that he may have used that role to steal funds from a California-based user of the exchange. CoinMKT had reached out to Force due to suspicious activity from a particular user. The user in question had withdrawn $10,000 three times from his CoinMKT account rather than opting for a single $30,000 withdrawal. CoinMKT found this activity to be a possible attempt to avoid anti-money laundering regulations. CoinMKT noted that the user in question still had 128 bitcoins — worth roughly $109,000 at the time — in his account. Force allegedly noted that he would “seize the 128 BTC federally and do all the paperwork.” Shortly after, Force allegedly had a DEA intelligence analyst run a criminal history check on the suspicious user.
@matt_levine you have to get a VC deck for CoinMKT. “Our Chief Compliance Officer is also DEA, is that something you might be interested in”
— modest proposal (@modestproposal1) March 30, 2015
It should also be noted that the CoinMKT CEO notified Force that the suspicious activity from the user in question may have been due to a bug in the exchange platform. He told Force that he wanted to discuss the matter, but it’s unclear if that discussion ever took place.
CoinMKT was hesitant to seize the funds
Over the next few weeks, Force directed CoinMKT to seize the user’s account. The criminal complaint claims, “CoinMKT has expressed it was hesitant to do so, but did not want to draw the ire of federal law enforcement, especially given that the digital currency field was already subject to fairly intense law enforcement scrutiny.” After receiving something in writing from Force related to the seizure, CoinMKT seized the funds by creating a new account on their exchange platform.
Force’s alleged theft
At the time of the seizure, the “suspicious user” had roughly $37,000 in cash and nearly $300,000 in various digital currencies. While the criminal complaint claims Force instructed CoinMKT to send a check to the DEA for the cash from the user’s account, it also states, “I have confirmed that no such digital currency funds were received in any official DEA account, but instead went into FORCE’s own personal account with Bitstamp.”
[Read More: Ulbricht’s Diary Reveals Inner Workings of Silk Road]
The report goes on to claim that it appeared Force was attempting to cover up the actual amount of money seized from the CoinMKT user in an attempt to launder the digital currency to his own personal accounts. In other words, Force was trying to make it seem like the roughly $37,000 in cash was all that was seized from the user’s account. The report concluded, “I have also confirmed with DEA that no case was ever opened against [the suspicious CoinMKT user]. I am aware of no legal basis on which Force seized [the user’s] balances.”
Featured image via frankieleon.
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