‘Innocent’ Silk Road Seller Will Sue to Stop Sale of Seized Bitcoins

Former Silk Road merchant Peter Ward has announced his intention to hire a lawyer and file a claim for 100 bitcoins that he says were wrongly taken by the government during its seizure of online black market bazaar Silk Road.

The owner of Planet Pluto – a head shop in Devon, England, Ward says he earned the bitcoin – worth $85,000 at press time – lawfully, through the sale of drug accessories such as bongs, marijuana seeds and rolling papers, items he sells successfully online through other outlets.

Speaking to Forbes, Ward suggested that he has the ability to prove his transactions on the site were all legal, and as such, should not have been subject to forfeiture.

“I’m probably in a unique position in that I can prove my coins came from selling legal items. 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?”

Ward was also arrested on his 52nd birthday on 2nd October in connection with Silk Road. Law enforcement officials from the UK’s National Crime Agency entered his home and confiscated his personal stash of marijuana and cocaine, however, he was released on bail and has yet to be charged.

Impact on the Silk Road sale

For those more interested in the price of bitcoin, Ward hopes the action will keep the government from its forthcoming sale of $25m worth of bitcoins taken from the now-defunct website.

“It will be cool if an old hippy can throw a spanner in the big FBI machine,” Ward said.

Speaking to CoinDesk, Los Angeles-based asset forfeiture lawyer Dave Katten said Ward is unlikely to be successful in this goal, even if he has a legitimate claim to the money.

“If he’s really an innocent owner, they should return it, as long as they can’t find a specified unlawful activity to tie to it,” Katten said.

Katten believes the government, if it finds Ward innocent or settles with him out of court, is likely to reimburse Katten after the Silk Road sale. In this case, Ward would not receive his bitcoins, but would likely be compensated in US dollars and with interest similar to what consumers would receive on treasury bonds.

Legal reaction

Steven L. Kessler, an asset forfeiture lawyer Ward is considering for the case, told Forbes that the US government had an obligation to inform Ward of the sale, but that it did not follow through.

“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. Clearly after you’ve arrested a person, you have direct knowledge,” Kessler said.

Katten isn’t surprised, telling CoinDesk that Ward was likely to be “missed” by government, as his claim represents a small chunk of the total seizure. However, he stresses that this doesn’t mean Ward can’t file a claim or receive compensation, should it be owed.

As to whether such a claim would be worth it monetarily for Ward, Katten would only say that the legal process is likely to be lengthy, but that early action could be effective. Still, he says the government could fight such action on different grounds, should it choose.

“They may say the goods he’s selling are not illegal, but they may argue he’s using the system to hide the transactions rather than using a more common market. So they may not be so quick to given them back to him.”

Publicity stunt

Another lawyer familiar with Silk Road litigation, speaking on background, suggested Silk Road’s perception as a known drug bazaar could also lead the US government to take Ward’s case less seriously. The source further suggested that the case seems more like a publicity stunt than a legitimate claim given Silk Road’s reputation.

Still, Ward has taken to Twitter to find others who will help support his fight:

Any donations to my legal fund gratefully received, help me get my bitcoins back from the FBI 18bugRoYM6kz4dU2mHJuBnXMbU4SMQdnio #silkroad

— Pluto Pete (@plutopete) January 30, 2014

The announcement is just the latest development in the ongoing saga of Silk Road. For the latest updates, click here.

Image credit: US government building | CBP photography