British Columbia

Bitcoin battle: Millions from B.C. 'dark web' trafficker at stake in Silk Road court case

Questions about a police search are threatening to derail the government's bid to keep more than $3 million in bitcoins seized from the computer of an alleged "dark web" pot trafficker.

Vancouver police seizure of digital currency challenged in forfeiture fight with pot trafficker

B.C.'s director of civil forfeiture claims that more than $3.6 million worth of bitcoin found on D.A.L.'s computer is the proceeds of unlawful activity. (Jim Urquhart/Reuters)

Questions about the Vancouver Police Department's treatment of a "dark web" pot trafficker are threatening to derail the province's bid to keep millions of dollars worth of bitcoins found on the man's computer.

The trafficker, D.A.L., has accused the VPD of misleading a justice of the peace in obtaining an order to detain his laptop hard drive two months after a B.C. Supreme Court judge ordered it returned.

D.A.L. — who served time for possession for the purpose of drug trafficking long before police applied for the order — claimed investigators didn't tell one arm of the court they'd been told to give the computer back while asking another for permission to keep it.

In a ruling released this week, a different judge called the allegations of misconduct "extremely serious."

At the very least, they have delayed the director of civil forfeiture's bid to keep bitcoins valued at about $3.6 million which the province claims is the proceeds of D.A.L.'s unlawful activity.

But they could result in the claim for the cash being abandoned altogether if D.A.L. is able to argue that the VPD breached his charter rights.

'A reputation on the Silk Road'

B.C.'s Civil Forfeiture Act allows the province to file suit against property linked to unlawful activity, regardless of whether or not a person has been convicted or even charged with a crime.

To win, the director of civil forfeiture has to establish that the property in question is either the proceeds of crime or an instrument of unlawful activity.

A ban prohibits the publication of any information that might identify D.A.L.'s children.

According to the director of civil forfeiture's initial notice of civil claim, police first showed up at D.A.L.'s Kitsilano home in April 2013 in response to a 911 call.

D.A.L. was charged with possession for the purpose of trafficking after police responded to a 911 call and found a tub full of ziploc bags filled with marijuana. (Thunder Bay Police Service)

Officers were "immediately struck by a strong smell of marijuana bulk plant." They found vacuum sealers, a weigh scale and a blue Rubbermaid container with ziploc bags full of pot.

The officers then obtained a search warrant, seizing 32 pounds of marijuana, as well as computer equipment that would eventually land at the heart of the civil forfeiture case.

D.A.L. was accused of operating under the alias 'MarijuanaisMyMuse' on the so-called Silk Road website, which is described as a "dark web" platform "primarily devoted to the international sale of illegal drugs."

"The customers paid (D.A.L.) the bitcoins in exchange for the drugs," the notice of claim said.

"(D.A.L) delivered the drugs to the customers by mail. By his efforts, (D.A.L) attained a reputation on the Silk Road platform for successfully delivering illegal drugs to purchasers in Canada and internationally."

MarijuanaisMyMuse

D.A.L. is the second Vancouver resident associated with 'MarijuanaisMyMuse'.

The United States is seeking the extradition of another B.C. resident, James Ellingson, who is also accused of using the handle to sell drugs in exchange for bitcoins.

The director of civil forfeiture claims that D.A.L. sold marijuana on the Silk Road platform in exchange for bitcoin. (Lucy Nicholson/Reuters)

The judge who released Ellingson on bail pending his extradition hearing next December was asked to consider the fact that two men were simultaneously operating under the name 'MarijuanaisMyMuse.'

But she didn't see a conflict.

"Ellingson is alleged to be part of a conspiracy, involving one or more persons," the judge said.

"Within this context, it is rationally conceivable that more than one person would have access to MarijuanaisMyMuse as a vehicle for illicit drug sales."

D.A.L doesn't face any charges in the U.S. but he pleaded guilty in Vancouver to possession for the purpose of trafficking in March 2015.

He was sentenced to nine months.

'Deliberately and fraudulently misled'

In March 2017, B.C. Supreme Court Joseph Galati signed an order that saw the VPD agree to return items they seized in the initial 2013 search — including computer equipment — to D.A.L. and his brother.

But the brothers "soon discovered that the computers' hard drives were missing."

"The VPD knew they were in breach of and blatantly disobeying a court order," D.A.L. argues in a response to the civil claim.

CBC's Bethany Lindsay explains how B.C.'s civil forfeiture system works. 1:55

On May 18, 2017, the VPD applied to detain the computer equipment through a section of the Criminal Code that allows police to hang onto seized material for extra time for the purposes of investigation or trial.

A few days later, the VPD notified D.A.L. that the hard drives had been seized for forensic examination. Investigators found 226.4365 bitcoins.

"The police committed fraud by deliberately failing to advise the justice of all the pertinent facts," D.A.L. argues.

"The police deliberately and fraudulently misled, not only the justice who approved their application, but also counsel."

According to the most recent ruling in the case, the VPD intends to commence legal proceedings relating to the court order.

They did not respond to an email asking for comment on the case.

Likewise, the director of civil forfeiture would not comment on the alleged breach of charter rights.

But a B.C. Supreme Court justice has ordered that the issues relating to the seizure should be heard before the rest of the director of civil forfeiture's claim for the money.

About the Author

Jason Proctor

@proctor_jason

Jason Proctor is a reporter in British Columbia for CBC News and has covered the B.C. courts and mental health issues in the justice system extensively.

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