Former Silk Road Senior Advisor Pleads Guilty In Manhattan Federal Court
Roger Thomas Clark Pleads Guilty In Manhattan Federal Court
On January 30, 2020, the United States Attorney for the Southern District of New York (SDNY) issued a press release that Roger Thomas Clark, who was also known as “Plural of Mongoose” or “Variety Jones,” pled guilty for conspiring to distribute illicit narcotics in mass quantities. The press release stated that Mr. Clark was the senior advisor to the owner and operator of the Silk Road online illicit black market and in committing his crime also used the online nicknames “CaptainSargeant”, “VJ,” and “Cimon”.
What Was “Silk Road”?
“Silk Road” was created by Ross Ulbricht in January 2011. He owned and operated an underground website until it was shut down by law enforcement authorities in October 2013. Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet at the time, serving as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs including cannabis, were bought and sold regularly by the site’s users. While in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.
Silk Road enabled its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. Silk Road was operated on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the network’s users. Silk Road also included a Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.
Mr. Ulbricht was eventually convicted and is serving a life sentence without the possibility of parole. His appeal to the Supreme Court of the United States was denied on June 28, 2018. Already he has been languishing in prison for half a decade now.
Clark Guilty Plea
The press release stated that Mr. Clark was described by Mr. Ulbricht as a “real mentor” who advised Ulbricht about, among other things, security vulnerabilities in the Silk Road site, technical infrastructure, and the rules that governed Silk Road users and vendors, and the promotion of sales on Silk Road, including the sales of narcotics. Clark also provided advice to Ulbricht on developing a “cover story” to make it appear as though Ulbricht had sold Silk Road. Clark also assisted with hiring programmers to help improve the infrastructure of, and maintain, Silk Road. Clark also was responsible for gathering information on law enforcement’s efforts to investigate Silk Road and Clark advised Ulbricht on how to protect the Silk Road Empire. For instance, when a Silk Road staff member was suspected of stealing $350,000 in Bitcoin from the site, Clark suggested to Ulbricht that Ulbricht commission a murder-for-hire. Ulbricht took that suggestion. (Ultimately, unbeknownst to both men, the attempted murder-for-hire did not result in any harm to the target.) Clark was paid at least hundreds of thousands of dollars for his assistance in operating Silk Road.
Mr. Clark, age 56 and a citizen of Canada, pled guilty to one count of conspiracy to distribute narcotics, which carries a maximum sentence of 20 years in prison. He is scheduled to be sentenced in Federal District Court on May 29, 2020.
Clark’s Troubles Could Spill Over To IRS
For individuals nabbed by the Federal Government, it is not surprising that the IRS gets involved and they are also charged with tax crimes.
Failure to report all the money you make is a main reason folks end up facing an IRS auditor. Carelessness on your tax return might get you whacked with a 20% penalty. But that’s nothing compared to the 75% civil penalty for willful tax fraud and possibly facing criminal charges of tax evasion that if convicted could land you in jail.
Criminal Fraud – The law defines that any person who willfully attempts in any manner to evade or defeat any tax under the Internal Revenue Code or the payment thereof is, in addition to other penalties provided by law, guilty of a felony and, upon conviction thereof, can be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than five years, or both, together with the costs of prosecution (Code Sec. 7201).
The term “willfully” has been interpreted to require a specific intent to violate the law (U.S. v. Pomponio, 429 U.S. 10 (1976)). The term “willfulness” is defined as the voluntary, intentional violation of a known legal duty (Cheek v. U.S., 498 U.S. 192 (1991)).
And even if the IRS is not looking to put you in jail, they will be looking to hit you with a big tax bill with hefty penalties.
Civil Fraud – Normally the IRS will impose a negligence penalty of 20% of the underpayment of tax (Code Sec. 6662(b)(1) and 6662(b)(2)) but violations of the Internal Revenue Code with the intent to evade income taxes may result in a civil fraud penalty. In lieu of the 20% negligence penalty, the civil fraud penalty is 75% of the underpayment of tax (Code Sec. 6663). The imposition of the Civil Fraud Penalty essentially doubles your liability to the IRS!
It is risky enough to be involved in cannabis (which is illegal under Federal law) or crypto-currency, so imagine how much riskier it is combining both. It is important to control this risk which you can do by engaging a cannabis tax attorney or a bitcoin tax attorney at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Inland Empire (Ontario and Palm Springs) and other California locations. We can come up with solutions and strategies to these risks and protect you and your business to mitigate criminal prosecution, seek abatement of penalties, and minimize your tax liability.