6.Richard Chapman Bates — Direct/Cross (Part 2)
766 linesMR. HOWARD: Good afternoon, Mr. Bates.
RICHARD CHAPMAN BATES: Good afternoon.
MR. HOWARD: So, Mr. Evert, could we please publish Government Exhibit 1002, which is where we left off before the lunch break?
RICHARD CHAPMAN BATES: Before I had a folder with these exhibits in them. I don't have that.
MR. HOWARD: May I approach the witness, your Honor?
THE COURT: You may.
MR. HOWARD: So, Mr. Evert, could you please zoom in to the middle of the conversation, starting at "My site had."
"me: my site had a 40 minute spot on a national radio program. Friggin crazy, you gotta keep my secret buddy
"baronsyntax: I haven't told anyone and I don't intend to
"me: i know i can trust you
"baronsyntax: I don't even know the onion url. I might tell people about the site though - if that's ok? I won't even mention I know someone who runs it
"me: mmm....ok, go..a have a good story for how you found it in case they ask
"baronsyntax: I'll just tell them I saw it on 4chan or something."
"Me: coo."
So, Mr. Bates, what is going on in this part of the conversation?
RICHARD CHAPMAN BATES: In this part of the conversation Ross was excited that Silk Road was getting some media coverage. And eventually I asked him if it's OK if I just tell people that I know that the Silk Road exists without, you know, associating him or myself with it. And he approves of that as long as I have a good story.
MR. HOWARD: And continuing down the chat:
"baronsyntax: What was the national radio program? Conservative talk radio?
"me: ill tell ya in person, i don't want to talk to much over unsecured channels
"baronsyntax: gotcha. Need to switch to TorChat soon."
So, Mr. Bates, what's occurring in this part of the conversation?
MR. DRATEL: Your Honor, the conversation speaks for itself.
THE COURT: I will allow it. You may give your view as to what's happening in the conversation with the cross.
RICHARD CHAPMAN BATES: This conversation happened over Google Chat, which is, as I said earlier, I believe not encrypted, and Tor chat was -- after I learned about Tor, I thought wouldn't it be neat if there was a chat program that worked on that, and a simple Google search led me to TorChat. And I suggested to Ross that we use that to communicate securely and privately.
MR. HOWARD: Did you, in fact, later have communications with the defendant over TorChat?
RICHARD CHAPMAN BATES: Yes, I did.
MR. HOWARD: Can you please flip in your binder to what has been marked for identification purposes as Government Exhibit 1003.
Do you recognize what this is?
RICHARD CHAPMAN BATES: 1003? Oh, yes. This is a Google Chat between Ross and me.
MR. HOWARD: The government offers Government Exhibit 1003.
MR. DRATEL: The same objection, your Honor.
THE COURT: The same as the ones just in the immediately prior ones?
MR. DRATEL: Yes.
THE COURT: All right. Those objections are overruled. GX1003 is received.
(Government's Exhibit 1003 received in evidence)
BY MR. HOWARD:
MR. HOWARD: So, Mr. Bates, what is the date of this online chat?
RICHARD CHAPMAN BATES: This is April 1, 2011.
MR. HOWARD: Mr. Evert, could we please zoom in on the conversation, please. The top half. Thank you.
MR. HOWARD: "baronsyntax: All my friends think your site is really cool :•])
"Me: :)
"Baronsyntax: I told them I know the guy who runs it
"Me: you should be quiter
"Me: quieter
"Me: sp?
"Me: i think you mentioned something to jon too, huh?
"Baronsyntax: I didn't tell anybody about it - this is just the only idea I had for an April Fool's joke
"Me: aww geez
"Baronsyntax: All I told Jon was that it was cool
"Me: even so, shhhh."
So, Mr. Bates, what is occurring in this conversation?
RICHARD CHAPMAN BATES: This is an April Fool's joke that I laid on Ross, which in retrospect is not very funny.
MR. HOWARD: And what was the joke?
RICHARD CHAPMAN BATES: The joke was that I told everybody that -- about the Silk Road and told everyone that I know the guy who runs the Silk Road, when in fact I had not told anybody about Ross' involvement.
MR. HOWARD: So did you -- you continued to provide programming help to Mr. Ulbricht after you learned he was running Silk Road, correct?
RICHARD CHAPMAN BATES: That is correct.
MR. HOWARD: And why did you do that?
RICHARD CHAPMAN BATES: Because he was my friend.
MR. HOWARD: What sorts of things, generally, do you remember him asking for help on?
RICHARD CHAPMAN BATES: I remember him asking me some php questions. I remember him asking me about object-oriented programming, a little bit of Web design. I remember us talking about encryption a little bit. That's all that's coming to mind right now.
MR. HOWARD: Are you familiar with what a computer server is, Mr. Bates?
RICHARD CHAPMAN BATES: Yes, I am.
MR. HOWARD: Did you ever have administrative access to Silk Road's servers?
RICHARD CHAPMAN BATES: No, I did not.
MR. HOWARD: Was it ever offered to you?
RICHARD CHAPMAN BATES: Yes. There was one time, granted, Ross and I had both been very heavily drinking, and I was at the bar and Ross came up to me and said something akin to, Hey, do you want to be an admin. I understood he was talking about Silk Road. I turned back to him and I said, I've already got a job.
MR. HOWARD: Did the defendant talk to you about -- tell you why he was asking you?
RICHARD CHAPMAN BATES: Yes. Earlier he had kind of complained -- he vented a little bit to me about some of the administrative duties that he had. He had to resolve conflicts between buyer and seller in case something went wrong with the transactions. He also had to monitor the site. It had certain rules about things that could or could not be posted and he had to enforce that, and he told me the workload was becoming too much and he would have to hire some admins.
MR. HOWARD: And when did this conversation occur, approximately?
RICHARD CHAPMAN BATES: I believe this was in March of 2011 at some point.
MR. HOWARD: What, if anything, did the defendant provide you in exchange for your help on Silk Road?
RICHARD CHAPMAN BATES: Nothing but his friendship.
MR. HOWARD: How long did you continue to provide assistance with programming help on Silk Road?
RICHARD CHAPMAN BATES: I continued to provide help going into the summer of 2011.
MR. HOWARD: And what happened?
RICHARD CHAPMAN BATES: I grew increasingly uncomfortable. Primarily, I recall there was a news article about Chuck Schumer, you know, telling the FBI to investigate. I recall that being sometime in June of 2011. I remember after that came out, I went over to Ross' apartment and I told him, "You know, they're looking for you, right?" And he just said, "Yeah."
Going after that, I at some point, maybe a few weeks, possibly a month later, I remember having a conversation with him where I said, "You know, hey, have you ever thought about doing something legitimate, something legal?" And that's when he first mentioned the idea of creating a bitcoin exchange to me. And then a little later we actually started working on that project.
MR. HOWARD: And was the bitcoin exchange a legitimate project?
RICHARD CHAPMAN BATES: It started off that way. We had discussions later about possibly using it to launder money.
MR. HOWARD: Now, while you were working on this bitcoin exchange, were you aware of whether or not the defendant was still working on Silk Road?
RICHARD CHAPMAN BATES: Yes. To my knowledge he was still working on Silk Road.
MR. HOWARD: And how do you know that?
RICHARD CHAPMAN BATES: We had conversations about it. I assume that if he was to stop --
MR. DRATEL: Objection.
RICHARD CHAPMAN BATES: -- he would have mentioned it.
THE COURT: Sustained. Don't assume.
BY MR. HOWARD:
MR. HOWARD: Can you flip in your binder at what has been marked for identification purposes as Government Exhibit 228, please.
THE COURT: Can you give a timeframe of when the bitcoin exchange work was occurring, Mr. Howard.
MR. HOWARD: So when, approximately, did you start working on the bitcoin exchange project with Mr. Ulbricht?
RICHARD CHAPMAN BATES: It really ramped up around the September and October timeframe.
MR. HOWARD: How long did you work on it with Mr. Ulbricht?
RICHARD CHAPMAN BATES: A. It wasn't long after that, around late October or November, you know, we started having disagreements and I became not as interested in the project. To be specific, we had discussions about who else could be hired. I wanted to vet other programmers. And there were some discussion about me also having a job at the same time, which, you know, would make me not able to contribute as much to that project.
MR. HOWARD: And so what happened after you had those discussions about you having a job at the time?
RICHARD CHAPMAN BATES: After that, you know, he was also going to Australia. He sent me a contract. I never replied to that message and I never signed it.
MR. HOWARD: So approximately when did you start working on that bitcoin exchange project?
RICHARD CHAPMAN BATES: November of 2011.
MR. HOWARD: And during the time that you were involved in that project, was it ever operational?
MR. HOWARD: Can you please flip in your binder to what has been marked for identification purposes as Government Exhibit 228.
Do you recognize what this is?
RICHARD CHAPMAN BATES: Yes, I do.
MR. HOWARD: What is this?
RICHARD CHAPMAN BATES: This is a TorChat conversation between Ross and me.
MR. HOWARD: Mr. Evert, could you please publish Government Exhibit 228, which is already in evidence.
MR. HOWARD: Now, Mr. Bates, how are your parts of this conversation labeled?
RICHARD CHAPMAN BATES: They are labeled as "r."
MR. HOWARD: And what are Mr. Ulbricht's parts of the conversation labeled as?
RICHARD CHAPMAN BATES: They are labeled as "myself."
MR. HOWARD: Starting on October 6, 2011:
"r: Hey man, I've got an idea how we both can make a little bit of money
"myself: i like money
"r: You don't have a job besides the site right now, do you?
"myself: nope
"r: ok, hear me out. If it's not your bag, that's fine
"myself: right on
"r: I've got lots of stuff I've been meaning to ebay, but I don't have the time. How about I give it to you, you sell it and take care of packaging and I give you 20% and you can pay me my share in BTC
"myself: haha, I need someone to do that for me too!
"r: haha
"myself: I still haven't sold my two cars
"r: well, that's a little harder to do on ebay
"myself: yea, that's a craigslist project
"r: I've got like an old radar detector and an old GPS, a police scanner I haven't programmed since I moved and I don't use anymore, that kinda of stuff
"r: well, if you decide that's something you wanna do, let me know. Otherwise I'll probably just find one of those local services
"myself: i have a friend who just lost a job that might want to do it
"r: ok, as long as he's trustworthy
"myself: I'll have him contact you."
So, Mr. Bates, what was occurring during this conversation?
RICHARD CHAPMAN BATES: During this --
MR. DRATEL: Objection. The conversation speaks for itself.
THE COURT: Overruled.
RICHARD CHAPMAN BATES: Sorry. What was the question again.
MR. HOWARD: What was occurring during this conversation?
RICHARD CHAPMAN BATES: I was suggesting to him that I had some things that I was selling, and if he wanted to, I could give them to him and he could sell them on eBay and package them and deal with taking pictures and all of that and I would give him a cut.
MR. HOWARD: So, Mr. Evert, could you please zoom in on the top two lines of the conversation we just read. No, on the first page, please.
(Pause)
MR. HOWARD: So, here, on October 6, 2011, you say: "You don't have a job besides the site right now, do you?"
And "myself" responds: "Nope."
What were you referring to when you asked him if he had a job besides the site?
RICHARD CHAPMAN BATES: I was referring to the Silk Road website.
MR. HOWARD: Now, how did you understand the defendant to be making money at the time?
MR. DRATEL: Objection.
THE COURT: Overruled.
RICHARD CHAPMAN BATES: Umm, at the time I knew he had some money and I did know that he was receiving some money from Silk Road and from the bitcoin.
MR. HOWARD: And how do you know that he was receiving money from Silk Road?
RICHARD CHAPMAN BATES: At some point we discussed it. I don't remember exactly when.
MR. HOWARD: And did he ever explain to you how he got money from Silk Road?
RICHARD CHAPMAN BATES: As I recall, it was a percentage of the transactions. So when someone had a transaction, he would get a percentage.
MR. HOWARD: Mr. Evert, let's go to the next part of the excerpts.
October 11, 2011:
"myself: you want to get together tonight or tomorrow?
"r: either would work for me. On an unrelated note, Aspen's new BF is quite the drug dealer
"myself: ok, let me make sure I'm free tonight...
"r: apparently they have LOTS of MDMA
"myself: rly!!!
"r: yeah, but they are charging more than SR is
"myself: ha! Ok, I'm free tonight... wanna see my new place?
"r: You're not living at that girl's place anymore?
"myself: same place, have you been here?
"r: dude . . .
"myself: when were you here?!?!
"r: I helped you move in
"myself: forhead smack. Right right, well, anyway. my place or yours?
"r: either one. I've got to swing by office depot or something for a whiteboard
"myself: ok, I don't really feel like driving, so is my place ok? I can cook us some dinner while I wait for you
"r: sure
"myself: cool, what's your eta?
"r: text me your address again and I'll glympse you when I leave at least an hour
"myself: ok, glimps me when you are leaving the store and I'll start cooking then --
"1200 Treadwell St, apt. 119, 78704.
"r: going offline now
"myself: cya."
Mr. Bates, what was happening during this conversation?
RICHARD CHAPMAN BATES: I guess let's look at the beginning part.
So starting --
MR. HOWARD: Mr. Evert, would you turn to the second page, please, and zoom in here.
RICHARD CHAPMAN BATES: So starting here, a mutual acquaintance of Ross and I, named Aspen, had a new boyfriend who was selling MDMA. I mentioned it to Ross because I knew that he was interested in MDMA. And I also thought he would find it interesting that they were charging more than Silk Road was because he was running --
MR. DRATEL: Objection.
THE COURT: Overruled.
RICHARD CHAPMAN BATES: Because he was running the Silk Road at this time.
Moving on into the conversation, we start talking about me coming over. I was going to get a white board so that we could diagram some things about the bitcoin exchange. And I think that's everything in the conversation.
MR. HOWARD: And, Mr. Bates, at the end of the conversation there was an address, 1200 Treadwell Street, Apartment 119. Are you familiar with that address?
RICHARD CHAPMAN BATES: Yes. It's where Ross was living at the time in south Austin.
MR. HOWARD: Now, Mr. Bates, I want to direct your attention to November 11, 2011.
Did you see the defendant that day?
RICHARD CHAPMAN BATES: Yes, I did.
MR. HOWARD: And can you explain what happened?
RICHARD CHAPMAN BATES: I was having a party, a 11/11/11 party to celebrate the date as just an excuse to have a party, really. Ross showed up early to the party and he wanted to speak with me. He started by asking me, you know, have you told anybody about, you know, my involvement in the Silk Road. And I had tried to tell one person but I don't think I communicated across. We were at a bar and I was very drunk.
And then he explained to me very panicked that someone who knew about his involvement had posted to his Facebook wall something along the lines of I'm sure the authorities would be very interested in your drug-running site. And he told me that he, you know, deleted that post, unfriended the person. And at that point I told him you've got to shut the site down. This is all they need. Once they see this, they can get a warrant and it's over. This is not worth going to prison over.
And he told me that he couldn't shut down the site because he had already sold it to someone else.
MR. HOWARD: How did the defendant appear to you as he told you this story?
RICHARD CHAPMAN BATES: He was nervous.
MR. HOWARD: And did the defendant tell you about who else he had told about the Silk Road website?
RICHARD CHAPMAN BATES: To my knowledge, Ross had told two people -- his ex-girlfriend Julia and me.
MR. HOWARD: When the defendant told you that he sold the site, did you believe him?
RICHARD CHAPMAN BATES: Yes, I did.
MR. HOWARD: Now, following that party at your house on November 11, 2011, did you have any further discussions about Silk Road with the defendant?
RICHARD CHAPMAN BATES: Yes, I did.
MR. HOWARD: Where was the defendant -- let's take a step back.
At the time of the 11/11/11 party, where was the defendant living at that time?
RICHARD CHAPMAN BATES: He was still living in Austin, Texas.
MR. HOWARD: And at some point did he move away from Austin?
RICHARD CHAPMAN BATES: Yes. I think it was somewhere around the Thanksgiving timeframe he went to Australia.
MR. HOWARD: And so later did you have any discussions about Silk Road with the defendant?
RICHARD CHAPMAN BATES: Yeah. A few times over Google Chat, I would send him links about Silk Road usually when there was some sort of problem like some sort of security issue or someone getting arrested, and I was really kind of trying to insinuate, hey, aren't you glad, you know, that you don't have to deal with this anymore.
MR. HOWARD: Can you please flip in your binder to what has been marked for identification purposes as Government Exhibit 1004.
(Pause)
MR. HOWARD: Do you recognize what this is?
RICHARD CHAPMAN BATES: Yes, I do. This is another Google Chat conversation between Ross and me.
MR. HOWARD: The government offers Government Exhibit 1004.
MR. DRATEL: No objection.
THE COURT: Received.
(Government's Exhibit 1004 received in evidence)
MR. HOWARD: Mr. Evert, could you please publish Government Exhibit 1004.
MR. HOWARD: What is the date of this conversation?
RICHARD CHAPMAN BATES: This is February 5, 2013.
MR. HOWARD: Mr. Evert, could you zoom in to this section here.
MR. HOWARD: And in this chat how are your parts of the conversation labeled?
RICHARD CHAPMAN BATES: They were labeled as baronsyntax@gmail.com.
MR. HOWARD: How about the defendant's parts?
RICHARD CHAPMAN BATES: They are labeled as "me."
MR. HOWARD: "baronsyntax@gmail.com: Did you see slashdot last week?
"Me: negative
"Baronsyntax@gmail.com: There was something posted on Friday that you might have found interesting
"Me: I'll take a look, thanks. Glad that's not my problem anymore :)
"Baronsyntax@gmail.com: yes
"Me: I have regrets, don't get me wrong... But that shit was stressful. Still our secret though, eh?
"Baronsyntax@gmail.com: yup. I'm spilling the beans when I turn 65 though.
"Me: lol. OK."
So, Mr. Bates, what was he referring to in this part of the conversation?
RICHARD CHAPMAN BATES: At some point Ross had asked me not to send him links about the Silk Road anymore, and so I got kind of creative and I said, you know, did you see slashdot last week. I don't remember exactly what the article was about but I know it was related to Silk Road.
Here he kind of acknowledges that, you know, he's not working on it at that time. And I tell him, you know, it's still a secret but when I turn 65, long after the statute of limitations is up, I may tell someone.
MR. HOWARD: Your Honor, may I just talk with co-counsel for one minute? Maybe not.
THE COURT: Yes.
MR. HOWARD: No further questions, your Honor.
THE COURT: All right. Thank you.
Mr. Dratel.
CROSS-EXAMINATION BY MR. DRATEL:
MR. DRATEL: Good afternoon, Mr. Bates.
RICHARD CHAPMAN BATES: Good afternoon.
MR. DRATEL: And the first time you met with the government was October 3, 2013, correct, about this case?
RICHARD CHAPMAN BATES: I believe it was that date or around that time.
MR. DRATEL: And that was very soon after Mr. Ulbricht had been arrested, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And as you said before, you lied to the government, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And you lied because you wanted to stay out of trouble?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: And they asked you about Mr. Ulbricht and Silk Road, right?
RICHARD CHAPMAN BATES: Yes, they did.
MR. DRATEL: And they asked you whether you were an administrator on the site?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: And you denied that, right?
RICHARD CHAPMAN BATES: Yes, I did.
MR. DRATEL: And you said you had no idea that Mr. Ulbricht was operating Silk Road, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And that you had no idea what Mr. Ulbricht was doing with the website, correct?
RICHARD CHAPMAN BATES: That's also what I said.
MR. DRATEL: And you also said that you didn't know anything about Mr. Ulbricht and a bitcoin exchange, a bitcoin site, right?
RICHARD CHAPMAN BATES: I recall differently. I recall that as they were leaving, I told them that I worked with him on a bitcoin exchange and it never came to fruition.
MR. DRATEL: I show you what's been marked as 3513 -- sorry, 3513 -- three-five-one-three dash 55. I ask you to look at the end of the second paragraph.
MR. DRATEL: Read it to yourself, please.
RICHARD CHAPMAN BATES: The second-to-last paragraph?
MR. DRATEL: The second paragraph, the end of the second paragraph. Just read it to yourself.
(Pause)
MR. DRATEL: And did you not tell the government, or did you not deny that you knew anything about Mr. Ulbricht and a bitcoin business?
RICHARD CHAPMAN BATES: I'm sorry, I'm a little confused. Does it say that I denied it somewhere in here? I'm not seeing it.
MR. HOWARD: Objection.
THE COURT: Sustained.
MR. DRATEL: Let me just point to the part of the document that I'll need --
MR. HOWARD: Objection. As a matter of fact, may we request a sidebar?
To be clear, there has been no foundation that -- I think it is probably better for us all to have a sidebar.
THE COURT: All right.
(Continued on next page)
(At the sidebar)
MR. HOWARD: Your Honor, I believe the witness testified that he had a different recollection. There was no foundation that he couldn't remember. He improperly is trying to refresh his recollection when the witness himself denied that he had a memory.
MR. DRATEL: I'm not refreshing his recollection. I'm impeaching him. This is a prior inconsistent statement, if he adopts it. If he doesn't, he doesn't. This is what the 3500 material is.
THE COURT: I will allow it. Let me see.
MR. TURNER: It is those --
THE COURT: It is just 302?
MR. HOWARD: Yes.
THE COURT: Let me just think about this.
MR. DRATEL: Every judge in this courthouse --
THE COURT: I never worry about that. Never.
(Pause)
THE COURT: I'm going to allow it on the basis that it's not a prior inconsistent statement because we have no idea if he even made the statement that is in that document. Hold on. But he can show him that, for whatever it is worth, that somebody wrote it down and does that refresh his recollection that in fact he didn't tell him that.
MR. DRATEL: Your Honor, it is not a refreshed recollection. This is what it is.
THE COURT: This is not a prior inconsistent statement?
MR. DRATEL: It is, because 3500 is prior statements of the witness. I don't get this unless it is deemed by government to be a prior statement of the witness. It doesn't have to be signed.
THE COURT: You get it for a variety of reasons.
MR. DRATEL: Not 3500 material.
THE COURT: You can't put this into evidence, right?
MR. DRATEL: I'm not putting it into evidence.
THE COURT: I'm saying if it is a prior inconsistent statement, then you can put it into evidence.
MR. DRATEL: I can ask him if he --
THE COURT: You know it is not a prior --
MR. DRATEL: I can --
THE COURT: Hold on. I get to finish my sentence and so you do you. OK?
MR. DRATEL: OK.
THE COURT: Then I will let you finish your sentence.
MR. DRATEL: OK. Thank you.
THE COURT: A prior inconsistent statement has a particular meaning under the hearsay rules. And it's a prior inconsistent statement of the witness. Something that is written down on a 302 doesn't have the kind of evidentiary value of a prior inconsistent statement. Typically, I think it is has to be, under the rules, under oath and a prior inconsistent statement under oath.
MR. DRATEL: No, it doesn't.
THE COURT: I will take a look. Hold on.
(Continued on next page)
THE COURT: Let's take mid-afternoon break. All right? I hate to have you guys waiting because then I know it is just like wasting your time. We'll work this out and then you come back out and then we'll go smoothly. All right?
And I want to remind you not to talk to each other about this case.
(Continued on next page)
(In open court; jury not present)
THE COURT: Let's all be seated.
Mr. Dratel, 801(d)(1) does require an inconsistent statement to have been given under oath under the penalty of perjury.
MR. DRATEL: That's not the --
THE COURT: Give me your rule.
MR. DRATEL: 613.
THE COURT: Now the word "statement" here, Mr. Howard.
MR. HOWARD: Yes, your Honor. It's not the defendant's statement. This is hearsay. It's someone else's statement about what he said.
THE COURT: Correct.
MR. HOWARD: So it can't be admitted as extrinsic evidence of an inconsistent statement.
THE COURT: Correct. You can use a 302 for impeachment purposes for the purposes of refreshing his recollection, as I was explaining to you, where you can say to him I'm showing this to you now, does this refresh your recollection that in fact you did tell someone. And he can either say no, it doesn't refresh my recollection or he can say yes, but you can't get it in as his statement.
MR. DRATEL: I'm not getting in it, but he can adopt it just like --
THE COURT: If his recollection is refreshed, it's neither here nor there.
MR. DRATEL: No. But just like I did with Mr. Kiernan where I showed him a memorandum of an interview, he did not write the memorandum of this interview. Every single case, you get a 302 by an agent of a witness' statements or proffer of a proffer interview. You use it to impeach them by saying did you not tell the government X on X date. And if he says -- if he looks at the thing and says, yeah, I did, because you confront him with it -- and if he says no, then you're stuck with it.
THE COURT: Exactly.
MR. DRATEL: He hasn't answered that question as to whether he told the government.
THE COURT: I think it's not, though, an inconsistent statement. You were saying before that you can get it in as an inconsistent statement.
MR. DRATEL: It is inconsistent.
THE COURT: You are doing exactly what I had suggested over here that you can do. You can do it in the following way, which is the witness says I told them X. You say, didn't you really tell them Y. He says I told them X. Then you say let me show this to you; does this refresh your recollection that you told them Y. And he'll say it doesn't refresh my recollection because I have no idea who wrote this. Or he'll say actually, maybe it has spurred on a memory, yes. That's the way you use 302s.
MR. DRATEL: No, actually I think Mr. Howard is right. There was no failure of recollection. And it's not a refresh -- I can use anything to refresh recollection. I don't need 302. I can use anything. That's not the issue. The issue is it's a prior statement by the witness provided in 3500. The government certainly adopted it. They're not giving it out of some largess. And while there are different practices in different places, here, 302s are considered 3500 material. And this is not technically a 302, but it's a report by a government agent acting within the scope of his authority.
The point is, if there's an inconsistent statement there, I can confront the witness with it saying did you not tell the government on such and such a date the following.
And if he says yes, I did, just like Mr. Kiernan said yes, I did -- or he can say no, and then I'm stuck with it. And even if he says yes, I can't put in the statement; I just have the impeachment.
THE COURT: Mr. Howard.
MR. HOWARD: Your Honor, if he proceeds that way, that's fine, in that manner.
THE COURT: But it's not coming in for the truth.
MR. DRATEL: It's impeachment. It's purely impeachment.
THE COURT: Purely impeachment.
MR. DRATEL: Does your Honor still have the page?
THE COURT: I didn't take the page.
I think the jury is taking a break. Let's take, like, as little time as we can take, get ourselves back here and see if we can gather up the jury and then come on back up.
COURT CLERK: All rise.
(Recess)
(Continued on next page)
(In open court; jury present)
THE COURT: Mr. Dratel, you may proceed, sir.
MR. DRATEL: Thank you, your Honor. May I approach, your Honor.
THE COURT: Yes.
BY MR. DRATEL:
MR. DRATEL: Can you just read the underlying statement to yourself and then I'll ask you a question after you've done that, the underlying sentence.
RICHARD CHAPMAN BATES: It says here "Bates -- "
MR. DRATEL: No. Don't read it out loud.
RICHARD CHAPMAN BATES: Just read it to myself. Okay.
MR. DRATEL: Just read it to yourself. And now if you have, I'll be able to ask you a question, okay?
MR. DRATEL: Did you not tell the government October 3, 2013, or a date right around there, that first interview, did you not tell the government that you had no idea that Ross Ulbricht was involved in any bitcoin business?
RICHARD CHAPMAN BATES: I believe it's possible I may have contradicted myself at that time. I remember very specifically as they were leaving I told them, you know, we worked on a bitcoin exchange together but it never came to fruition.
MR. DRATEL: Okay. Thank you. So, November 21, 2014 is the date of your agreement with the government, right -- withdrawn -- your proffer with the government, correct?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: You had an interview. And that's also the date of your agreement, right.
MR. DRATEL: If you need to, I can refresh your recollection.
RICHARD CHAPMAN BATES: Please do.
MR. DRATEL: I'm sorry. The date of the agreement is December 12. Does that sound right?
RICHARD CHAPMAN BATES: That sounds correct; yes.
MR. DRATEL: But your interview was November 21, right?
RICHARD CHAPMAN BATES: That sounds right.
MR. DRATEL: Of 2014?
MR. DRATEL: When you met with the government on November 21, you didn't have any kind of agreement with the government as to what was going to happen to you, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And you knew that if you were charged and convicted of being involved, of participating in the Silk Road and the sale of drugs that you could face a life sentence, right?
RICHARD CHAPMAN BATES: I don't know if I imagined it being so harsh, but I knew that I could go to prison.
MR. DRATEL: For a long time, right?
RICHARD CHAPMAN BATES: For a long time.
MR. HOWARD: Objection.
THE COURT: Overruled.
MR. DRATEL: You said for a long time right, yes; you agreed?
MR. DRATEL: And part of that November 21 meeting with the government was about telling the government about your involvement so you would hope that you could avoid getting charged, getting convicted, going to prison, right?
RICHARD CHAPMAN BATES: That was not a specific goal, but my lawyers told me we have to tell them the truth, come clean, and then maybe we can come to some kind of agreement, not necessarily a nonprosecution agreement.
MR. DRATEL: Ultimately you got a nonprosecution agreement, correct, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: You're not going to be prosecuted at all?
MR. DRATEL: And what you have to do is testify here, correct?
RICHARD CHAPMAN BATES: I have to tell the truth here today.
MR. DRATEL: You have to testify here today, right? You couldn't refuse to testify?
RICHARD CHAPMAN BATES: No, I could not.
MR. DRATEL: And all of your assistance would be provided pursuant to specific instructions and control of the United States Attorney's Office, right?
RICHARD CHAPMAN BATES: I'm sorry. Could you repeat the question one more time.
MR. DRATEL: Sure. Any assistance that you would provide to federal criminal investigators would be pursuant to the specific instructions and control of the U.S. Attorney's office and designated investigators?
MR. HOWARD: Objection to form, your Honor.
THE COURT: I think he's asking him whether that's his understanding.
Overruled.
MR. DRATEL: Is that your understanding?
RICHARD CHAPMAN BATES: I'm sorry. Is this in my agreement?
MR. DRATEL: If you can't recall, I'd be happy to refresh your recollection.
RICHARD CHAPMAN BATES: Yeah. I would like to see it.
MR. DRATEL: Okay. I'm showing you what's marked as 3513-65 and I'd ask you to read to yourself the last sentence on the page.
MR. DRATEL: Does your agreement provide that any assistance that you provide to the government, to investigators would be provided pursuant to specific instructions and control of the U.S. Attorney's Office and designated investigators?
MR. HOWARD: Objection to form.
THE COURT: You can rephrase it: Do you recall that?
MR. DRATEL: Does that refresh your recollection that your agreement provides that any assistance that you provide to the investigation is pursuant to specific instructions and control of the United States Attorney's Office and designated investigators?
MR. HOWARD: The government has the same objection.
THE COURT: Overruled.
RICHARD CHAPMAN BATES: So that -- my understanding of the instructions is, you know, them telling me things like I need to be at, you know, we're going to meet at this time, that kind of thing.
MR. DRATEL: I'm asking about your agreement. Does that refresh your recollection --
RICHARD CHAPMAN BATES: I'm talking about the agreement.
MR. HOWARD: Objection.
THE COURT: Hold on. We have to get a question and an answer and a clean question.
So what's the question, Mr. Dratel?
BY MR. DRATEL:
MR. DRATEL: Does 3513-65 refresh your recollection that your written agreement with the government requires that any assistance that you provide be pursuant to specific instructions and control of the United States Attorney's Office and designated investigators?
THE COURT: You can answer that.
RICHARD CHAPMAN BATES: Yes; that is what it says verbatim.
MR. DRATEL: Now, your agreement also provides that the government determines whether or not you have given false, incomplete or misleading testimony or information or otherwise violated your agreement, right?
RICHARD CHAPMAN BATES: Perhaps you could point that out and refresh my memory again if it's highlighted.
MR. DRATEL: Sure.
RICHARD CHAPMAN BATES: Is it that one?
MR. DRATEL: Yes. It's the first sentence there. Some of it is not highlighted but you can read the whole sentence silently.
RICHARD CHAPMAN BATES: Okay. Can you please repeat the question.
MR. DRATEL: Sure. That it's the government that determines whether or not you've given false, incomplete or misleading testimony or information or otherwise violated the agreement, right? That's if the government determines?
RICHARD CHAPMAN BATES: Yes. It says "If the government has determined..."
MR. DRATEL: Right. So there's no arbitrator involved, right, it's the government that gets to make that decision. You understand that, right?
RICHARD CHAPMAN BATES: I suppose, yeah.
MR. DRATEL: And so if the government determines that you have not honored your agreement, that if you've given false or misleading testimony or otherwise violated the agreement, they can rip it up, right?
RICHARD CHAPMAN BATES: Yes. It would mean that I could be prosecuted.
MR. DRATEL: Correct. You'd be prosecuted for all the things that you're essentially getting a pass for, right, the things that you mentioned on direct, right, your assistance with respect --
MR. DRATEL: -- your assistance with respect to Silk Road, right?
MR. DRATEL: Your assistance with respect to the bitcoin operation to the extent it was involved in money laundering, right?
RICHARD CHAPMAN BATES: I said that we discussed the possibility of using it for money laundering.
MR. DRATEL: But that's part of your agreement, right?
RICHARD CHAPMAN BATES: It is in the agreement; yes.
MR. DRATEL: And also your personal use of drugs during the period of -- of a couple of years, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And the agreement provides that if the government determines that you have violated the agreement, that everything you said to the government, not only in the context of here, but also all that you've said in your meetings with the government, all that's admissible against you if the government chooses to prosecute you, right?
RICHARD CHAPMAN BATES: That sounds correct.
MR. DRATEL: And that anything that may be outside the statute of limitations by the time you're prosecuted, as long as it was within the statute when you signed the agreement, you could be prosecuted for, right?
RICHARD CHAPMAN BATES: Yes. That sounds correct also.
MR. DRATEL: So your choice is testify here for the government, you reached that agreement with the government, or face those charges and a very serious prison sentence, right?
RICHARD CHAPMAN BATES: That sounds correct.
MR. DRATEL: You chose to be there on the witness stand instead of there as a defendant, right?
MR. HOWARD: Objection.
THE COURT: Why don't you rephrase.
MR. DRATEL: You chose to make your agreement with the government and testify rather than be charged?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And you know -- and you knew when you signed the agreement and you know here today that it's whether the government is satisfied with your testimony as to whether that agreement holds; it's not whether Mr. Ulbricht is satisfied or the judge or anyone else, right? It's whether the government is satisfied, right?
RICHARD CHAPMAN BATES: So I recall during the proffer agreement I asked my attorney, I said to him what if I tell the truth and they don't believe it, and he told me -- may I continue.
MR. DRATEL: I don't know. It's a privileged conversation.
THE COURT: It is a privileged conversation.
RICHARD CHAPMAN BATES: I apologize.
THE COURT: Let me explain to you that you have a privilege between yourself and your attorney insofar as you've had any communications that were private between yourself and your attorney.
THE COURT: You can choose to waive that privilege, but there are lots of implications about that you would want to likely confer with an attorney about, all right?
THE COURT: So if it's a private conversation between you and your attorney, that's where the privilege attaches.
Mr. Dratel, why don't you pose a question.
MR. DRATEL: Rather than get into a privileged conversation, I'll move on
THE COURT: All right.
MR. DRATEL: You talked about commissions this morning, one question and answer - or maybe this afternoon - during your direct, correct?
RICHARD CHAPMAN BATES: Yes, I did.
MR. DRATEL: And that subject with the prosecutors just came up very recently, right?
RICHARD CHAPMAN BATES: I don't know. Can you please explain the question.
MR. DRATEL: Sure. The idea of commissions at Silk Road, that just came up recently in your discussions with the prosecution, not back in November of 2014 but much more recently, right?
RICHARD CHAPMAN BATES: I don't recall. I do remember us talking about it recently. I don't remember if we talked about it before then. It's possible.
MR. DRATEL: But you remember talking about it recently, right, very recently?
RICHARD CHAPMAN BATES: Yes, I do.
MR. DRATEL: Within the last week, right?
MR. DRATEL: In fact, you never discussed commissions with them before, right?
RICHARD CHAPMAN BATES: I'm not sure.
MR. DRATEL: Now, in terms of bitcoin, you invested in bitcoin at one time, correct?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: When it was ten dollars a bitcoin, right?
RICHARD CHAPMAN BATES: That sounds about right.
MR. DRATEL: And you put $100 in?
RICHARD CHAPMAN BATES: Something like that.
MR. DRATEL: And you cashed out when it was $160 per bitcoin?
RICHARD CHAPMAN BATES: Again, that sounds about right.
MR. DRATEL: If you want, I can refresh your recollection.
RICHARD CHAPMAN BATES: Please do.
MR. DRATEL: It's one you may have up there still.
RICHARD CHAPMAN BATES: No, I just have the proffer -- yes, okay, this is the one.
RICHARD CHAPMAN BATES: Yes, this was the -- I've read it here.
MR. DRATEL: Okay. By the way, you read that, does that refresh -- never mind. Withdrawn.
Okay. So you invested at ten, cashed out at 160, right?
RICHARD CHAPMAN BATES: That sounds correct.
MR. DRATEL: And that's sometime around 2013 you think?
MR. DRATEL: In fact, it helped to finance your trip to San Francisco in April 2013?
RICHARD CHAPMAN BATES: That is also correct.
MR. DRATEL: And you relied on Mr. Ulbricht with respect to information about bitcoin to some extent at least in the beginning, right?
RICHARD CHAPMAN BATES: I heard about bitcoin from him initially.
MR. DRATEL: And the idea for a bitcoin exchange was really Mr. Ulbricht's idea?
RICHARD CHAPMAN BATES: Yes, it was.
MR. DRATEL: And it was an exchange site that would allow buyers and sellers to exchange -- rather, to monitor all bitcoin exchanges simultaneously?
RICHARD CHAPMAN BATES: I don't -- not monitor, but it would work on top of other exchanges was part of the idea. So that if you had an order, it could be fulfilled by our exchange directly or by another exchange indirectly.
MR. DRATEL: And this obviously would be on the Internet?
RICHARD CHAPMAN BATES: That was the idea.
MR. DRATEL: The split was going to be 60 percent/40 percent in Mr. Ulbricht's favor?
RICHARD CHAPMAN BATES: That sounds about right. Can I look at the contract?
MR. DRATEL: Sure. I don't have a contract, but I'll show you something that's marked 3513-64. Directing your attention to a specific part and then ask you if it refreshes your recollection. Look at the bracketed -- the first bracketed one.
RICHARD CHAPMAN BATES: Okay. What is your question?
MR. DRATEL: That the proposed split would be 60/40, Mr. Ulbricht and you, for the bitcoin exchange?
RICHARD CHAPMAN BATES: There is a contract that was written out that specifies that specifically, but that number sounds correct to me.
MR. DRATEL: You testified today that -- about why you withdrew from that project, but principally, it was because you were unwilling to put in the time because of your other job, right?
RICHARD CHAPMAN BATES: That was definitely a major factor.
MR. DRATEL: And it was something that required a lot of work?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And a lot of programming work, right?
RICHARD CHAPMAN BATES: That is also correct.
MR. DRATEL: And that's your specialty?
MR. DRATEL: And that was your responsibility for the particular project, right?
RICHARD CHAPMAN BATES: Yes, I believe that that is specified in the contract that wasn't signed.
MR. DRATEL: So, as you mentioned, you asked -- you asked Mr. Ulbricht to explain bitcoin to you, right, back in March of 2011?
RICHARD CHAPMAN BATES: That sounds correct.
MR. DRATEL: And you obtained a bitcoin wallet, right?
RICHARD CHAPMAN BATES: Yes, at some point. I don't recall exactly when but yes, I did.
MR. DRATEL: Would April 2011 sound right?
RICHARD CHAPMAN BATES: That's perfectly possible it was at that time.
MR. DRATEL: Let me show you 3513-31.
MR. DRATEL: Let me show you 3513-31 and ask you if it refreshes your recollection that you had a bitcoin wallet in April of 2011.
MR. DRATEL: And in fact, you had a Google Chat with Mr. Ulbricht about it that day, right?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: And you were going to encrypt your bitcoin wallet, right?
RICHARD CHAPMAN BATES: That was something I had planned on doing, yes.
MR. DRATEL: And that's for security purposes, right?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: And you were going to keep it on a thumb drive, right?
RICHARD CHAPMAN BATES: That's also correct.
MR. DRATEL: Now, you also asked Mr. Ulbricht where you could monitor bitcoin exchange rates, right, back at the same time in April 2011?
RICHARD CHAPMAN BATES: That sounds correct. Would this help refresh my memory?
MR. DRATEL: No. There's another. 3513-37. I'm going to ask you to just review that and then when you have, let me know.
RICHARD CHAPMAN BATES: I'm sorry. Can you repeat the question one more time.
MR. DRATEL: Sure. That you asked Mr. Ulbricht where you could monitor the bitcoin exchange rate, right?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: And that's April 28, 2011 is when you did that, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And in fact, you had a Google Chat that day about bitcoin?
MR. DRATEL: And with respect to the bitcoin exchange project that you had with Mr. Ulbricht, as you testified, it lasted into early November of 2011, right?
MR. DRATEL: And it started in the summer?
RICHARD CHAPMAN BATES: The idea started in the summer. I remember the work really ramped up around September and October.
MR. DRATEL: Okay. And a lot of it was programming issues that you were trying to solve, right?
RICHARD CHAPMAN BATES: That sounds correct.
MR. DRATEL: So, let me show you what's marked as 3513-57. Show you what's marked as 3513-57.
RICHARD CHAPMAN BATES: What number was that again, the last one.
MR. DRATEL: Fifty-seven. Look at the bottom right. That's what I'm talking about.
RICHARD CHAPMAN BATES: Okay. Okay. What's your question?
MR. DRATEL: And so do you recognize that?
RICHARD CHAPMAN BATES: Yes, I do recognize this.
MR. DRATEL: What is it?
RICHARD CHAPMAN BATES: This is a Tor chat between Ross and me.
MR. DRATEL: And is it at around the same time or even the same day as Government Exhibit 228, October 2011.
RICHARD CHAPMAN BATES: It's a little bit -- you said October 28?
MR. DRATEL: No. The sixth.
RICHARD CHAPMAN BATES: October 6. Okay. Yes, part of this conversation happens on October 6, 2011.
MR. DRATEL: I move it in, your Honor, as Defendant's 3533-57 -- let's call it R-57.
THE COURT: All right. Any objection?
MR. HOWARD: No objection, your Honor.
THE COURT: Defense Exhibit R-57 is received.
(Defendant's Exhibit R-57 received in evidence)
THE COURT: Just give me the Bates number one more time.
MR. DRATEL: 3513-57, your Honor.
THE COURT: Thank you.
MR. DRATEL: While we're waiting, let me just ask you some other questions about bitcoin in terms of you, at some point, before this, before October back in the spring of 2011 when you were becoming interested in bitcoin, you were invested in silver at that time?
RICHARD CHAPMAN BATES: That's -- I owned physical silver.
MR. DRATEL: But you were also interested in the market price for that at the same time as well?
RICHARD CHAPMAN BATES: Yes, because I own some.
MR. DRATEL: And bitcoin was -- looked more attractive as an investment at that time?
RICHARD CHAPMAN BATES: I'm not sure.
MR. DRATEL: But you talked about it with Mr. Ulbricht?
MR. DRATEL: About the relative attractiveness of bitcoin and silver and how they were doing in the market?
RICHARD CHAPMAN BATES: Yeah. We talked about how they were doing in the market; yes.
MR. DRATEL: Mr. Bates, let me have what is highlighted because that makes it easier for me and I'll give you this one and I'll be able to direct you to where it is. Thanks. So if we go about two-thirds down the page -- I'm sorry -- go about one-third down the page at 19:14.
RICHARD CHAPMAN BATES: Okay. 19:14.
MR. DRATEL: It says -- if we can just make that a little larger if possible and I can read it here, but I don't know if everybody can read. Okay.
"R" is you, correct, Mr. Bates?
RICHARD CHAPMAN BATES: Yes, that's correct.
MR. DRATEL: "I need to talk to you sometime about you interact with bitcoin.
R: I can use the bitcoinj lib, but I don't know what I'm doing."
And L-I-B, do you mean library?
MR. DRATEL: And "myself" is Ross?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: "Okay. Let me look up the link, just a sec. Have you read this."
And this is Ross again. And that's a link, correct?
RICHARD CHAPMAN BATES: Yes, that is a link.
MR. DRATEL: This is Ross again: "I of course used the JSON-RPC PHP library, but they have examples for a bunch of different languages.
Myself: Including java and perl.
Myself: I've gotta jump in the shower, ttyl."
And what does that mean?
RICHARD CHAPMAN BATES: Talk to you later.
MR. DRATEL: "R" is you. "Suweet."
And is that just the spelling of the word sweet with an extra sylabble in there?
RICHARD CHAPMAN BATES: Yes. It's meant to be stressed, but yes, it says suweet.
MR. DRATEL: "And this is JSON too.
R: I should be able to use what I wrote today to access this too.
R: So you have everyone's bitcoin address in one instance of bitcoind.
R: Okay. This is pretty neat.
Myself: Tell me more about what you are working on." And there's an emoticon.
"R: Okay. I think I'm going to start by making a JSON-RPC wrapper to bitcoin documentation says it only accepts local calls by default. Reply when you get this."
So you're talking there about the technical aspects of writing program for this bitcoin exchange, right?
MR. DRATEL: And further on down the page at 1909, and I'll just summarize it, you are also talking about making a java wrapper, right? Go to 1909.
RICHARD CHAPMAN BATES: Yes, that's correct.
MR. DRATEL: And so you're talking about making a java wrapper so you can do the bitcoin stuff in java, right?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: And java being a program language, right?
RICHARD CHAPMAN BATES: Yes. Java is a programming language.
MR. DRATEL: Thank you. And you continued to talk to Mr. Ulbricht throughout -- even into 2013 about bitcoin, correct?
RICHARD CHAPMAN BATES: Yes. I believe we probably had conversations about it. Again, if you have something to refresh my memory.
MR. DRATEL: Sure. Let me show you what's been marked as Defendant's AA. So, after you've had a chance to look at that, does that refresh your recollection that in April of 2013 you were discussing bitcoin and bitcoin values and trading bitcoin with Mr. Ulbricht by chat?
RICHARD CHAPMAN BATES: I was not trading bitcoins with Mr. Ulbricht.
MR. DRATEL: No, I don't mean -- the discussion with Mr. Ulbricht?
RICHARD CHAPMAN BATES: Yes. The discussion was with Mr. Ulbricht and it was about bitcoin prices and that I had just sold some.
MR. DRATEL: Very good. Now, you know at certain points -- withdrawn.
At certain points in the spring of 2011, Mr. Ulbricht and you discussed trading in bitcoin and money that could be made in terms of the fluctuating price of bitcoin, right?
RICHARD CHAPMAN BATES: That sound correct.
MR. DRATEL: And in April of that year, Mr. Ulbricht told you -- and you would be chatting with the Google chats, right?
MR. DRATEL: And Mr. Ulbricht told you that he made $4,000 over one weekend if he sold out, if he had sold; in other words, the appreciation in value?
RICHARD CHAPMAN BATES: Is that in -- I'm having trouble remembering that again.
MR. DRATEL: Okay. That's the 3513-37.
RICHARD CHAPMAN BATES: Ah, there we go. Yes.
MR. DRATEL: Okay. Right?
RICHARD CHAPMAN BATES: Sorry.
MR. DRATEL: I'll repeat the question.
RICHARD CHAPMAN BATES: Repeat the question.
MR. DRATEL: That if he had sold his bitcoins that weekend, he would have made $4,000?
MR. DRATEL: And that ultimately in May, he does sell some bitcoins. In a chat he mentions to you that he sold all of his bitcoins and that he was going to get back in the market, hopefully at a lower price. That's a different one. Let me show you -- let me refresh your recollection of that. This is 3513-38. Let me know when you're finished.
MR. DRATEL: Does that refresh your recollection that in a chat on May 31, 2011, Mr. Ulbricht told you that he had sold all of his bitcoins and was trying to get back in at under a dollar?
RICHARD CHAPMAN BATES: Yes. That's what he told me.
MR. DRATEL: And a couple of weeks later, you mentioned to him that his prediction of a bitcoin crash in the price had been correct and that bitcoin had, in fact, gone down in value?
RICHARD CHAPMAN BATES: I do recall there being a crash sometime around that time. I don't remember Ross' prediction. I'm sorry. This was all many years ago.
MR. DRATEL: I'm sorry. That's a different one. I'll go back to that in a minute, but since you have this one here now, also, Mr. Ulbricht in June of 2011 told you that he would have made $250,000 if he had cashed out -- rather, he tried to, but that the market had closed, that he was unable to?
MR. HOWARD: Objection; hearsay.
THE COURT: Are you offering it for the truth?
MR. DRATEL: No, your Honor.
THE COURT: All right.
You can answer.
RICHARD CHAPMAN BATES: Yes. There was an incident where Mt.Gox was hacked. There was extreme volatility. And he told me, you know, he would have made a quarter of a million dollars if he had -- if his -- I believe he said that his orders were undone as part of Mt.Gox's correction.
MR. DRATEL: You also had a discussion with Mr. Ulbricht about bitcoin mining, right?
RICHARD CHAPMAN BATES: About -- are you asking about how bitcoin mining -- we had discussions about how bitcoin mining works?
MR. DRATEL: Yes.
RICHARD CHAPMAN BATES: I think that that's probable that we did.
MR. DRATEL: Now, in terms of your relationship with Mr. Ulbricht, he was a fun person to be around?
RICHARD CHAPMAN BATES: Very much so.
MR. DRATEL: And you also shared some political philosophy, right?
RICHARD CHAPMAN BATES: At that time, yes.
MR. DRATEL: And you mentioned, and it comes up in some of the chats that are in evidence, Mr. Ulbricht's girlfriend he was living with at the time in Austin, right? Her name was Julia?
MR. DRATEL: It was her friend who put up the Facebook post, correct?
RICHARD CHAPMAN BATES: That is what Ross told me.
MR. DRATEL: So there were three people who knew: There was you, there was his girlfriend Julia, as you said on your direct testimony, and that other woman as far as you know, the other woman who is Julia's friend who put something up on Mr. Ulbricht's Facebook page?
RICHARD CHAPMAN BATES: There are four people, if you include Ross himself.
MR. DRATEL: Yes, but I'm saying, other than Ross.
RICHARD CHAPMAN BATES: Other than Ross, what I was told was that -- obviously, I knew about it, and I was told about two other people who knew about it.
MR. DRATEL: You were the person who wanted to switch over to Tor chat, correct?
RICHARD CHAPMAN BATES: I was the one who found the program, and I did suggest that we use that.
MR. DRATEL: And you had to prod Mr. Ulbricht over a period of time to do it, right?
RICHARD CHAPMAN BATES: There were problems connecting on the software. I believe somewhere there's a conversation where we talk about us trying to connect, so we didn't keep that Tor chat connection open all the time. So there were instances where we would say let's go to Tor chat basically.
MR. DRATEL: But also wasn't there a series of times where you were on Google Chat and you said we should be doing this on Tor chat?
RICHARD CHAPMAN BATES: That sounds accurate.
MR. DRATEL: Now, your relationship with Mr. Ulbricht, did it -- withdrawn.
He went to Australia in the fall of 2011, correct?
RICHARD CHAPMAN BATES: He went to Australia and then Costa Rica and a few other places, but at that time, I think it was Australia that he went to.
MR. DRATEL: And you didn't know when he would be back at that point?
RICHARD CHAPMAN BATES: I don't believe I did know, no.
(Continued on next page)
MR. DRATEL: And the relationship dissipated somewhat after that, right?
RICHARD CHAPMAN BATES: Yes, a little bit.
MR. DRATEL: And so there were a lot fewer chats in 2012 and 2013 than there were in 2011, correct?
RICHARD CHAPMAN BATES: That's correct.
MR. DRATEL: In fact, when he moved to San Francisco, initially you weren't aware of that?
RICHARD CHAPMAN BATES: I was not aware of that initially, but I messaged him and found out he was in San Francisco.
MR. DRATEL: Now, I want to talk about you have a background and degree in computer science, right?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And you have been in a programming capacity all your professional life, right?
RICHARD CHAPMAN BATES: That's also correct.
MR. DRATEL: And you worked at PayPal, right?
MR. DRATEL: And then you left PayPal for eBay, right?
RICHARD CHAPMAN BATES: This actually gets a little complicated because eBay owns PayPal, so technically my contract was with eBay and I have moved within that organization.
MR. DRATEL: And one of the things you have done as a programmer at PayPal is designing portions of adaptive payment systems?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: Did that give you some insight into creating this bitcoin exchange?
RICHARD CHAPMAN BATES: Actually, I don't think so.
MR. DRATEL: Was that basically from the ground up, the bitcoin part?
RICHARD CHAPMAN BATES: Yeah, the bitcoin exchange would have been from the ground up. There were a lot of -- you know, this is really managing buy-and-sell orders, which is a little different than what I was doing at PayPal, which is, you know, just processing a transaction.
MR. DRATEL: Now, you've seen some of the government exhibits that you've looked at this morning from the chats, right? And I want to talk about the technical discussion between you and Mr. Ulbricht in 2010, in 2011, OK?
So in terms of the dates, those are all either in the latter part of 2010 running through the spring of 2011, correct?
RICHARD CHAPMAN BATES: To my recollection, yes.
MR. DRATEL: Well --
RICHARD CHAPMAN BATES: Well --
MR. DRATEL: We can look -- we can just go through them and --
RICHARD CHAPMAN BATES: Pardon me. The question is our technical conversations went through --
MR. DRATEL: Withdrawn.
MR. DRATEL: When you were asked by Mr. Ulbricht, in 2010, about technical questions, the initial questions were about a programming language called Perl, right, P-e-r-l?
RICHARD CHAPMAN BATES: Yes, that's correct.
MR. DRATEL: And that was about the Good Wagon Books Company that Mr. Ulbricht was running, right?
RICHARD CHAPMAN BATES: That is what he told me, yes.
MR. DRATEL: And he was trying to work on a website, right?
RICHARD CHAPMAN BATES: That's what he told me.
MR. DRATEL: And you were able to help him with respect to certain of those questions that he had, right?
RICHARD CHAPMAN BATES: I certainly tried. I think I did.
MR. DRATEL: Well, let's look at Government Exhibit 1,000, please.
So if you look at that chat, is there any doubt in your mind that it's about Good Wagon Books and not Silk Road?
RICHARD CHAPMAN BATES: If you go to the bottom of this chat, he does tell me this is about the artofbooks.com.
MR. DRATEL: Right. So -- but I'm saying in terms of the technical part of it, the Perl part of it, is there anything that would lead you to believe that it had anything to do with Silk Road, which you were discussing later on?
RICHARD CHAPMAN BATES: The only thing he did -- I know that he did lie to me now. It's possible, but I think it's a reasonable assumption to assume -- sorry, I'm not supposed to assume, am I?
MR. DRATEL: That's right.
RICHARD CHAPMAN BATES: Umm, I --
MR. DRATEL: Is there anything technical about that in the Perl language that had anything to do with what you know about Silk Road?
MR. DRATEL: And all the Perl discussions are about that subject, correct, about Good Wagon Books, to your knowledge?
RICHARD CHAPMAN BATES: I believe so.
MR. DRATEL: Now, when Mr. Ulbricht starts talking about php, that's different, correct?
RICHARD CHAPMAN BATES: My recollection is when he switched to php is when I began asking him what he was working on, and that's when he started telling me it was top secret.
MR. DRATEL: Right. And that's in the early part of 2012 -- I'm sorry, 2011. Sorry, the early part of 2011?
RICHARD CHAPMAN BATES: I think it may go back into late 2010.
MR. DRATEL: And he had questions for you about Ubuntu, right?
RICHARD CHAPMAN BATES: Yes, he did.
MR. DRATEL: And about Debian, D-e-b-i-a-n?
MR. DRATEL: Now, was he -- withdrawn.
He was having some difficulty with those things, correct, with some of the programming issues?
RICHARD CHAPMAN BATES: I don't know if that's accurate. Debian and Ubuntu are operating systems so there wouldn't be necessarily programming involved.
MR. DRATEL: How about php?
RICHARD CHAPMAN BATES: Php is a programming language, yes, so --
MR. DRATEL: So he was getting frustrated, he told you, right, about php -- about learning php?
RICHARD CHAPMAN BATES: I don't recall him saying he was frustrated about learning php but he did have issues with php.
MR. DRATEL: I am going to show you what's marked as Defendant's P.
(Pause)
MR. DRATEL: OK. We'll come back to that.
MR. DRATEL: OK. So when you first saw Silk Road, you said you were intrigued by it, correct?
RICHARD CHAPMAN BATES: I was intrigued by the technology that it was built upon.
MR. DRATEL: And even the concept, right? You compared it to Craigslist, did you not?
RICHARD CHAPMAN BATES: I think at one point I probably did.
MR. DRATEL: And so even after that point you had continued to assist Mr. Ulbricht with respect to technical questions that he had?
RICHARD CHAPMAN BATES: We're talking about 2011 again?
MR. DRATEL: 2011, yes, the first half of 2011.
RICHARD CHAPMAN BATES: Yes, I did help him.
MR. DRATEL: You may have provided him code on occasion, right?
RICHARD CHAPMAN BATES: I believe that there were times I provided code snippets in chat. I don't remember writing any code. At that time I had a particular disdain for php so I really think I would have remembered if I had written any significant php.
MR. DRATEL: And he would send you code -- Mr. Ulbricht would send you code occasionally?
RICHARD CHAPMAN BATES: Again, he sent me code snippets.
MR. DRATEL: Right. And you would review it and delete it, right?
RICHARD CHAPMAN BATES: Review it and delete it?
MR. DRATEL: Yes.
RICHARD CHAPMAN BATES: I don't -- oh, yeah. Sorry. There was one time over TorChat that he did send me a zip file that had the php code for the Silk Road website. I looked at that. He asked me to review it. I looked at it for a little bit and ultimately did end up just deleting it.
MR. DRATEL: So one of the reasons why you deleted it is you didn't want it on your computer, right, anything connecting you to that?
MR. DRATEL: OK. You can look at P now, Defendant's P.
RICHARD CHAPMAN BATES: Mm-hmm.
MR. DRATEL: And I just ask you if you recognize that?
RICHARD CHAPMAN BATES: I have no reason to believe that this is not an actual conversation, but I don't remember it very well. But we can talk about it.
MR. DRATEL: But April 2011, right?
MR. DRATEL: Actually, I just ask you if it refreshes your recollection --
RICHARD CHAPMAN BATES: A little bit, yes.
MR. DRATEL: -- that Mr. Ulbricht was frustrated trying to learn Cake, C-a-k-e, php?
RICHARD CHAPMAN BATES: Yes, which I'm not sure what that is right now. I believe it might be a module or library on top of php.
MR. DRATEL: In terms of Mr. Ulbricht's state of mind during this period, as time passed you observed that he was getting under more and more stress, correct, during the period in 2011 now that we are talking about -- that first half of 2011?
RICHARD CHAPMAN BATES: There were times when he seemed stressed, as is evidenced by the voicemail.
MR. DRATEL: Yes. And, also, though, you observed that it was occupying too much of his time and he was dealing with crises on the site, right?
RICHARD CHAPMAN BATES: He did have a number of, you know, problems with running the Silk Road, yes.
MR. DRATEL: And you observed that that was wearing on him, correct?
RICHARD CHAPMAN BATES: That's my opinion.
MR. DRATEL: Yes. And you told him that you thought it was a good idea for him to get out because it was having an effect on him?
RICHARD CHAPMAN BATES: I did tell him -- I don't recall if I did, actually. I do remember that on November 11th I did tell him to shut down the site.
MR. DRATEL: But he did express to you on some of the chats that we saw and other times that you met him in person that he was stressed out by all of this?
MR. DRATEL: He also told you he was overwhelmed, right?
RICHARD CHAPMAN BATES: That's possible. Again, is there something to help me remember?
MR. DRATEL: I show you what's marked as 3513-25. Just look at the highlighted portion.
Does that refresh your recollection that March 29, 2011 in a chat Ross told you he was overwhelmed?
RICHARD CHAPMAN BATES: Yes, he did tell me on this date that he was overwhelmed. I'm not sure based on the context if this is about Silk Road or not but it very well possibly could be.
MR. DRATEL: Now, after Mr. Ulbricht returned from Australia and from some other trips, you were in touch with him in May of 2012, correct?
RICHARD CHAPMAN BATES: That sounds correct.
MR. DRATEL: And you chatted with him and you asked him how he was doing and he said "chillin'," right?
RICHARD CHAPMAN BATES: Again, you're going to have to refresh my memory but that sounds right.
(Pause)
MR. DRATEL: Just a second, your Honor. I'm sorry.
(Pause)
MR. DRATEL: So -- and occasionally you said that you would send Mr. Ulbricht certain articles or links that you had seen about Silk Road, correct? This is during 2012.
RICHARD CHAPMAN BATES: Yeah, this is going on 2012 into 2013.
MR. DRATEL: Right.
MR. DRATEL: And ultimately he asked you not to send him any more, correct?
MR. DRATEL: And you saw Government's -- if we could have Government's 1004?
So Government's 1004, you mention, "There was something posted on Friday that you might have found interesting." Then Ross says, "I'll take a look, thanks."
By the way, this is Google Chat, right?
RICHARD CHAPMAN BATES: That's correct. This is on --
MR. DRATEL: Not TorChat?
RICHARD CHAPMAN BATES: This is on Google Chat.
MR. DRATEL: So -- and then Ross says, "I'll take a look, thanks. Glad that's not my problem anymore." Right?
And that's -- what you said to him was about Silk Road, correct?
RICHARD CHAPMAN BATES: That is correct.
MR. DRATEL: And then there is an emoticon. And what do you take that emoticon to be?
RICHARD CHAPMAN BATES: That is a smiley face.
MR. DRATEL: As in happy, right?
MR. DRATEL: And you say, "Yes." Because you are in agreement, right? That is a good thing?
RICHARD CHAPMAN BATES: I'm in agreement that he communicated to me that he was happy.
MR. DRATEL: And then he says -- Ross says: "I have regrets, don't get me wrong ... but that shit was stressful."
Right?
RICHARD CHAPMAN BATES: That is what it says.
MR. DRATEL: Then he asks you to continue to keep the involvement secret, right, that he was involved in?
(Pause)
THE COURT: Well, I was thinking of taking a short additional break, anyway. And it looks like you are looking for something?
MR. DRATEL: Yes, and then I will wrap up, your Honor. I appreciate it.
THE COURT: Let's do that. We'll take a short break. We are going to go to 5 o'clock on the dot, or a minute or two before. As I mentioned to you, we are not going to sit tomorrow, on Friday. All right? So when we break at 5, it will be we will break until Monday morning. But for right now we'll just take a short break. And remember not to talk to each other or anybody else about this case. Thank you.
COURT CLERK: All rise as the jury leaves.
THE COURT: You can take a short break, too.
(Continued on next page)
(Jury and witness not present)
THE COURT: Are you folks talking about timing?
MR. TURNER: Yes.
THE COURT: I am interested, too.
MR. TURNER: Your Honor, the issue is our next witness is from San Francisco. I expect my direct to be pretty compact.
THE COURT: What does that mean?
MR. TURNER: 15 minutes. So I am hopeful we can finish with him today so that he doesn't have to fly back here Monday.
THE COURT: The only issue is that we need to end by 5, because we do have some jurors, as you folks know, who have got childcare and other issues on the back end. So we can't ask them to stay.
You know, how much longer do you have with this witness?
MR. DRATEL: Five minute, ten minutes, maybe, at most.
THE COURT: OK. So why don't we then just -- we'll try to take as quick a break as we can. Come right back on out. I only broke because we had taken the earlier break and I didn't want to keep people and make them uncomfortable. So we will come back out and just proceed as expeditiously as possible. All right?
COURT CLERK: All rise.
(Recess)
THE COURT: Let's get the jury back out. It is always hard to get 15 people out in five minutes, but they are gathered again. It took a little while to get them all rounded up.
(Continued on next page)
COURT CLERK: All rise as the jury enters.
(Jury and witness present)
THE COURT: All right. Let's all be seated.
OK. Mr. Dratel, you may proceed, sir.
MR. DRATEL: Thank you, your Honor.
BY MR. DRATEL:
MR. DRATEL: I just want to go back to something we talked about earlier, about the bitcoin market in June of 2011 and you couldn't recall about Mr. Ulbricht making a prediction. So I'm just going to show you what's marked as Defendant's CC.
I just ask you to look at that and then I'll ask you a question.
(Pause)
MR. DRATEL: Does CC refresh your recollection that at some point in June 2011 you commented that the bitcoin market was crashing, just like Mr. Ulbricht said it would?
MR. DRATEL: Thank you. And with respect to another one that we just did right before the break, which is in May of 2012, when you asked him what have you been up to and he said "chillin'," so I'm going to show you what's marked as Defendant's P.
RICHARD CHAPMAN BATES: The date on this is accurate?
MR. DRATEL: Yes. Your Honor, we have an agreement that the date is accurate because it is a series of chats sort of in a row.
MR. HOWARD: That is correct, your Honor.
THE COURT: All right.
MR. DRATEL: So does that refresh your recollection that May 15, 2012, you reached out to Mr. Ulbricht and said "How are you doing" and he said "chillin'"?
MR. DRATEL: Thank you. Now, in terms of your meetings with the government, did you ever bring them your laptop for review?
MR. DRATEL: Ever bring them a desk-top for review?
MR. DRATEL: Ever bring them anything you ever worked on, any computer you worked on for review?
MR. DRATEL: And there were two people who knew about your involvement -- beside yourself, two people who knew about your involvement in Silk Road, right?
RICHARD CHAPMAN BATES: At which time?
MR. DRATEL: At the time -- before you were confronted by the government in October of 2013, there were two people who knew about your involvement in Silk Road, correct -- Mr. Ulbricht, right?
RICHARD CHAPMAN BATES: Mm-hmm.
MR. DRATEL: And a woman you confided in sometime in 2012?
RICHARD CHAPMAN BATES: In 2012?
MR. DRATEL: Well, when was it? You confided in a woman that you had involved in Silk Road, correct?
RICHARD CHAPMAN BATES: I tried to confide in a woman and a particular friend of mine in 2011. I don't think it was communicated across. We were both at a bar drunk.
MR. DRATEL: Is that Shelli?
MR. DRATEL: Didn't she say she didn't want to hear any more about it when you told her about that?
RICHARD CHAPMAN BATES: I don't remember. Maybe.
MR. DRATEL: Maybe.
MR. DRATEL: I have nothing further, your Honor. Thank you.
THE COURT: Thank you.
Mr. Howard, anything further?
MR. HOWARD: The government has no further examination of this witness.
THE COURT: All right. You may step down, sir.
(Witness excused)
THE COURT: All right. Would the government call their next witness, please.
MR. HOWARD: Your Honor, before we do that, the government would like to read just one Tor chat excerpt that is already admitted into evidence as we get the witness.
THE COURT: All right. What government exhibit is this?
MR. HOWARD: Just give me one moment and I will pull it up. It is 226D, as in dog.
Mr. Evert, could you publish it.
Page 59 of 1,096. December 9, 2011:
"vj: IRL - is there anyone with a clue at all? Girlfriend, boyfriend, bunny you talk to, online buddy's who you've know for years? Gramma, priest, rabbi, stripper?
"myself: unfortunately yes. There are two, but they think I sold the site and got out and they are quite convinced of it.
"vj: good for that - when do they think you've sold?
"myself: about a month ago
"vj: and do they now notice the demands on your time? These the kinda people you'll know forever, or would a move work someday?
"myself: no, I live no where near them anymore. One I'll prob never speak to again, and the other I'll drift away from."
Continuing from the same chat on page 314 of 1,096 on January 15, 2012:
"vj: Have you even seen The Princess Bride?
"myself: growing up my parents had the last half of spaceballs and the last 3/4 of the Princess Bride and all of Romancing the Stone. that pretty much sums up my personality.
"vj: Well, that's about as well rounded as one can get. So you know the history of the Dread Pirate Roberts.
"<-- it's a thought I'm working on, so humour me
"myself: can't quite remember.
"myself: Wesley was him though yea. Took up his name
"vj: and over the years, a new one would take the name, and the old one would retire.
"myself: yep
"vj: You need to change your name from Admin, to Dread Pirate Roberts
"<-- isn't kidding - start the legend now
"myself: I like the idea
"vj: <-- has just put 12 solid hours of thought into it. Clear your old trail - to be honest, as tight as you play things, you are the weak link from those two prev contacts
"myself: goes along with my captain analogy
"vj: and the whole thing - I quite love it."