Michael Duch — Cross/Redirect/Recross (Part 3) - Day 9 - 2015 Federal Trial

Ilhwan Yum testified about bitcoin tracing and its limits, and the court denied a motion to strike his testimony. Brian Shaw presented reconstructed marketplace pages and account-attributed messages. Michael Duch completed testimony, an FBI agent demonstrated malware, and the court addressed disputed jury instructions.

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Michael Duch — Cross

CrossCrossMichael Duch — Cross

CROSS-EXAMINATION CONTINUED BY MR. DRATEL:

MR. DRATEL: Good morning Mr. Duch.

MICHAEL DUCH: Good morning.

MR. DRATEL: Now, going back to your initial meetings with the government back in February of 2014, you were initially told that you would have to plead guilty to everything that you did, right?

MICHAEL DUCH: That's correct.

MR. DRATEL: But you didn't, right?

MICHAEL DUCH: I did not.

MR. DRATEL: And with respect to your cooperation agreement with the government, it's required that you provide substantial assistance to the government, right?

MICHAEL DUCH: Can you repeat the question, please.

MR. DRATEL: Sure. Your cooperation agreement requires you to provide substantial assistance to the government, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: And the government is the sole decider as to whether or not you have provided that substantial assistance, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: Now, you haven't been asked to testify against anyone with respect to Atlantis, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: And Atlantis, just to refresh, is another website that you sold drugs on, right?

MICHAEL DUCH: That's correct.

MR. DRATEL: And you haven't been asked to testify about anybody with respect to BMR, right, which is another website of that sort?

MICHAEL DUCH: That's correct.

MR. DRATEL: So the only case you're testifying is this case, right?

MICHAEL DUCH: From what I understand, yes.

MR. DRATEL: Now, you testified yesterday that you sold drugs on Atlantis, correct?

MICHAEL DUCH: Yes, I did.

MR. DRATEL: But initially, you denied that you sold anywhere but Silk Road, right?

MICHAEL DUCH: No. I did mention that I did have accounts on Atlantis as well as Black Market Reloaded.

MR. DRATEL: And that's BMR, right, Black Market Reloaded?

MICHAEL DUCH: That's correct, BMR.

MR. DRATEL: Let me show you what's marked as 3514-2. I'm sorry. 3514-10. Page two, 3514-10, and just look at the document. I'll show you where to look.

But you met with the government on October 14, 2014, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: Let me just show you this highlighted portion. Did you not deny -- withdrawn.

Did you not at first tell the government that you only sold drugs on Silk Road?

MICHAEL DUCH: No, I did not. From what I understand, the government was aware I also had accounts on BMR as well as Atlantis, and it was my testimony yesterday that I did transact drug deals on those sites as well.

MR. DRATEL: You testified to that yesterday, but the question is when you first talked to the government or when you talked to them October 14 whether or not you sold only on Silk Road?

MICHAEL DUCH: The statement here says that I sold drugs only on Silk Road but --

THE COURT: Don't read it in. He's asking you whether or not that refreshes your recollection. If it doesn't, it doesn't. If it does, it does.

MICHAEL DUCH: It does not because, again, I did sell --

THE COURT: That's the answer.

MICHAEL DUCH: Okay.

MR. DRATEL: So you first saw Silk Road, the website, in October 2012, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: And you were already back on heroin as of August of 2012, correct?

MICHAEL DUCH: That was the time that I relapsed, yes; that's correct.

MR. DRATEL: And yesterday you said you bought heroin once on Silk Road, correct?

MICHAEL DUCH: Yes, I did.

MR. DRATEL: And didn't you tell the government in your first interview with them that you didn't buy any heroin on Silk Road?

MICHAEL DUCH: I don't remember whether I mentioned that I did purchase heroin at that time on Silk Road.

MR. DRATEL: That's not my question. My question is, didn't you tell the government that you only bought Oxycontin, Oxycodone and Methadone from Silk Road?

MR. TURNER: Objection; asked and answered.

THE COURT: Overruled.

MICHAEL DUCH: Can you repeat the question.

MR. DRATEL: Sure. In your first interview back in February of 2014 with the government, did you not tell the government that you bought only Oxycontin, Oxycodone and Methadone from Silk Road and did you say that twice in that first interview?

MICHAEL DUCH: Not that I can recall.

MR. DRATEL: Did you -- well, let me show you what's marked as 3514-2.

MR. TURNER: The government objects. There's no prior inconsistent statement.

THE COURT: Let's see whether or not he can refresh his recollection with it.

MR. DRATEL: Does this refresh your recollection that during the first meeting with the government, February 6, 2014, you claimed that you only bought Oxycodone, Oxycontin and Methadone or Methylone? Which is it?

MICHAEL DUCH: It was Methadone.

MR. DRATEL: Okay. So, did you tell the government that, and then -- and that you did it and that you told the government that twice? Just read that sentence. See if that refreshes your recollection.

MICHAEL DUCH: No. I believe I told the government all of the drugs that I purchased on Silk Road.

MR. DRATEL: You first started selling drugs on Silk Road April 2013, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: That's the first time you were ever involved in the seller's contract or anything like that, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: And you never saw the site in 2011 or 2012 until you got on in October, right?

MICHAEL DUCH: That's correct.

MR. DRATEL: Now, you claim that you didn't sell any drugs before Silk Road, right, before you sold on Silk Road, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: But you were arrested in 2008 for possession with intent to distribute drugs, right?

MICHAEL DUCH: That was the charge at the time. That's correct.

MR. DRATEL: And you pled guilty to a felony in that regard, correct?

MICHAEL DUCH: Yes, I did.

(Continued on next page)

MR. DRATEL: So you went to jail ultimately, too, for that, correct?

MICHAEL DUCH: Yes, I did.

MR. DRATEL: And, in fact, that's where you detoxed, correct?

MICHAEL DUCH: That's correct.

MR. DRATEL: You also told -- well, this -- you also had a DUI in 1993, right?

MICHAEL DUCH: Yes, I did.

MR. DRATEL: And was that from sports injury pain?

MICHAEL DUCH: The DUI?

MR. DRATEL: Yeah.

MICHAEL DUCH: No.

MR. DRATEL: And then in 1997 you had a misdemeanor conviction for possession of drugs, right?

MICHAEL DUCH: I don't recall that.

MR. DRATEL: I show you what's marked as 3514-14. Look at the first highlighted one.

1997, right, possession of drugs?

MICHAEL DUCH: Ah, yes.

MR. DRATEL: You told the government in an interview that you didn't begin using drugs until 2007/2008, right?

MICHAEL DUCH: No, that's not correct.

MR. DRATEL: Well, do you still have -- do you still have 3514-10?

You met with the government, again, in October of 2014, correct?

MICHAEL DUCH: Yes, I did.

MR. DRATEL: Did you not tell the government that you first became a drug user in approximately 2007 or 2008? Did you not tell the government that?

MICHAEL DUCH: My first drug use was at an earlier --

MR. DRATEL: That's not the question. The question is didn't you tell the government in that meeting that you didn't become a drug user until 2007 or 2008?

MICHAEL DUCH: I told them that I did become a drug user in 2007/2008 but that was not the first time that I was a drug user.

MR. DRATEL: Is that a technicality?

MR. TURNER: Objection to form.

THE COURT: Why don't you rephrase it.

MR. DRATEL: You told the government you became a drug user in 2007, in 2008, correct?

MICHAEL DUCH: Yes, I did.

MR. DRATEL: So you really became a drug user well before that, right?

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MICHAEL DUCH: My first drug use is prior to that.

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MR. DRATEL: So that was a lie you told the government, right?

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MICHAEL DUCH: No, it wasn't.

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MR. DRATEL: No, OK.

You told them 2007/2008 -- when did you first start as a drug user?

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MICHAEL DUCH: I probably used alcohol for the first time when I was 16.

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MR. DRATEL: OK. What about other types of drugs?

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MICHAEL DUCH: Marijuana probably when I was 18.

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MR. DRATEL: And what year was that?

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MICHAEL DUCH: 1992.

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MR. DRATEL: So then 16 years before 2007 -- it was 15 or 16 years before 2007/2008, right?

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MICHAEL DUCH: Correct.

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MR. DRATEL: So when you say you became a drug user, you didn't include the part from 1992 to 2007?

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MICHAEL DUCH: Sure, I did. I mentioned that at the time.

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MR. DRATEL: Look at that again.

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MICHAEL DUCH: Mm-hmm.

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MR. DRATEL: You told the government it was 2007/2008 is when you became a drug user.

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MICHAEL DUCH: That's what it says here, that's correct.

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THE COURT: The question is does that refresh your recollection that you said that?

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MICHAEL DUCH: It does not because my first drug use was prior to that.

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MR. DRATEL: That wasn't my question, your Honor. It was not a refresh your recollection.

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MR. DRATEL: It was: Didn't you tell the government that?

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MICHAEL DUCH: No, I did not.

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MR. DRATEL: You just said before that you did, right?

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MICHAEL DUCH: My first drug use was prior to 2007 --

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MR. DRATEL: No, that is the not question.

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THE COURT: You've got to let him finish and then you can ask him your question.

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MR. DRATEL: The record will be what the record will be about what you just said five minutes ago, right, where you said, yes, I told the government I became a drug user in 2007, 2008.

You said that five minutes ago, right?

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MICHAEL DUCH: I became a drug user and first became a drug user are different. There are distinctions.

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MR. DRATEL: Became a drug user and first became, that is the technicality you are going to rely on?

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MICHAEL DUCH: No. You are asking, you said became a drug user or first became a drug user.

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MR. DRATEL: You think there is a difference in that question?

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MICHAEL DUCH: I think there was a period of abstinence in between.

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MR. DRATEL: Wait. You think there is a difference in that question?

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THE COURT: Hold on. Let him finish.

Do you think there is a difference between those two questions?

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MICHAEL DUCH: Yes, I do. First becoming a drug user and reengaging in drug use --

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MR. DRATEL: No. The word is "become," not "reengage."

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THE COURT: Hold on. Let him finish and then you are going to ask another question.

Go ahead. Mr. Duch, you may finish.

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MICHAEL DUCH: My first drug use is prior to 2007/2008, as I mentioned, probable about 1992 for marijuana use. There was quite a period of abstinence, and I did reengage in drug use in the years of 2007 and 2008.

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MR. DRATEL: But you didn't tell them "reengage," you said became a drug user in 2007/2008, right?

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MR. TURNER: Objection, your Honor.

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THE COURT: I will allow this last one and --

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MR. DRATEL: You didn't use that term, right, "reengage"?

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MICHAEL DUCH: I'm not sure what term I used at the time.

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MR. DRATEL: Now, you claimed on direct that you started using pain killers first because of sports injuries, right?

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MICHAEL DUCH: That's correct.

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MR. DRATEL: Didn't you tell the government, though, in October of 2014 that it was because of Lyme disease?

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MICHAEL DUCH: That was the reason why I was represcribed pain killers was because of Lyme's disease, that's correct.

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MR. DRATEL: And then when the doctor found out that you had used heroin before, he refused to write you any more prescriptions for OxyContin, right?

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MICHAEL DUCH: I believe that the course of antibiotics, the treatment was successful and I no longer required the pain killers. And I also did reengage in heroin use.

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MR. DRATEL: OK. That was fine but except it wasn't the actual question.

The question was didn't the doctor halt your OxyContin or your oxycodone prescription because he found out you were doing heroin?

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MICHAEL DUCH: That was one of the reasons, yes.

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MR. DRATEL: And that was one of the reasons that you went back on heroin more severely, right, because you couldn't get the OxyContin any more, right?

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MICHAEL DUCH: Because it became too expensive, that's correct.

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MR. DRATEL: To buy in the street?

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MICHAEL DUCH: That's correct.

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MR. DRATEL: Yeah. So it was the doctor's fault that you went back on heroin, right?

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MICHAEL DUCH: Absolutely not. It's my fault.

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MR. DRATEL: Now, you took various security measures, correct?

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MICHAEL DUCH: Regarding what?

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MR. DRATEL: Regarding Silk Road.

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MICHAEL DUCH: Yes.

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MR. DRATEL: Regarding your online drug sales, right?

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MICHAEL DUCH: Yes.

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MR. DRATEL: And in that seller's contract that we saw, it says, "Security is of paramount importance," right?

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MICHAEL DUCH: Of course.

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MR. DRATEL: And you used a different buyer's account from your seller's -- withdrawn.

You created a different seller's account than your buyer's account, correct?

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MICHAEL DUCH: Yes, I did.

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MR. DRATEL: And that was a security measure, correct?

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MICHAEL DUCH: That's one of the security measures that the Silk Road website advised people to do.

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MR. DRATEL: Right. And you did that?

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MICHAEL DUCH: Yes, I did.

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MR. DRATEL: And one of the things that you did that some other people didn't do on Silk Road was you didn't even put up photos, right?

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MICHAEL DUCH: That's correct.

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MR. DRATEL: Because you knew from your computer background and your security background that there is metadata in those, right?

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MICHAEL DUCH: That's correct.

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MR. DRATEL: And so metadata can be of significant use in terms of tracking, right?

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MICHAEL DUCH: Yes.

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MR. DRATEL: And you wanted to eliminate that so you eliminated the metadata, right?

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MICHAEL DUCH: Yes, I did.

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MR. DRATEL: And you also down the road instituted limits or conditions for customers, right?

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MICHAEL DUCH: Over a period of time, yes.

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MR. DRATEL: And one of those reasons was because you were concerned about who your customers were, right?

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MICHAEL DUCH: Potentially, yes.

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MR. DRATEL: By the way, your technical background made it easier for you to operate on Silk Road, correct?

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MICHAEL DUCH: I don't think it made it easier. I don't think that there was any level of complexity required to engage in Silk Road activity.

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MR. DRATEL: In that October 14th meeting with the government, didn't you say that your technical background made it easier to operate on Silk Road?

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MICHAEL DUCH: I did not.

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MR. DRATEL: You did not tell the government that it was easier to learn and operate on Silk Road due to your familiarity with the technologies associated with it?

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MICHAEL DUCH: The only technologies that were required is that you use a Google search.

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MR. DRATEL: That was not my question.

My question is -- use a Google search? You can find Silk Road on a Google search?

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MICHAEL DUCH: Absolutely.

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MR. DRATEL: You can get to the Silk Road website on a Google search?

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MICHAEL DUCH: You can find out the URL, that's correct.

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MR. DRATEL: But don't you have to get on Tor, though, too?

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MICHAEL DUCH: Sure.

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MR. DRATEL: And you knew Tor already, right? You were familiar with Tor?

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MICHAEL DUCH: I was familiar with it, yes.

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MR. DRATEL: Did you not tell the government October 14, 2014, which is about three-and-a-half months ago, it was easier for you to learn to operate on Silk Road due to your familiarity with the technologies associated with it? Did you not tell the government that?

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MICHAEL DUCH: Not for the technologies associated with Silk Road. Perhaps things like encryption which helps provide confidentiality of data.

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MR. DRATEL: So you did tell them that?

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MICHAEL DUCH: Tell them what?

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MR. DRATEL: What you just said. I'm asking a question --

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THE COURT: Hold on. Let me just say, why don't you rephrase the question.

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BY MR. DRATEL:

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MR. DRATEL: You didn't answer the specific question so I will ask it again.

Did you not tell the government October 14, 2014 that it was easier for you to learn to operate on Silk Road due to your familiarity with the technologies associated with it?

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MICHAEL DUCH: Not to operate with the technologies associated with Silk Road but to --

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MR. DRATEL: Didn't you tell the government that?

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MICHAEL DUCH: No, I did not.

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MR. DRATEL: OK. Now, explain what you say when you say what technologies enabled you to operate --

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MICHAEL DUCH: I think to potentially ensure that there were additional security measures, like recommending encryption, as well as helping other users of Silk Road in the implementation of encryption. That was something that my technical background allowed me to at least help other people with and implement it with my use of Silk Road.

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MR. DRATEL: Now, you talked about your security measures, and you said potentially you were concerned about who your customers might be, right?

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MICHAEL DUCH: Sure.

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MR. DRATEL: They might be law enforcement, right?

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MICHAEL DUCH: It's very possible.

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MR. DRATEL: And because when you're on the computer, you're never quite sure who is on the other side of a transaction or a conversation, right?

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MICHAEL DUCH: That's correct.

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MR. DRATEL: Nothing further, your Honor. Thank you.

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THE COURT: All right. Thank you.

Mr. Turner, anything further from you?

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MR. TURNER: Yes, your Honor.

RedirectRedirectMichael Duch — Redirect

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REDIRECT EXAMINATION BY MR. TURNER:

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MR. TURNER: You were asked on cross about an arrest you had in the past for possession with the intent to distribute drugs, is that right?

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MICHAEL DUCH: That's right.

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MR. TURNER: Were you convicted for possession with intent to distribute drugs or were you convicted for something else?

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MICHAEL DUCH: I was convicted -- I was not convicted of possession with intent to distribute. I was convicted of failure to turn over a controlled dangerous substance to law enforcement.

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MR. TURNER: So it was a possession offense, not a distribution offense?

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MICHAEL DUCH: Essentially a possession offense.

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MR. TURNER: Did you ever deal drugs before you dealt drugs on Silk Road?

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MICHAEL DUCH: I never have.

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MR. TURNER: You were asked about encryption. I just want to clarify.

At some point while you were dealing on Silk Road, did you start requiring your customers to encrypt their messages to you?

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MICHAEL DUCH: Yes, I did, all their messages as well as their addresses.

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MR. TURNER: Even though they were sending it, the messages to you on Silk Road?

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MICHAEL DUCH: Yes.

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MR. TURNER: You wanted them to encrypt their messages further?

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MICHAEL DUCH: Within Silk Road, that's correct.

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MR. TURNER: Because you were worried about law enforcement?

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MICHAEL DUCH: Yes, I was.

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MR. TURNER: But it wasn't necessary -- that wasn't required to deal on Silk Road, right?

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MICHAEL DUCH: It was not required. It was something that I implemented.

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MR. TURNER: That's all, your Honor.

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THE COURT: All right. Thank you.

Mr. Dratel, anything further from you?

RecrossRecrossMichael Duch — Recross

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RECROSS-EXAMINATION BY MR. DRATEL:

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MR. DRATEL: What were the facts of that arrest? In other words, what drug did you have that you were caught in possession of back in two-thousand and -- in that arrest 2008?

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MICHAEL DUCH: I believe it was heroin.

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MR. DRATEL: So you were allowed to plead to a lesser offense, correct, of not turning over heroin to law enforcement authorities, right?

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MICHAEL DUCH: That was -- the plea agreement was for a possession charge.

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MR. DRATEL: Right. But how much heroin did you have on you when you were arrested that you were charged with a felony?

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MICHAEL DUCH: I believe it was about 35 bags of heroin.

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MR. DRATEL: And you weren't selling any of that?