KYLE BASS: What percentage of the transactions that were going on, were done, say, for dark reasons as opposed to for reasons of commerce?
KATHRYN HAUN: Well, in the early days, the number of the percentages were way higher. Because the thing we know about criminals is that they're often the earliest adopters of new technology. And we saw this in the internet.
KYLE BASS: And they love the anonymity of this one. Yeah.
KATHRYN HAUN: They love the anonymity. But it turns out, it's not anonymous. If anything, it's like digital breadcrumbs. This 21,000 bitcoins goes missing overnight. DPR looks into it and says, hey, it's Curtis Green's pins and passwords that have allowed this to all be drained. And actually, I want to have a hit put out on him.
KYLE BASS: So, kill Curtis Green?
KATHRYN HAUN: Where we live in a world of daily cyber breaches, centralized systems are huge targets and huge honey pots.
KYLE BASS: Well, this one's going to be a fun one, Katie, it's a pleasure to sit down with you in a more formal sense, since we're mostly informal.
KATHRYN HAUN: Likewise, Kyle. Thanks for inviting.
KYLE BASS: So, for those of you that don't know Katie, she is one of the partners at Andreessen Horowitz. But more importantly, the former US attorney here in San Francisco who prosecuted the Bitcoin Silk Road case. We're going to talk about a lot of interesting things today. And for the Real Vision crowd, I think talking a lot about crypto digital assets will come more at the end. But let's go back to your law school days. And talk about which Supreme Court Justice you clerked for and why, and then how that brought you into working in the US Attorney's office?
KATHRYN HAUN: Well, it's funny, Kyle. I wasn't actually planning to be a prosecutor, some people think I'm going to go to law school and go be a corporate M&A lawyer or go into international business or go be a public defender. I didn't really know what I wanted to do. But I knew I wanted to go to law school. And that's something that I had always wanted to do even from the early days. And so, I went to Stanford. And there, I really was focused on going to New York City. And so, I signed up, I took the New York bar. And I was planning to go work at Kravets, which is a big Wall Street firm.
And one of the things I realized, though, was that what was really interesting me in law were the human stories and the human element, whether you're talking about things like employment law, or especially criminal law. And ironically, my best grades, were not from the transactional classes, like the corporate law, or the securities and capital markets classes, but from the criminal law, or the constitutional law side of things. So, maybe that was an early sign.
KYLE BASS: It was and clearly it's what drew me to you as we developed our friends over time is this you're one of the coolest ladies that I know. You're one of the few people in San Francisco that can carry a gun. You've prosecuted some of the worst MS13 cases as well as, again, the Bitcoin Silk Road case, which I'd love to get into a little bit next. I know that there are movies being made about this and things like that. But if you would, I think this talk, what people are going to find to be most interesting about our conversation is, is how you came from law enforcement on the criminal side into the investment universe into being a partner at one of the most prestigious venture capital firms in the world.
KATHRYN HAUN: I was fortunate to clerk for Justice Kennedy. And I remember that he asked me in my interview- I'll never forget, he asked me, what do you want to do when you leave here? What's your five-year or 10-year career plan? And I told him, I want to go be a prosecutor. And I knew by that point that I really felt strongly that I wanted to be involved in the criminal justice system in some way. And that was quite a shift from the early days of when I thought I was going to be a corporate lawyer in New York City.
And I went to work for a big law firm in Washington, DC. And I told the partner very candidly, my goal here, the partner who hired me, my goal is to really go into the US Attorney's Office. And fortunately, that was a firm called Sidley Austin, they appreciated the transparency and said that it's a tough nut to crack. But if you can get into that office, good for you. And 10 months later, I found myself there.
And that was out in the Washington DC area, it was in the Eastern District of Virginia called the Rocket Docket. Because the Rocket Docket, so named because of the pace with which cases go through. And we were doing cartel cases there, a lot of the international work that the DEA was doing. So, that's where I cut my teeth as a baby prosecutor, was in this Rocket Docket.
And then I was out, also in headquarters working on some national security cases, and also working in the attorney general's office. But in 2008, so they call it back to the line back, to the line being a prosecutor. So, I had been in some senior roles in headquarters working on national security, and things implicating national policy, and went back to the line of prosecuting cases, which is what I loved.
KYLE BASS: And that's when they sent you to San Francisco?
KATHRYN HAUN: I actually chose to move out here, mostly for family reasons. And I had been in DC by that point for eight years. Which was a nice long time.
KYLE BASS: But you got involved in some really interesting cases really quickly. Somewhere gang-related and somewhere, again, then the Bitcoin case came. And that was a big one. So, if you would take us right into the Bitcoin case.
KATHRYN HAUN: Sure. Well, so it was around 2012, late 2012 I think it was, and my boss came into the office. I had been doing murder cases and organized crime and Rico gang murders up until then. Had done a few trials, I did a two-month biker murder case and was felt like I had been there and done that with a lot of violent crime cases. And my boss knew that I really was looking for a change, but I still wanted to stay in the office. And they proposed, why don't you work on this new case that we have in the office? And that's a case against Bitcoin.
Here we were in 2012-2013. And we quickly learned there's no such thing as prosecuting Bitcoin, that would be like prosecuting cash, it's not possible. We also quickly discovered it's not desirable. There were some really good things about this new technology also. Instead, what we did was we focused on- we said, let's- just like we do with cash or wires or any medium of exchange, let's focus on the bad uses of this. And that same thing happened in the early days of tech and in the early days of the internet. It wasn't let's prosecute technology, it was like, let's stand up a computer crimes unit within the Justice Department and go after the nefarious cases using this technology.
So, that's how we were approaching Bitcoin in those early days. And there were a lot of bad, nefarious uses involving crypto. And in those days, when I say crypto now, I mean crypto assets are there are more than 1500 of them. Back in those days, we're talking really just about Bitcoin. We're talking about Bitcoin, this is pre-TOR.
KYLE BASS: And in your mind, what percentage of the transactions that were going on in let's just say Bitcoin early on were done, say, for dark reasons, as opposed to for reasons of commerce?
KATHRYN HAUN: In those early days?
KYLE BASS: Yeah. KATHRYN HAUN: Well, in the early days, the number of the percentages were way higher. Because the thing we know about criminals is that they're often the earliest adopters of new technology. And we saw this in the internet.
KYLE BASS: And they love the anonymity of this one. Yeah.
KATHRYN HAUN: They love the anonymity. But it turns out, it's not anonymous, which I'll get into. It's pseudo anonymous, and there's an important distinction there. Because Bitcoin is far from anonymous, if anything, it's like digital breadcrumbs. Speaking as a former investigator and prosecutor, we actually loved cases that involve Bitcoin, way more than cash. And sometimes even more than wires because turns out Bitcoin is highly traceable, which I'll get into, as I tell you a little bit about this story.
KYLE BASS: Great. So, what happened?
KATHRYN HAUN: So, we're prosecuting some early cases involving criminal uses of Bitcoin. And my colleagues out in New York were prosecuting a case known as the Silk Road. And at that time, no one really knew who was running the Silk Road. The government was really trying to find out who was running the Silk Road, where were the people or person, he or she, it was unknown at the time who it was, was running the Silk Road, and where were they doing it from? Little did they know they were doing it right here from San Francisco. At that time, the mastermind of the Silk Road could have been anywhere in the world. And so, the US government was really trying to find out who was running this criminal enterprise, or depending on your perspective, libertarian paradise.
KYLE BASS: So, the Silk Road was essentially a marketplace from the way I understand it. And again, correct me. I'm not an expert in these things. And the marketplace had various nefarious items on it. So, what were some of the things that the Silk Road was purveying?
KATHRYN HAUN: Sure, well, you're exactly right, Kyle. It was a marketplace. It was an online marketplace, like an eBay, or an Amazon. But more akin to an eBay. So, there were vendors on this marketplace. And Silk Road was an online platform, and you could access it using TOR, which do you know what TOR is?
KYLE BASS: No.
KATHRYN HAUN: It stands for The Onion Router, okay. And it's basically a way to anonymously browse online.
KYLE BASS: This is the dark web?
KATHRYN HAUN: Well, actually, you access parts of the dark web with TOR. TOR is the browser.
KYLE BASS: Got it.
KATHRYN HAUN: So, think of TOR as the Chrome or Internet Explorer.
KYLE BASS: I see, for the dark web?
KATHRYN HAUN: For the dark web. Not just for the dark web, like anything with technology, people are also using the TOR browser and places like Iran or China.
KYLE BASS: So, the dark web?
KATHRYN HAUN: Well, there are there are good uses for- all I'm saying is there are good uses for the TOR Browser. There are also a lot of bad uses for the TOR browser. So, like anything with technology, there are good and bad uses. But absolutely, people who are accessing the dark web, which I grant you, are people that are up to no good typically, are accessing the dark websites using TOR browsers. Or a TOR browser.
And so, Silk Road was one such online marketplace. And like I say, I always say, was it a criminal enterprise? Being a former prosecutor, I sure think so. Or was it a libertarian paradise? Because I also know a lot of people, especially here in San Francisco, who think it's not a criminal enterprise. Everyone should be able to choose whatever they want to buy. One could go buy anything from heroin to fake passports, and to a lot of things in between. And by the way, Silk Road-
KYLE BASS: And they just mail them to your house?
KATHRYN HAUN: Yeah. Well, typically, for sophisticated actors or users of Silk Road, they wouldn't pick their house. But there were plenty of people who indeed did select their house. And the Silk Road was making millions of dollars a month. And they had them generating a lot of revenues. And I believe it was I'm trying to remember how exactly the case got opened in New York, but I believe hearing that Senator Schumer read a wired article and was wondering why this was being allowed to proceed. And so, the Southern District of New York, which was another US Attorney's office, I was in the US Attorney's Office out in San Francisco.
SDNY opened the case and was trying to figure out who was behind the Silk Road. At the same time, you had a DC office just in Baltimore, outside of DC, also trying to figure out who was running the Silk Road. And there were parallel investigations going in. And the government had taskforces comprised of an alphabet soup of agencies. You're talking about FBI, Secret Service, DEA, ATF, Marshals, on and on. And one task force, the one out of Washington, DC, well, Baltimore in Washington DC, they had an undercover agent. And that undercover agent was able to befriend the person running the Silk Road and all the government knew at the time was that the person running the Silk Road went by the nickname DPR for Dread Pirate Roberts. From the movie The Princess Bride. Yeah. So, they didn't know who DPR was. But the undercover agent-
KYLE BASS: Struck up an online relationship with him?
KATHRYN HAUN: Exactly. He actually said I want to buy the Silk Road. So, struck up an online conversation with DPR, and proceeded for the next two years to engage in messaging conversations with DPR. The two actually became quite close confidantes.
KYLE BASS: Interesting.
KATHRYN HAUN: Yeah, over two years.
KYLE BASS: And then what went wrong?
KATHRYN HAUN: Well, a lot of things went wrong on both sides. From the Silk Road's side, 2013 was a really bad year for the Silk Road, because what you had was you had a person, an online persona, who went by the name Death From Above. Death From Above started extorting DPR saying, if you don't pay me hundreds of thousands of dollars in bitcoin, I'm going to reveal your identity to law enforcement. And then meanwhile, there was another online persona, and this person went by the moniker French Maid. I can't make these names out. French Maid was selling DPR information into the government's investigation for Bitcoin. And French Maid was telling DPR the feds are closing in and the end is near. And you're about to be had.
KYLE BASS: So, French Maid, in theory had to be someone either married to or was part of the government's investigations.
KATHRYN HAUN: Well, DPR didn't know but DPR paid for that information. And the government didn't know any of this at the time of course, this all came out after the fact. But amidst this, something else really bad happened-
KYLE BASS: What else happened in 2013?
KATHRYN HAUN: About 21,000 bitcoins, which is today, in excess of I always have to do the calculation given how Bitcoin is moving, but it's an excess of 150 million dollars, I think today, went missing overnight from the Silk Road. From Silk Road vendor accounts and also from what you might consider the petty cash account, although there's nothing petty about 21,000 bitcoins. And so, that went missing overnight. And DPR was of course infuriated the next day. He thought he'd been hacked. So, he launched his own internal investigation, and he quickly discovered so he thought his right hand man, the Silk Road administrator was responsible for this theft.
KYLE BASS: And it was about 21,000 bitcoins?
KATHRYN HAUN: 21,000 bitcoins. So, whatever the figure is today, it's in excess of 100 million dollars. And so, the right hand man, the Silk Road administrator, it turns out, was a grandfather living in Utah, by the name of Curtis Green. And Curtis Green, what DPR didn't know was that Curtis Green, his right hand man, was already cooperating with the feds by this point, with those task forces that I mentioned to you earlier.
KYLE BASS: Yeah, the feds had found him.
KATHRYN HAUN: The feds had found Curtis Green in what's called a buy bust operation. Where they delivered some keys of coke to his house. There's a wired article story about the bust. And Curtis Green said I'd like to cooperate and spare myself a long sentence, and I can help you with the Silk Road. And so, that's what he did. He sat down with the federal task force, the one I mentioned outside of Baltimore, and he showed them how did the Silk Road work? How do you log into it? How do you reset vendor pins and passwords? Of course, he had that access because he was a key administrator. So, he was showing this federal task force that day, here's how it works. And he even gave them his laptop to keep because it was evidence. So, they had it. And that becomes important to the story later that they had the access. They had the login credentials.
KYLE BASS: They actually became an administrator.
KATHRYN HAUN: They could have.
KYLE BASS: For the Silk Road.
KATHRYN HAUN: They certainly could have, they had the tools to do that and the know-how. And what ended up happening was in this 21,000 bitcoins goes missing overnight, DPR looks into it and says, hey, it's Curtis Green's pins and passwords that have allowed this to all be drained. And Curtis Green, therefore, must have committed this theft. And actually, I want to have a hit put out on him.
KYLE BASS: So, kill Curtis Green.
KATHRYN HAUN: To kill Curtis Green. So, he paid about $80,000 in two installments of $40,000. Interestingly, not in bitcoin, just in a pure old- fashioned wire and guess who he turned to, to do the hit?
KYLE BASS: Who?
KATHRYN HAUN: The undercover federal agent who had befriended DPR. He had a code name named Nob. That was his cover.
KYLE BASS: And that's who he turned to in the murder for hire?
KATHRYN HAUN: DPR turned to Nob not knowing Nob was actually an undercover federal agent. DPR thought Nob was actually a drug lord with connections to the criminal underworld. All he knew is the two had only ever conversed online for two years but he clearly trusted Nob, that's who he asked to help him torture and murder Curtis Green.
KYLE BASS: Wow. And so, what happened next?
KATHRYN HAUN: So, of course, the feds, now, they have Curtis Green cooperating, they confront Curtis Green the next day and say, there's a hit put out on you. And by the way, we know you stole 21,000 bitcoin, you're not going to make a very good cooperating witness if you don't come clean on that. And Curtis Green was insistent he had not stolen the money. He pointed out he had turned over his laptop just the day before to the task force. And he didn't have any way that he could have committed this theft. So, he was insistent. But the feds had to go about staging Curtis Green's murder. And so, they proceeded to take photos, proof of death photos that depicted the torture and murder of Curtis Green. Yeah, they sent this to DPR saying the hit's been done. And Curtis Green's dead, your problem's gone. And we still didn't know though-
KYLE BASS: But did DPR ever think he could get the 21,000 bitcoin back?