What are bitcoins?

Bitcoins are a digital currency that function like Internet cash. They allow for rapid, anonymous peer-to-peer transactions at low or no cost, without the need for a bank or middleman.

Like cash, bitcoin transactions are not reversible. They are traded worldwide and can be purchased and sold through online exchanges. Like other investments and currencies, bitcoins fluctuate in value, with the price on Tuesday listed at $74.20 on the Bitstamp.net exchange.

Source: Bitcoin Foundation, Bitstamp

A Charleston man caught up in online buzz over his alleged ties to the first-ever law enforcement seizure of digital bitcoins is offering to cooperate with authorities in an effort to clear his name, his lawyer said Tuesday.

The U.S. Drug Enforcement Administration recently attracted a bevy of Internet attention when it posted a forfeiture notice indicating that agents had seized 11.02 bitcoins worth $814 from 31-year-old Eric Daniel Hughes for allegedly violating the federal Controlled Substances Act.

That notice prompted a flurry of speculation that the DEA had infiltrated the infamous Silk Road website, an off-the-grid marketplace where drugs are bought and sold. The site relies on bitcoins, an Internet cash equivalent that can be sent directly to other users with no involvement from banks or middle men.

Heightening suspicions, the DEA stated that Hughes also went by the name Casey Jones, a monicker that surfaced on Silk Road forums in connection with alleged prescription pill sales.

Hughes faces criminal charges in connection with a local drug case, but the DEA has not charged him with a crime at the federal level.

David Aylor, Hughes’ attorney, said his client strongly denies that he is Casey Jones or ever used that name online. Hughes maintains that the bitcoins didn’t belong to him and that he had no part in buying or selling anything on Silk Road, Aylor said.

“This was not him, and he has no Silk Road connection,” he said. “In no way, shape or form is he Casey Jones.”

A guest to blame?

Hughes is a Hilton Head native who has been living in Charleston in recent years working in the hospitality industry, Aylor said.

Hughes had some friends staying at his St. Philip Street apartment when the seizure went down in April, and he suspects he is being blamed for the actions of one of his house guests, Aylor said.

Hughes thinks he knows who the real Casey Jones is, Aylor said. He intends to cooperate with law enforcement and he plans to approach police with a computer that contains information that may well clear up the confusion, he said.

“His main objective is to clear his name and his reputation,” Aylor said.

Charleston police spokesman Charles Francis said investigators had not yet heard from Aylor. He referred further comment to the DEA.

The DEA’s Los Angeles field office is investigating the bitcoin seizure. Special Agent Sarah Pullen, the office spokeswoman, did not return an email seeking comment Tuesday. She has previously declined to discuss the case, citing the ongoing investigation.

The DEA moved to seize the bitcoins the same month that Charleston police conducted two undercover buys targeting Hughes, according to court documents. He is accused of selling 0.77 grams of the muscle relaxant Clozepam and 10.7 grams of marijuana to informants working with police, arrest affidavits said.

Arrest sparks buzz

Charleston police moved in to arrest Hughes last month, charging him with distributing marijuana and prescription pills after a June 5 raid on his apartment, according to county court records. The charges stem from 10 bags of the narcotic Suboxone found in Hughes’ bedroom during the search and the previous undercover drug purchases, according to arrest affidavits.

The search of his apartment also uncovered digital scales, a small amount of marijuana, various white powders and pills, computer equipment, a loaded pistol and other items, a police report noted.

Aylor said he has not had an opportunity to study the state’s criminal case against Hughes, and could not yet comment on those charges.

Hughes has no convictions on his criminal record, according to the State Law Enforcement Division. Beaufort police charged him in 2000 with possessing marijuana with intent to distribute, but the charge was dismissed, SLED records show.

The federal investigation has drawn a great deal of attention online because of its potential linkage to Silk Road, an underground marketplace that exists in the Deep Web, a sub-layer of the Internet outside the reach of standard search engines.

Silk Road, accessible only through the anonymity cloaking Tor Network, is named after an ancient and enduring trade route that connected Asia to Europe.

Just how the DEA would be able to identify an alleged trader on Silk Road and confiscate virtual Bitcoin currency has been the source of much puzzlement and speculation.

“With Tor, it’s really hard to be able to establish someone’s identity,” said Adam B. Levine, editor and chief of the website Let’s Talk Bitcoin!, which tracks developments with the currency and first reported on the seizure. “It doesn’t make sense to me that how they could locate someone on Silk Road unless someone used their actual address for the stuff they sent out or was sent to them.”

Reach Glenn Smith at 937-5556 or Twitter.com/glennsmith5.