Silk Road Leads to Federal Prison for Drug Kingpin

Alleged dark web drug kingpin arrested @ SF library

How low the mighty have fallen.

by Henry K. Lee

After spending months trying to infiltrate an underground website that made buying and selling drugs as easy as shopping online for a book or TV, half a dozen FBI agents shuffled into the science fiction section of a San Francisco library and grabbed a young man working on a laptop.

Authorities said Wednesday the man was Ross William Ulbricht, and they accused him of being “Dread Pirate Roberts,” the once-anonymous mastermind behind the online drug marketplace known as Silk Road. Ulbricht, 29, collected tens of millions of dollars in commissions, investigators said, and twice ordered people killed in a bid to protect his empire.

The Texas native and San Francisco transplant didn’t resist as he was taken into custody Tuesday at the Glen Park library branch, officials said.

In a complaint filed in New York and a parallel grand jury indictment handed down in Maryland, federal prosecutors accused him of charges including narcotics trafficking, money laundering and attempting to murder a witness.

They said his business, while operating in a dark corner of the Internet, was penetrated by undercover agents.

The FBI said Ulbricht ran Silk Road from San Francisco, where he had been living for the past year, including at a cafe not far from his former Hayes Valley home. Since at least 2011, authorities said, he had facilitated the sale of heroin, cocaine and other drugs as “Dread Pirate Roberts” – a reference to a character in the film “The Princess Bride” who turns out to be not one man but rather a series of men passing down the title.

Sen. Chuck Schumer, D-N.Y., who in 2011 asked federal agents to take down the site after it began to get media attention, applauded the arrest.

“Sayonara to Silk Road,” Schumer said. “The country is safer now that this open market for lawbreaking has been shuttered.”

Change in goals

Ulbricht has in the past railed against government control. After studying solar cells as a graduate student in Pennsylvania, he wrote on his LinkedIn profile that his goals had changed.

“The most widespread and systemic use of force is amongst institutions and governments, so this is my current point of effort,” he said. “I am creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force.”

That simulation, the government alleged, is Silk Road.

Federal authorities had seized the website by the time Ulbricht appeared Wednesday in U.S. District Court in San Francisco, where he was remanded into custody pending a hearing Friday. His attorney declined to comment.

Undercover buys

The charges were the result of an investigation during which law-enforcement officials made more than 100 undercover purchases of drugs from Silk Road vendors from 10 countries, authorities said. The site itself didn’t sell drugs, but connected sellers with buyers, who would generally ship items through the mail.

FBI Special Agent Christopher Tarbell described the website in an affidavit as a “sprawling black-market bazaar.” Users could only access Silk Road using the Tor network – technology that was first developed by the U.S. Navy and conceals communications. Tor browser software can be downloaded for free on the Internet.

To pay for items, buyers used Bitcoins, an anonymous digital currency with no central bank or authority. Bitcoins – whose value plunged after news spread of Ulbricht’s arrest – aren’t illegal and are used in many legitimate ways, but the FBI noted that they’ve been used by “cyber-criminals for money-laundering purposes.”

The Silk Road site had many of the trappings of popular online retail sites, like user comments, which sought to ward off shady dealers and undercover cops. It featured wares like “amphetamine paste” and “high quality #4 heroin.” One commenter wrote after making a purchase that he “had to snort almost triple the amount of this new stuff to get where I was with the old.”

The F.B.I. siezed the Silk Road website. Photo: FBI

The F.B.I. siezed the Silk Road website. Photo: FBI

$1.2 billion in sales

Over the past two years, Silk Road had been used by “several thousand drug dealers and other unlawful vendors” to sell “hundreds of kilograms” of illegal drugs, generating the Bitcoin equivalent of $1.2 billion in sales and $80 million in commissions, Tarbell wrote. At one point, Ulbricht hid behind the username “altoid” to marvel about Silk Road, describing it as an “anonymous,” investigators said.

Authorities also alleged that Ulbricht sought to use violence to protect his domain.

The Maryland grand jury indictment said a federal agent began communicating with Ulbricht in April 2012 while posing as a drug smuggler. Then in January, prosecutors said, Ulbricht paid the agent $80,000 to torture and kill a Silk Road employee who had stolen Bitcoins and had been arrested, prompting fears he would become a government witness.

Ulbricht allegedly wrote to the agent that he had “never killed a man or had one killed before, but it is the right move in this case.”

In February, the agent sent staged photographs of the employee being tortured and a picture of the purported dead body, prosecutors said.

Another try

They said they found out later that Ulbricht soon sought to kill again. In March, Tarbell wrote, Ulbricht offered $150,000 to a Silk Road user “to execute a murder-for-hire of another Silk Road user, who was threatening to release the identities of thousands of users of the site” unless he was given $500,000.

“I wouldn’t mind if he was executed,” Ulbricht allegedly wrote.

Ulbricht was again given a picture of the purportedly dead victim, a resident of British Columbia, but there were no reports of anyone having been killed there, the FBI said.

“Your problem has been taken care of,” the reported hit man wrote in a message to Ulbricht, authorities said. “Rest easy though, because he won’t be blackmailing anyone again. Ever.”

Ulbricht “has acted as a law unto himself in deciding how to deal with problems affecting Silk Road, and that he has been willing to pursue violent means when he deems that the problem calls for it,” Tarbell wrote.

San Francisco operation

Authorities said they identified Ulbricht by tracing his online activity. They said that in June he was living with a friend on Hickory Street in San Francisco’s Hayes Valley, just 500 feet from an Internet cafe on Laguna Street “from which someone logged into a server used to administer the Silk Road website.”

By July, he had moved to 15th Street in San Francisco, where U.S. Department of Homeland Security agents visited him to see why a package for him that they had intercepted contained nine fake identification documents, all with his picture on it, authorities said.

Ulbricht refused to discuss the counterfeit papers, the affidavit said, but “volunteered that ‘hypothetically’ anyone could go onto a website named ‘Silk Road’ on ‘Tor’ and purchase any drugs or fake identity documents the person wanted.”

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