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NORTHWEST NEWS

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McMenamins
By Tim Hume CNN







The FBI caught the man accused of creating Silk Road -- the shadowy e-commerce site it describes as "the most sophisticated and extensive criminal marketplace on the Internet today" -- after he allegedly posted his Gmail address online, according to court documents.

Federal agents swooped on Ross William Ulbricht in a San Francisco public library Tuesday afternoon, charging the 29-year-old American with narcotics trafficking, computer hacking and money laundering. They allege he is "the Dread Pirate Roberts," the Silk Road's mysterious founder, who drew his pseudonym from the feared, fictitious character in the film The Princess Bride.

The FBI claims the former physics and engineering student even publicly alluded to his alleged criminal enterprise on his LinkedIn profile, with a statement describing how his goals had "shifted" in accordance with his libertarian economic views since leaving grad school at Pennsylvania State University.

Ulbricht's LinkedIn profile states that, since completing his studies in 2010, he has focused on "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" of the kind imposed by "institutions and governments."

"I want to use economic theory as a means to abolish the use of coercion and agression (sic) amongst mankind," he wrote.

In the indictment against Ulbricht, filed in a New York court, the FBI cyber-crime specialist who led the investigation, Christopher Tarbell, stated that he believed "that this 'economic simulation' referred to by Ulbricht is Silk Road."

The Amazon.com of vice

The FBI swiftly shuttered the site, an underground digital marketplace that, since its inception in 2011, has allowed users to anonymously trade illegal goods and services in near total secrecy, using the digital currency bitcoin, and an encryption network called Tor that routes traffic through a "hidden" area of the Internet known as "the dark web."

Tarbell said the site "sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream e-commerce websites," and carried listings for hard drugs, hackers, counterfeit cash, forged ID documents, firearms, ammunition, even hitmen -- one of whom Ulbricht is alleged to have enlisted to kill a blackmailer.

According to the indictment, Silk Road had acquired nearly a million registered users worldwide -- about 30% of whom were based in the U.S. -- in its two and a half years of operation, providing them guidance on how to encrypt their communications and vacuum-pack their wares before shipping through the postal service to avoid detection by law enforcement. Last year, it said, the site added a "stealth mode" for users who considered themselves "at risk of becoming a target for law enforcement."

The indictment said the site had generated over 9.5 million bitcoins in sales revenue and over 600,000 bitcoins in commissions for its owner, allowing the site to employ a team of administrators. The value of bitcoins has fluctuated dramatically since the digital currency was created -- it plummeted after Ulbricht's arrest -- but Tarbell estimated Silk Road's turnover to be worth about $1.2 billion in sales, and $80 million in commissions.

In February, an Australian drug dealer became the first person to be convicted in connection to Silk Road after using the site to import cocaine and MDMA from Europe.

Catching the Dread Pirate Roberts

In the section of the indictment outlining how the link between Ulbricht and Dread Pirate Roberts was established, Tarbell detailed how an FBI expert codenamed Agent-1 had located an early online mention of Silk Road dating to January 27, 2011, when a user under the handle "Altoid" made a post on a forum for users of magic mushrooms.

"I came across this website called Silk Road," wrote Altoid, in a post which linked to the site. "I'm thinking of buying off it... Let me know what you think."

Two days later, someone using the handle "Altoid" made a similar post on a forum called Bitcoin Talk, recommending Silk Road and providing a link. "Has anyone seen Silk Road yet? It's kind of like an anonymous Amazon.com. I don't think they have heroin on there, but they are selling other stuff," it read.

The posts, said Tarbell, were an attempt to drum up interest in Silk Road, employing the online marketing tactic of "astroturfing."

Investigators were given a major break when, eight months later, "Altoid" made another posting on Bitcoin Talk, stating he was looking for "an IT pro in the Bitcoin community" to hire in connection with "a venture backed Bitcoin startup company." The posting asked interested parties to contact [email protected]

The indictment also noted that Ulbricht and Dread Pirate Roberts were both vocal adherents of the libertarian theories of Austrian School economist Ludwig von Mises, with Ulbricht's public Google+ account linking to YouTube videos posted by the Ludwig von Mises Institute, and Dread Pirate Roberts repeatedly crediting von Mises with "providing the philosophical underpinnings for Silk Road."

From a San Francisco Internet cafe

Tarbell said that while Dread Pirate Roberts used a "virtual private network," or VPN, to create a "false" IP address, the VPN server's records indicated a user had accessed it from a San Francisco Internet café near the home of a friend Ulbricht had gone to live with around September last year.

Records obtained from Google showed Ulbricht had regularly logged into his Gmail account from the Internet café, he said -- including on the same day in June that the VPN was accessed.

In July, Ulbricht was visited in San Francisco by Homeland Security agents who had intercepted a package from Canada containing fake ID documents in nine different names, each bearing a photograph of Ulbricht.

According to the indictment, Ulbricht -- whose roommates knew him as "Josh," and said he was always at home on his computer -- refused to answer questions about the IDs, but told the agents that "hypothetically" anyone could go on the Silk Road and purchase them.

In the weeks prior to the encounter, said Tarbell, Dread Pirate Roberts had been inquiring with Silk Road users about buying fake IDs, saying he needed them in order to rent extra servers for the site.

A killing for hire?

It was not the only time Ulbricht is alleged to have used the site to procure illegal services. Tarbell claimed that in March, Dread Pirate Roberts solicited the killing of a Silk Road user who was attempting to blackmail him by threatening to release the identities of thousands of users of the site.

The FBI alleges that the Canada-based extortionist, known as FriendlyChemist, demanded $500,000 to prevent the release of the information, prompting Dread Pirate Roberts to contact another user and order a hit on FriendlyChemist.

"In my eyes, FriendlyChemist is a liability and I wouldn't mind if he was executed," he is alleged to have written, before attempting to haggle down the price. "Don't want to be a pain here, but the price seems high. Not long ago, I had a clean hit done for $80k."

The FBI claims the hitman later sent a picture of the victim after the job was done -- for approximately $150,000 in bitcoins -- although Tarbell said Canadian authorities had no record of a Canadian resident with the name passed to the alleged hitman, nor any record of a homicide around that location and time.

Ulbricht's lawyer, Brandon Leblanc, declined to comment on the case.

Silk Road's closure is unlikely to bring an end to the trade of illegal goods on the "dark web," as similar sites operate on the Tor network.

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