How FBI caught Ross Ulbricht, alleged creator of criminal marketplace Silk Road
Ross Ulbricht, 29, is accused by the FBI of being "Dread Pirate Roberts," the founder of online drugs market Silk Road.
STORY HIGHLIGHTS
- Alleged creator of the Internet's biggest criminal marketplace arrested in U.S.
- The FBI claims Ross Ulbricht, 29, earned $80 million in commission from the shadowy site
- It had nearly a million registered users, responsible for an estimated $1.2 billion in sales
- Despite the site's secrecy, Ulbricht was tracked after a number of online slip-ups
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."
Ulbricht as pictured in his LinkedIn profile, which the FBI alleges alluded to Silk Road.
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
rossulbricht@gmail.com.
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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