It's All About the Bitcoins

Sorry, Druggies: The Feds Just Shut Down the Silk Road and Arrested the Alleged Proprietor

Remember what 2Chainz says, kids: FEDS WATCHIN'
Via the DOJ, this is the notice you get if you try the Silk Road today.

Via the DOJ, this is the notice you get if you try the Silk Road today.

Guess you potheads are gonna have to score the old-fashioned way for a while. The feds have just arrested one Ross William Ulbricht, and they say he’s the “Dread Pirate Roberts,” the owner of the Silk Road. He’s been indicted in New York on a whole mess of charges. Betabeat has the complaint, and Mr. Ulbricht is in seriously deep shit.

In a complaint that describes the Silk Road as a “sprawling black market bazaar,” the FBI accuses Mr. Ulbricht of a pile of offenses, including conspiracy to traffic narcotics, conspiracy computer hacking, and conspiracy to launder money (via Bitcoins). The complaint also alleges, yikes, a murder-for-hire scheme:

“On or about March 29, 2013, ROSS WILLIAM ULBRITCH, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” the defendant, in connection with operating the Silk Road website, solicited 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.”

The FBI has shut down the site and seized 26,000 Bitcoins, worth around $3.6 million, which is thought to be the largest Bitcoin bust to date. Too bad for Preet Bharara it’s hard to stage an impressive press conference about the drug dealer you allegedly just nabbed when all the cash is virtual. The complaint was written by an FBI agent based in New York’s cybercrime unit, and he writes that undercover agents have more than 100 individual purchases from the site, including ecstasy, heroin, cocaine, and LSD.

According to the complaint, the site’s generated 9.5 million Bitcoins in sales and collected 600,000 Bitcoins worth of commissions. “Although the value of Bitcoins has varied significantly during the site’s lifetime, these figures are roughly equivalent to $1.2 billion in sales and approximately $80 million in commissions.”

“Silk Road has been used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.”

“All told, the site has generated sales revenue totaling over 9.5 million Bitcoins and collected commissions from these sales totaling over 600,000 Bitcoins. Alothough the value of Bitcoins has varied significantly during the site’s lifetime, these figures are roughly equivalent to $1.2 billion in sales and approximately $80 million in commissions.”

Mr. Ulbricht was arrested in San Francisco and will appear in court later today. You can read the complaint here, courtesy of Brian Krebs.

News of the arrest comes just days after the shutdown of Silk Road competitor Atlantis. Let’s all take a moment to be grateful there was no time for old-media outlets to write empty-headed thought pieces about whether buying drugs off the Internet, rather than via face-to-face interaction, was destroying an essential human experience.

UPDATED: 

We’ve been digging deeper into the complaint, and here’s how the feds settled on Mr. Ulbricht as their man: The mail turned out to be the weak point in this whole billion-dollar scheme.

According to the complaint, in July customs “intercepted a package from the mail inbound from Canada as part of a routine border search.” Inside were nine counterfeit ID docs, all with the same face. Homeland Security went to the address listed on the package and they found Mr. Ulbricht, whose face matched the IDs. Now, he refused to answer most questions–BUT he “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.” Real smooth.

FBI agents then did some poking around and found that, sure enough, on July 8, DPR had posted soliciting fake ID docs.

Follow Kelly Faircloth on Twitter or via RSS. kfaircloth@observer.com