Transcript
In February 2011, Ross Ulbricht, under the pseudonym Dread Pirate Roberts, created the website platform Silk Road, where people could buy anything anonymously and have it shipped to their homes without any trails linking back to the transaction. Named after the historical trade route that connected Europe to East Asia, Ulbricht founded Silk Road with the desire to create a marketplace free from taxation and government.
The clandestine online marketplace was largely made possible by the combination of widespread adoption of bitcoin and the invisibility of the Dark Web. Combining the anonymous interface of Tor with the traceless payments of digital currency bitcoin, the site allowed drug dealers and customers to find each other in the familiar realm of e-commerce. It functioned like an anonymous Amazon for criminal goods and services.
Silk Road gradually developed to look similar to traditional web marketplaces with user profiles, reviews and more. And what started out focusing on drugs, soon included other products, such as firearms.
Although the authorities were aware of the existence of Silk Road within a few months of its launch, it would prove challenging to crack down on the website and reveal the true identity of its founder, Dread Pirate Roberts.
In June 2013, the site reached nearly 1 million registered accounts. Thousands of listings featured all kinds of drugs, prescription medication, weapons and more, turning its founder, the 28-year-old libertarian, into one of the world’s biggest drug kingpins.
From its launch on February 6, 2011, until July 23, 2013, over 1 million transactions had been completed on the site, totalling a revenue of almost 10 million Bitcoins and about 600,000 Bitcoins in commission. That involves 150,000 buyers and 4,000 vendors. At Bitcoin exchange rates in September 2013 that was equivalent to 1.2 billion USD in revenue and 80 million USD in commission.
In early 2013 a New York-based FBI team, Cyber Squad 2, had started their investigation of Silk Road. They were trying to crack the encrypted Tor network that Ulbrich was hiding behind. And like other law enforcement agencies, they were having a hard time. Even using undercover agents to try to get access to Ulbricht they were all struggling to break the case open.
Finally, through a warning note on Reddit, the cyber squad was able to find a code which was leaking an IP address, pointing to a facility in Reykjavik, Iceland. This further enabled them to create a replica of the entire Silk Road system allowing them to see everything and Dread Pirate Roberts’ every move. They read through his chat logs, followed the main Bitcoin server showing all vendor transactions, and even learned how he had ordered several assassinations of people who had tried to blackmail him.
Eventually, an IRS investigator was able to connect Dread Pirate Roberts to Ulbricht, through an old post on an open forum where Ulbricht had asked a question about the encryption tool, Tor. Through that question, Ulbricht’s personal email was revealed, which showed his full name.
What happened next was straight out of a movie. While Ulbricht was in a public library in San Francisco, agents from the US government distracted him by staging a fight. And when he turned away looking at them, other agents grabbed his laptop and were able to secure the information – connecting Dread Pirate Roberts to his account.
On the computer, they secured a mountain of evidence. A list of all the Silk Road servers, 144,000 bitcoins, which at the time was worth more than 20 million USD, a spreadsheet showing Silk Road accounting, and diaries that detailed all of Ulbricht’s hopes, fears and aspirations. As a result of all this, Silk Road was shut down and Ulbricht, the pioneer who opened the door for drug sales to flourish in cyberspace, was subsequently sentenced to a double lifetime in prison.
In court, the Judge echoed that what Ulbricht did was unprecedented and in breaking that ground as the pioneer, he had to pay the consequences. Anyone who might consider doing something similar needed to understand clearly that there would be serious consequences.
Since then, similar marketplaces have been launched all over the dark web. Some have outright just stolen their users’ bitcoins, others have been successfully shut down by law enforcement, but still some others operate in some corner of the dark web although none to the sheer magnitude of the Silk Road.
