Silk Road Admin and former Austinite arrested by Feds

He moved to San Fran and may have lived with B-Bob for a while... who could have guessed that all those drug/ illegal transactions were being run by a tech savvy, but naive young white guy..?
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Feds Arrest Alleged ‘Dread Pirate Roberts,’ the Brain Behind the Silk Road Drug Site

The FBI has arrested the San Francisco man they say ran Silk Road, the notorious underground digital bazaar that allowed traffickers to anonymously peddle heroin, cocaine and nearly anything else illegal.

Ross William Ulbricht, 29, who allegedly operated the site as “Dread Pirate Roberts,” was charged in the Southern District of New York with narcotics trafficking conspiracy, computer hacking conspiracy and money laundering conspiracy. A second complaint out of Maryland charges him with conspiring to commit murder, after he allegedly paid hit men to kill an employee of Silk Road and one of the site’s vendors.

The brazen site provided an international platform for drug dealers around the world to market a cornucopia of wares, expanding their empires beyond the corner drug stops and back alleys where they normally operated. Buyers and sellers could access the site only through the Tor anonymizing service and conducted transactions in Bitcoin to further conceal their identity.

The identity of Dread Pirate Roberts has been one of the internet’s most tantalizing mysteries. The FBI and other agencies evidently solved that puzzle with smart online gumshoe work, focusing on finding the earliest internet forum posts that publicized Silk Road when it launched in 2011. They located two posts made by someone named “altoid.” Subpoenas revealed that “altoid” was Ulbricht.

In July, the FBI identified an overseas hosting company used to host Silk Road, and with the cooperation of local law enforcement they obtained a complete image of the server, giving them access to all the private messages on the site.

The FBI complaint mentions a YouTube video of Ulbricht speaking with a friend in San Francisco, with whom he stayed. A video on YouTube (now removed) shows a conversation between two youths identified as Ross Ulbricht and Rene Pinell discussing their reasons for moving to San Francisco, their interest in launching startups to make a lot of money, along with talk about their first loves, favorite ice cream in childhood and their sexual experiences. Ulbricht also discusses his drug use in the conversation.

Hundreds of illicit drugs were available for anyone to purchase on Silk road, from Afghani hash to LSD and ecstasy, though the terms of service did provide some limitations – they prohibited the sale of weapons of mass destruction, the solicitation of murder, or the sale of stolen bank card data or anything else whose purpose was to harm or defraud.

Ulbricht allegedly violated his own rule, however, when earlier this year he allegedly solicited two murders-for-hire of another Silk Road member who was threatening to release the identities of thousands of users of the site and of one employee.

During the two-and-a-half years the site was in operation it was used by several thousand drug dealers to distribute hundred of kilograms of illegal drugs and other illicit services and goods to more than 100,000 buyers. The site did a brisk business. Between February 2011 and July 2013, it racked up more than 1.2 million transactions, generating sales revenue of more than 9.5 million Bitcoins — allegedly paying about 600,000 Bitcoins in commission to the site. The value of Bitcoins varies daily but the feds calculated this to about $1.2 billion in sales and $80 million in commissions.

According to the complaint, filed in the Southern District of New York, the site also sold hacking tools, such as keystroke loggers, password crackers and remote access and banking Trojans, as well as access to hacked Amazon and Netflix accounts and teaching tools such as a tutorial describing “22 different methods” for hacking ATMs. It also marketed a “Blackmarket Contact List”, which provided handy contact information for hitmen available for hire in more than ten countries, or purveyors of counterfeit bills and firearms.

“The site has sought to make conducting illegal transactions on the internet as easy and frictionless as shopping online at mainstream e-commerce websites,” according to FBI agent Christopher Tarbell, who is quoted in the complaint.

The site naturally was a watering hole for undercover feds who lurked on it since November 2011, buying drugs and hacking tools.

The site operated from a number of servers located in various countries, with Ulbricht allegedly serving as owner and administrator, overseeing a small staff.

His duties included controlling the servers and infrastructure, setting the terms of service, managing the small customer support and administrative staff and dealing with scammers and extortionists, demonstrating a “willingness to use violence” in doing so, according to the feds. Support staff were paid in Bitcoins, amounting to $1,000-$2,000 a week.

At the launch of the site, Ulbricht went by the name Silk Road but later adopted the Dread Pirate Roberts name, from the Princess Bride.

Who is Silk Road? Some call me SR, SR admin or just Silk Road. But isn’t that confusing. I am Silk Road the market, the person, the enterprise, everything. But Silk Road has matured and I need an identity separate from the site and the enterprise of which I am now only a part. I need a name.

Among the services he operated was a special feature for “superstar vendors” who were at greater risk of being targeted by the feds. The Stealth Mode service meant vendors would not be displayed in a visible listing but would only be accessibly by users who already knew the specific URL for the vendor’s page on the Silk Road site.

In March of this year, a Silk Road vendor known as FriendlyChemist began sending threats to Dread Pirate via private messages stating that he had a long list containing the real names and addresses of Silk Road vendors and customers that he had obtained by hacking the computer of another Silk Road vendor. He threatened to publish the data online unless he received $500,000. FriendlyChemist claimed he needed the money to pay off his drug suppliers.

As proof, he supplied a sample list of usernames and addresses as well as the username and password of the vendor whose computer he allegedly hacked.

Dread Pirate Roberts told FriendlyChemist to have his suppliers contact him directly and when one did, Dread Pirate proceeded to sweet talk him into supplying to Silk Road directly, rather than going through FriendlyChemist. He allegedly wrote the supplier that FriendlyChemist was a liability “and I wouldn’t mind if he was executed.”

Dread Pirate then disclosed a name and address in Canada for the supplier, stating he had a wife and three kids, adding “Let me know if it would be helpful to have his full address.”

When Friendly Chemist pressured him to pay up, Dread Pirate Roberts contacted the supplier saying “I would like to put a bounty on his head if it’s not too much trouble for you. What would be an adequate amount to motivate you to find him? Necessities like this do happen from time to time for a person in my position.”

Dread Pirate Roberts said the hit “doesn’t have to be clean” and the supplier later quoted him a price of $150,000 – $300,000, depending on whether the execution was clean or dirty. Dread Pirate Roberts tried to negotiate down the price saying he had previously paid only $80,000 for a clean hit. “Are the prices you quoted the best you can do?,” he asked.

They agreed on $150,000 for the alleged hit, and the supplier later sent a photo of the victim. In the photo was a sheet of paper next the victim with random numbers that Dread Pirate had provided.

According to the feds, however, Canadian authorities indicated that no such murder matching the description had occurred.

Ulbricht was arraigned in federal court in San Francisco this morning, and will be held in custody pending a bail hearing on Friday, the Justice Department says.

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