The operator of a notorious underground website that let its clientele purchase methamphetamine, cocaine, heroin and other illicit drugs by using encrypted virtual currency has been busted by the feds resulting in the largest-ever seizure of the commodity known as Bitcoin.
Ross William Ulbricht, 29, was arrested by the FBI in his hometown of San Francisco on Tuesday for being the mastermind behind the secret site called “Silk Road.”
Ulbricht — who used the workplace alias “Dread Pirate Roberts,” ostensibly based on a character in the 1987 cult classic film “The Princess Bride” — is expected to be presented in San Francisco federal court sometime Wednesday on charges of computer hacking, drug trafficking and money laundering.
“This guy was like the Wizard of Oz because he was impossible to find,” said one law-enforcement source.
The investigation was jump-started more than two years ago by the Drug Enforcement Administration’s Strike Force in New York, which brought in the FBI’s cyber crime unit and the IRS, sources said.
Silk Road, which was only accessible through the anonymous Tor network that conceals users, has been shut down and replaced by an FBI notice reading: “This hidden site has been seized.”
Prosecutors allege Ulbrict peddled the illegal drugs from January 2011 until last week, according to a sealed complaint dated September 27 and made public in Manhattan federal court on Wednesday.
Among the drugs sold on the site included 5 kilograms of cocaine, 1 kilogram of heroin, 500 grams of meth and 10 grams of LSD, the complaint says.
As of Sept. 23, there were 13,000 listings for drugs on the site, including “Cannabis,” “Ecstasy” and “Stimulants.”
There were also other listings, including 169 for “forgeries” placed by vendors offering fake drivers licenses and other fraudulent documents and another 159 under the category of “services” that included “firearms and ammunition” and “hitmen.”
“Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the Internet today,” the complaint says. “The site has sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream e-commerce websites.”
The site generated sales revenues totaling over $9.5 million in the digital currency Bitcoin and collected commissions from the sales totaling 600,000 Bitcoins, the complaint says. Since Bitcoins fluctuate in value by the day, these figures are currently worth $1.2 billion in sales and $80 million in commissions.
The feds say they have already seized approximately 26,000 Bitcoins worth approximately $3.6 million through the bust, in what they claim is the largest ever seizure of Bitcoins.
The site had 957,079 registered users as of July 23.
The complaint also says Ulbricht solicited a Silk Road user named “redandwhite” in March to “execute a murder-for-hire” of another website user named “Friendly Chemist” who “threatened to release the identities of thousands of users of the site” if he wasn’t paid $500,000.
Soon after, “redandwhite” offered to do the “bounty” for anywhere from $150,000 to $300,000 “depending on how [Ulbricht wanted it] done – ‘clean’ or non clean,’” the complaint says.
After Ulbricht tried to haggle, claiming he had a “clean hit done for” $80,000, both sides agreed to a $150,000 price.
In April 5, “redandwhite” claimed the “job was done,” but FBI Special Agent Christopher Tarbell, who headed the bust, says in the complaint that he checked with authorities in British Columbia, Canada — where “Friendly Chemist” was traced back to — and there are no records of homicides there during that period.
However, Tarbell in the complaint says he believes Ulbricht intended to “solicit a murder-for-hire.”
Ulbricht’s LinkedIn page claims he graduated with a Bachelor of Science degree in physics from the University of Texas in 2006 and also attended Penn State University from 2006 to 2010.
The profile also says he was CEO of a company called Good Wagon Books from January 2010 to May 2011 that picked up unwanted books and found them new homes. He doesn’t list other employment after that date.
“I studied physics in college and worked as a research scientist for five years,” Ulbricht says on his LinkedIn profile. “Now, my goals have shifted. I want to use economic theory as a means to abolish the use of coercion and aggression amongst mankind … I am 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.”
Additional reporting by Larry Celona