Imagine a website with over 950,000 users, $1.2 billion in revenue, and 13,000 listings for illegal drugs, guns, fake IDs, and assassinations— all accessible to anyone with a computer. Imagine it’s run by a straight-laced kid in San Francisco, that the US Postal Service ships the drugs, and that the FBI has no idea how to take it down.
You’re imagining Silk Road, a creature of the deep web that emerged in February 2011 as one of the most successful innovations in the history of the drug trade.
On Oct. 1, the FBI arrested the alleged founder of Silk Road, “Dread Pirate Roberts,” in a San Francisco public library while he was administering the site. The suspect, Ross William Ulbricht, 29, didn’t even have a chance to close his laptop. The FBI shuttered the site and seized about 144,000 bitcoins (roughly $100 million) from Ulbricht. Another $300 million of Ulbricht’s bitcoin profits remain untouched and unaccounted for.
The FBI Office of Public Affairs told the Observer in an email that the Bureau would continue to “devote resources to prosecuting the criminals and groups responsible,” calling the group’s activities “nefarious.” Ulbricht would disagree. On his LinkedIn page, which remains online, Ulbricht wrote, “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.”
For two years, law enforcement made over 100 undercover drug purchases from Silk Road and slowly assembled a case based on Roberts’s mistakes. The FBI said Ulbricht used the same username across web forums to promote Silk Road and recruit developers. The Bureau gathered evidence that Ulbricht used his personal Gmail address when recruiting administrators, left his IP address on servers used to administer the website, and made public posts soliciting fake IDs. Finally, there were the six murders Ulbricht allegedly ordered over the site.
Dread Pirate Roberts built the site using The Onion Router, or “Tor,” named for its layers of encryption. Tor hides the IP address of host servers for its websites by using more than 5,000 relays across the world— all made possible by Tor users who volunteer their IP addresses. After a simple software download, Tor pages are available to anyone. They make up part of what is known as the “deep web.”
Once on the Tor Network, the doors to Silk Road were completely open. From ecstasy to Afghan heroin, fake passports to ATM hacking guides, murders for hire to 20,000 Facebook likes, the Silk Road stores were vast. And because of Tor’s encryption, neither the website host nor its visitors could be traced.
Silk Road used bitcoin, a peer-to- peer cryptocurrency. Since bitcoins pass to and from digital wallets with only an address as their identifier, bitcoin users can remain completely anonymous.
Even if law enforcement attached a name to a bitcoin address, Silk Road sent the coins through a series of dummy transactions to obscure the record of bitcoin transactions. This process makes it nearly impossible to track where bitcoins start and where they end up. On Silk Road, both the buyer and seller were safe from identification. Roberts said in a rare Forbes interview last year that bitcoins return power to the individual by allowing people to “control the flow and distribution of information and the flow of money.” “We’ve won the State’s War on Drugs because of bitcoin,” Roberts claimed, “and this is just the beginning.”
But the layers of encryption didn’t protect Ulbricht. Ulbricht had made a mistake—naming himself in his username in a programmers’ forum, where he asked for help on a code for a “Tor hidden service.” An FBI forensic analysis found that lines from the code posted on the forum were nearly identical to the Silk Road code. Though Ulbricht changed the username a mere two minutes after posting, the edited username “frosty” was linked to the Silk Road web server, leading the FBI to Ulbricht.
Ulbricht has pleaded not guilty to the charges—narcotics trafficking, computer hacking, money laundering, and “engaging in a criminal enterprise”—but he’s suing the Justice Department to recover the bitcoins they seized.
A month after Ulbricht’s arrest, a new Dread Pirate Roberts emerged, promising a more secure platform and expanded service to the unregulated market. But the new Roberts fled six weeks later when some administrators of the new site were arrested. Since his disappearance, his second-in- command, “Defcon,” has taken over the site. Though less prolific than its predecessor, Silk Road 2.0 is still in business.
The Silk Road bust happened because of human error, not because the encryption infrastructure failed. With further innovation in this growing industry, Silk Road 2.0 might be just as successful as the original, if not more.
In his announcement of the reinstatement of Silk Road 2.0, Defcon wrote on a public forum, “Will this be the end of everything we’ve fought for? Will our movement be remembered as a cypherpunk fad, or as an unstoppable force? I’m here to fight.”
Silk Road’s Murders for Hire
January 26, 2013
An employee of Silk Road steals some $350,000 in bitcoins from the site. Dread Pirate Roberts contacts a Silk Road seller to beat up the employee and get the money back. The seller is an undercover law enforcement agent who arrests the employee. When news of the arrest reaches Dread Pirate Roberts, he “change[s] the order to execute rather than torture.” He pays the undercover agent $80,000 and the agent sends him a staged photo of the body of the arrested employee.
March 13, 2013
FriendlyChemist, a Silk Road user from White Rock, Canada, threatens to blackmail Dread Pirate Roberts. He says that he will release Silk Road users’ personal information unless Dread Pirate Roberts pays him $500,000, which he owes Hell’s Angels for drugs. Instead of settling the debt, Roberts contacts the Hell’s Angels user directly. He asks the Angels to start supplying Silk Road and he offers to pay them $150,000 in bitcoins to kill FriendlyChemist. The Angels send Roberts a picture of the body, he pays, and they go into business. Canadian law enforcement have no record of the man in question or of any murder in White Rock.
April 5, 2013
The same Hell’s Angels user contacts Dread Pirate Roberts again. He says that when he tortured FriendlyChemist, FriendlyChemist named a partner, Tony, who lived with three other drug dealers in British Columbia. Dread Pirate Roberts hires the user to kill Tony and recover the money. The user offers to kill the three roommates as well—just in case—and Dread Pirate Roberts agrees. He transfers $500,000 in bitcoins to the Hell’s Angel. Once again, Canadian police can find neither the victims nor any evidence of the murders.