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Contraband
10/02/2013

HSI seizes biggest anonymous drug black market website and assists in arrest of operator and overseas co-conspirators

HSI seizes Silk Road underground black market website
HSI seizes Silk Road underground black market website

BALTIMORE — The Silk Road website, which served as an online international marketplace for users to buy and sell controlled substances, false identifications and other contraband over the Internet, was seized and shut down Oct. 2 by special agents of U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the FBI, Drug Enforcement Administration (DEA), U.S. Postal Inspection Service (USPIS), and the Internal Revenue Service (IRS) pursuant to a seizure warrant obtained by the U.S. Attorney's Office for the Southern District of New York. The operator of the website was also arrested on federal criminal charges.

Ross William Ulbricht, aka Dread Pirate Roberts and DPR, 29, of San Francisco, was charged in a three-count indictment in the District of Maryland with conspiracy to distribute a controlled substance, attempted witness murder and using interstate commerce facilities in the commission of murder for hire. The superseding indictment was returned Oct. 1 and unsealed Oct. 2 upon Ulbricht's arrest in San Francisco, where he was using his laptop to conduct operations on the Silk Road website. Silk Road provided a marketplace and forum for drug distributors and suppliers to facilitate the drug trade and other illicit products via the Internet.

If convicted, Ulbricht faces up to 40 years in prison for the drug distribution conspiracy, 30 years in prison for attempted witness murder and 10 years in prison for using interstate commerce facilities in the commission of murder for hire.

In September 2011, HSI Baltimore special agents received information regarding an online illegal drug marketplace. The anonymous Silk Road website has been in operation since approximately March 2011 and has more than 957,079 registered users who made $1.2 billion transactions between February 2011 and July 2013.

Silk Road provides a forum for drug distributors and suppliers to offer their products via the Internet to buyers through an encrypted network known as the Tor network. This encrypted network was used by suppliers and users masking the true Internet protocol addresses of its users, thereby providing complete anonymity.

In April 2012, an undercover special agent claiming to be a drug smuggler who specialized in moving large quantities of illegal drugs, began communicating with Ulbricht, who under anonymity was using the name Dread Pirate Roberts and DPR, about selling illegal drugs on Silk Road.

According to the indictment, Silk Road protected the anonymity of its users in several ways. A Tor user's Internet traffic is routed through a worldwide network of volunteer computers to conceal the user's location and Internet usage. Communications via Tor are also encrypted to conceal the contents of communications to all parties except for the intended recipient. As a further measure to protect the anonymity of its users, Silk Road required all transactions to be conducted in crypto-currency bitcoin, an electronic untraceable peer-to-peer currency that has no association with banks or a government.

From December 2012 to January, Ulbricht is alleged to have knowingly conspired and agreed with others to distribute and possess with intent to distribute controlled substances including cocaine. Ulbricht is alleged to have profited from the operation of Silk Road by collecting a fee for each transaction. In January, Ulbricht is alleged to have communicated with the undercover agent to have one of his employees, who was serving as the website's administrator, tortured to recover funds he had stolen from other Silk Road users and thereafter murdered because he had been arrested and feared he would “give up info” to law enforcement. Ulbricht is alleged to have agreed to pay $80,000 to the undercover agent for the murder of the employee. The indictment additionally charges him from Jan. 27 to March 1, to knowingly use a facility in interstate commerce to pay for a murder to be committed.

Prior to DPR's identity being revealed in a Sept. 27 criminal complaint filed in the Southern District of New York, he was indicted May 1 as a “John Doe” aka Dread Pirate Roberts in U.S. District Court, District of Maryland.

During the investigation, HSI special agents identified bitcoins used by sellers and buyers to complete their transactions. The bitcoins were located in Silk Road's operating account and converted to approximately $3.6 million. Estimates indicate Silk Road processed $1.2 billion worth of business and earned commissions totaling 600,000 bitcoins or about $80 million using current bitcoin rates at the time of the seizure. Additionally, HSI Baltimore special agents provided leads to international law enforcement partners resulting in the arrest of four additional co-conspirators.

The case was investigated by HSI Baltimore; HSI Chicago; HSI Attaché London and Singapore; U.S. Customs and Border Protection (CBP); the DEA's Baltimore District Office; USPIS Washington Division; the U.S. Secret Service, Baltimore Field Office and the IRS Criminal Investigation, Washington, D.C. Field Office. Assisting in the investigation were the U.S. Attorney's Offices for the District of Maryland, Southern District of New York and the Northern District of Illinois; the FBI; and the U.S. Department of Justice's Computer Crimes and Intellectual Property Section.