The FBI arrested the suspected inventor and operator of online illegal drug market Silk Road in San Francisco on Wednesday, seizing a record $3.6 million in the online currency Bitcoin in the process.
Ross Ulbricht, who until Wednesday was known only by his online pseudonym “Dread Pirate Roberts,” allegedly created Silk Road in January 2011, using the anonymous software system Tor to evade scrutiny while building a drug marketplace the Feds believe was worth $1.2 billion in narcotics sales over its lifetime.
Users could shop for products like marijuana, ecstasy and methamphetamine in much the same way one shops for books or DVDs on Amazon.com.
Federal agents also closed down the site itself; a banner on Silk Road’s front page now displays the badges of various law enforcement agencies along with the message “This hidden site has been seized.”
Silk Road operated successfully for so long thanks in part to Bitcoin, a digital currency designed to lend semi-anonymity to its user. Buyers and sellers used an internal Bitcoin “bank,” and a so-called “tumbler” sent all payments through a series of complicated, fake transactions designed to obscure the users’ identities.
Contrary to popular understanding, Bitcoin does not completely protect a user’s identity. Jerry Brito, a Bitcoin expert at the free market-oriented Mercatus Center, told The Daily Caller News Foundation that the FBI could have examined the public “block chain” ledger, which records all transactions in the Bitcoin network, to nab their suspect. But they did not do so.
“[The federal complaint] tells me that the FBI is not using techniques that security researchers are now developing to look at transactions on the block chain, to de-anonymize those transactions and sort of tie identities to the transactions,” he said.
“Bitcoin really had nothing to do with how they identified the suspect here,” Brito continued, “and Bitcoin topography and security has not at all been compromised here.”
Instead, Ulbricht was caught after purchasing nine fake IDs from a Silk Road user in Canada. Customs and Border Patrol agents intercepted the package during a routine inspection in July, prompting additional scrutiny that eventually led to Ulbricht’s arrest.
As the Dread Pirate Roberts, Ulbricht wasn’t shy about sharing his political opinions with the Silk Road community. An avowed libertarian, he posted screeds on everything from the War on Drugs, free markets, the right to bear arms and even the Federal Reserve.
“Silk Road was founded on libertarian principles and continues to be operated on them,” he said in 2012. “The same principles that have allowed Silk Road to flourish can and do work anywhere human beings come together. The only difference is that the State is unable to get its thieving murderous mitts on it.”