Arrest In U.S. Shuts Down A Black Market For Narcotics

NEW YORK:  It began in 2011 as an underground online marketplace for drug users, a site where endless varieties of marijuana — as well as LSD, ecstasy and prescription pills — could be bought from sellers across the world. It branched out to other illicit goods, including forged documents, and emerged as a black market version of eBay, where criminals could do business with more than 100,000 customers.

It worked on one basic principle: Everyone remained anonymous. Users could gain access to the network only through software meant to ensure anonymity. Credit cards and PayPal were not accepted. Bitcoins, a virtual currency, were, and even those transactions were scrambled. All that connected them in real life was a name, often fake, and the address to which the package would be sent.

And the mastermind behind Silk Road was cloaked in mystery, known as Dread Pirate Roberts, after a character in the movie “The Princess Bride.” But Silk Road went dark this week, and its owner was unmasked as Ross Ulbricht, 29, who is accused in a criminal complaint, among other things, of asking a man to kill a Silk Road vendor who had threatened to reveal the identities of others who used the site.

In another case, Mr. Ulbricht is accused of asking an undercover agent for the Federal Bureau of Investigation to kill a former Silk Road employee whom Mr. Ulbricht feared would become a government witness, according to an indictment.

F.B.I. agents confronted Mr. Ulbricht in a library in San Francisco on Tuesday and arrested him on narcotics and money-laundering charges.

The case, which is being coordinated by federal prosecutors in New York, is part of a larger push by federal authorities to police illicit commerce along the frontier of the Internet. A few high-profile cases have involved defendants overseas, which made it all the more noteworthy that the man accused of being behind Silk Road was in the United States and remained undetected for so long. He had been living with his parents in Austin, Tex., until last fall, when he moved to San Francisco to tap into its entrepreneurial spirit.

“I feel like the world is in flux,” Mr. Ulbricht said, in a lengthy discussion with a childhood friend, Rene Pinnell, that appeared on YouTube last year. “I want to see where all this new technology goes.”

His goals included starting a family, making more friends and having “a substantial positive impact on the future of humanity,” according to the video, which makes no mention of Silk Road.

In a telephone interview on Wednesday, Mr. Pinnell said that “Ross is the most principled, honest person I’ve ever had the pleasure to know.” Referring to the government’s charges, Mr. Pinnell said Mr. Ulbricht “would never do anything like that.”

Mr. Ulbricht carved out an anonymous life in San Francisco. He rented a room and told his two housemates that his name was Josh, the authorities said. One roommate reported that “Josh” was always home in his room on the computer.

There, according to the federal complaint, he made a lot of money. The F.B.I. was able to obtain an image of the Silk Road’s Web server, which indicated the site had sales revenue of more than 9.5 million bitcoins, valued at about $1.2 billion today, though the total worth was most likely less at the time of the sales, according to the complaint.

Bitcoins also have had a strong following among young, technologically proficient libertarians who are attracted to a currency that is not connected to any government. According to technology experts, Silk Road was responsible for something approaching half of all transactions involving bitcoins. Investigators believe Mr. Ulbricht collected commissions of more than 600,000 bitcoins, the equivalent of $80 million, which they are trying to gain access to. So far, the authorities have seized 26,000 bitcoins, worth about $3.6 million, from escrow accounts into which Silk Road buyers placed funds.


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