back to article Feds smash internet drug bazaar Silk Road, say they'll KEELHAUL 'Dread Pirate Roberts'

The notorious online drug market Silk Road has been shut down by the FBI, its suspected operator arrested and charged with narcotics trafficking conspiracy, computer hacking conspiracy, and money laundering conspiracy, and $3.6m worth of the bitcoin crypto-currency has been confiscated by federal agents. The site's alleged …

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  1. LarsG

    A Phoenix will rise from the ashes.....

    1. Ian 55

      When there's $1.2b turnover, it's inconceivable that it won't.

      1. Vaughan 1

        Inconceivable - I see what you did there :)

      2. MrWibble

        You keep using that word. I do not think it means what you think it means.

        1. Great Bu

          My name is Inlandrevenueservice. You killed my government. Prepare to die !

    2. S4qFBxkFFg

      I'd say Dragons' Teeth myself.

      I am guessing that when the histories are written, Silk Road will be comparable to Napster.

      With all those dealers and customers left hanging, more Tor/Bitcoin drugs marketplaces will be springing up soon (if not already).

      They'll probably try to avoid the mistakes of Silk Road; some of them might succeed.

      Also, if this makes "street" dealing, with the associated violence, non viable, then we should all celebrate.

  2. Mtech25

    Just wondering

    If any of the seller went by the Heisenberg?

  3. Yet Another Commentard

    INCONCEIVABLE!

    or "As you wish".

  4. ops4096

    So I suppose that ...

    ... the remaining TOR traffic just got a whole lot more legitimate.

  5. Don Jefe

    Drug dealers who have enough scale to make real money get caught (or dead). That's a nearly universal truth. I don't think anyone will be screaming injustice.

    What does suck, is now that Bitcoin has been proven as a way to finance large scale drug transactions governments everywhere will squash it. I think the whole concept of Bitcoin is kind of dumb, but a lot of people are into it. Not all if those people are into drugs but they'll be 'associated' with narcotics financing now, and that does kind of suck for them.

    1. Destroy All Monsters Silver badge

      "Drug dealers who have enough scale to make real money get caught (or dead)"

      ...or protected by a US three-letter agency or the agency of some other state.

      As always, it depends

    2. Anonymous Coward
      Anonymous Coward

      What a crap comment!

      Cash was, and is the primary means of financing drug deals, do we all assume that local currency should be frowned upon because it's used for illegitimate means.

      1. jonathanb Silver badge

        Cash is frowned upon, certainly in large quantities.

      2. David Cantrell

        Cash, however, is overwhelmingly used to pay for legal transactions. Bitcoin isn't, as can be seen by it suddenly losing so much of its value.

    3. Japhy Ryder

      All kinds of financial instruments are used in all kinds of illegal deals, so you could say that anyone using, for example, "cash" has been 'associated' with narcotics financing for a heck of a long time now.

      I would also hazard a guess that just about every form of human communication has been pressed into service at one time or another by those engaged in nefarious deeds - are all those similarly tarnished?

      Or is it just those associated with the "Internet" that get tarnished?

      1. Don Jefe

        The point I was attempting to make, is that this gives governments an argument for pushing out virtual currency. They've been looking for an excuse for a while.

  6. Johnny Canuck

    How can they seize bitcoins? I thought they were held in a secure "wallet".

    1. Daniel B.

      By getting the wallet's private key. That way they either hold it or transfer it to their own wallet.

      At least, that's how I think they're doing it.

    2. S4qFBxkFFg

      What I'm wondering, is what does the FBI do with them now?

      I assume they go into an asset forfeiture process and then get auctioned, which will be slightly amusing to see (and perhaps slightly profitable if you're bidding).

      1. TakeTheSkyRoad

        Well they probably sold them, that would explain the dip in the bitcoin prices.

        Of course that could have been a few dealers cashing out but the charts show the big sales just with a couple of hours.

        1. auburnman

          Would they be allowed to sell them straight away? I know they can seize and sell proceeds of crime, but wouldn't they have to hold them until a court convicts Ulbricht before they can be disposed of?

          They would probably hang on to the 'cash' anyway, Bitcoins will probably be in demand in the FBI for undercover/sting operations.

          From a technical perspective, would it be possible for other users of BitCoin to know which Bitcoins landed in FBI hands from the blockchain? ie if I were an Underworld Kingpin, could I rig a system to decline BC transactions involving coins that were in Ulbricht's wallet?

          1. TakeTheSkyRoad

            After posting the above I actually read somewhere else that assets aren't "liquidated" until after a case is closed. In that case they might just hold onto them but they could still treat the bitcoins as currency (rather than a physical asset) and exchange them to USD for easier handling later. This would preserve the current value as well in a volatile market.

            1. DanDanDan

              I'm not sure whether it's the selling of the bitcoin or the intention to sell the bitcoin that would cause its value to crash. As with shares, it's the perceived expected value that determines the current value. This explains why markets can be so volatile.

          2. CommanderGalaxian
            Terminator

            >From a technical perspective, would it be possible for other users of BitCoin to know which Bitcoins landed in FBI hands from the blockchain...

            Not really no. But unfortunately - BitCoin being only really pseudo-anon - it could be possible for the Feds to figure who the BitCoins originally belogned too.

            1. Anonymous Coward
              Anonymous Coward

              originally belonged to?

              WTF? Are you telling me that you think the first person to have a bitcoin is responsible for transactions made by its current holder?

              Now if they can trace transactions from each coins' inception, that would be, i think, a very large pitfall.

              1. CommanderGalaxian
                Boffin

                Re: originally belonged to?

                Dude, FYI:

                https://en.bitcoin.it/wiki/Anonymity

                and

                http://www.forbes.com/sites/andygreenberg/2013/09/05/follow-the-bitcoins-how-we-got-busted-buying-drugs-on-silk-roads-black-market/

          3. Richard Taylor 2 Silver badge
            FAIL

            Ummmm

            If you could tag 'individual' bit coins then that would surely invalidate their use as an anonymous currency....

        2. CommanderGalaxian
          Childcatcher

          >>Well they probably sold them, that would explain the dip in the bitcoin prices.

          >Of course that could have been a few dealers cashing out but the charts show the big sales just with a couple of hours.

          Sounds like Insider Trading to me. You would assume they do the honourable thing and turn themselves in, rather than profiting from drugs and crime and things....

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  8. Paul J Turner

    Not as bad as depicted

    Bitcoin value didn't drop as much as the graph of the inflated Mt. Gox exchange rate seems to show, the Y-Axis starts at 105, not zero and only goes up to 145.

    So, a drop from 140 to 100 , since recovered to around 122.6, about 20% as opposed to the 42% the graph seems to depict at first glance.

    1. Vaughan 1

      Re: Not as bad as depicted

      Lies, damned lies and statistics

    2. Anonymous Coward
      Anonymous Coward

      Re: Not as bad as depicted

      When a "real" currency drops 20% in a few hours, then it's time to worry.

      1. Anonymous Coward
        Anonymous Coward

        Re: When a "real" currency drops 20% in a few hours

        You should do a graph that starts at 75% and goes to 100%?

  9. MrDamage
    Pirate

    Hello

    My name is Inigo Montoyo. You killed my server. Prepare to die.

    1. Tim Jenkins

      Re: Hello

      and if we're doing quotes, '"don't get high off your own supply" goes back at least as far as '83, in 'Scarface'

      Frank: "Lesson number one: Don't underestimate... the other guy's greed!"

      Elvira: "Lesson number two: Don't get high on your own supply. Of course, not everyone follows the rules... "

      Can't think what they were referring to, though, as no-one could buy drugs before Tor/Bitcoin, could they?

  10. Winkypop Silver badge
    Coat

    So...

    ...all your base are belong to us - FBI

  11. Daniel B.
    Facepalm

    Identity FAIL

    So the one thing that is still a mystery is how they got hold of the server itself. Because tracking down this guy seems to have been pretty easy; having your nickname or "internet handle" be easily linked to your real life name is a surefire way to get the feds on you. Especially if you're running an overtly illegal scheme.

    So it seems to be less of an NSA-assisted manhunt and more of the Dreaded Pirate Roberts ... err... Ulbricht being too dumb to do illegal stuff.

    1. Anonymous Coward
      Anonymous Coward

      Re: Identity FAIL

      It's hard work being a criminal full time online, people always get caught slippin.

    2. Anonymous Coward
      Anonymous Coward

      Re: Identity FAIL

      So the one thing that is still a mystery is how they got hold of the server itself. Because tracking down this guy seems to have been pretty easy;

      He probably had a post-it with the server admin's email & phone number stuck to his monitor...

      1. Brewster's Angle Grinder Silver badge

        Re: Identity FAIL

        "He probably had a post-it with the server admin's email & phone number stuck to his monitor..."

        Or sneak in when he's out and add a key logger.

    3. Don Jefe

      Re: Identity FAIL

      All the technology for finding people usually doesn't work. They find you like they did this guy, or your friend or neighbor rolls over in you. The fancy stuff gets lucky sometimes, but nothing works as well for tracking someone down than that person themselves.

  12. Sceptic Tank
    Stop

    I need a new drug...

    "These documents were intercepted by customers and border patrol officials".

    Well, with customers like those, who needs the NSA?

    Anyway, for a moment there I thought this Silk Road thing was suspended as part of the US Gov shutdown.

    <=== Winners say "no".

  13. Magnus_Pym

    "Ulbricht made a number of operational security mistakes".

    Probably linked to financial data available to certain agencies. It's alright being a bitcoin billionaire but convert it to a 'real' currency and you pop up on certain agency's OPDM (other peoples data mining) radar and become a 'person of interest'.

  14. Jon Green

    Doesn't need TOR-cracking abilities

    It's easy to make woo-woo noises and be scared of the NSA for tracing the server, but that's probably not how it happened. Once the Feds had enough information to identify Ulbricht - and he certainly doesn't seem to have been too discreet about it, if the testimony's accurate - they would have subpoenaed his financial records, worked out to whom he was paying hosting fees, and then followed due process in/with the host's country to track down the server itself. This is standard policing, not über-spookery: "Follow the money."

    1. Charles 9 Silver badge

      Re: Doesn't need TOR-cracking abilities

      Also seems to indicate the host is not in a country hostile to the west.

  15. DJO Silver badge

    Tor

    Oh I wonder how they broke TOR? let's look at the genesis and history of TOR:

    Q: Now who developed it?

    A: A notorious group of dissident anarchists known as "The U.S. Naval Research Laboratory" - the fiends

    Q: Who paid for it?

    A: 80% of the Tor Project's $2M annual budget comes from the United States government, with the Swedish government and other organizations providing the rest. Such evil anti establishment organisations you'd be harder to find.

    This took 30 seconds of research and people are still dumb enough to fully trust TOR.

    1. Daniel B.

      Re: Tor

      TOR project has been off-Navy for years, plenty of time to catch or fix any planted backdoors. However, people from the TOR project themselves have stated that TOR isn't built to withstand a multi-national snooping operation (precisely what the NSA does).

      However, this particular dude was caught for being stupid. TOR wasn't even involved in tracing him to the source!

  16. codeusirae
    Facepalm

    Notorious Silk Road founder ?

    "Silk Road .. alleged founder .. was arrested in a public library"

    --

    Meanwhile listen to a good tune from yester-year ..

    https://www.youtube.com/watch?v=ClQcUyhoxTg

  17. Anonymous Coward
    Anonymous Coward

    In the Forbes interview DPR says he is not the original DPR.

    In The Princess Bride DPR is a collective nom, it is inherited by the most prolific of the pirates. It's not the same person all the time.

    Why is the SR logo in the background?

    The emergency payout seems to be working correctly from reports I've seen. SWIM also received their money back.

    I have no doubt this was a high level user, possibly the current DPR, but there are others ready to take over the mantle.

    1. Anonymous Coward
      Anonymous Coward

      "In the Forbes interview DPR says he is not the original DPR."

      In other words, "It wasn't me! Some big boys did it and ran away."

      Am I the only one unwilling to buy that as a credible defence?

  18. Anonymous Coward
    Anonymous Coward

    dread pirate roberts

    made the mistake of not being HSBC. He could have walked away with a fine

    1. jonathanb Silver badge

      Re: dread pirate roberts

      mtgox or whoever he used to launder the money will probably get away with a fine, just like HSBC.

      1. Charles 9 Silver badge

        Re: dread pirate roberts

        Could be tricky. Mt. Gox is based in Japan.

  19. Keith Glass

    OK, but where was it hosted ??

    If outside the US, why would the FBI have jurisdiction. For that matter, if there is no DNS registry for TOR, how can the FBI sieze the domain ??

    1. Charles 9 Silver badge

      Re: OK, but where was it hosted ??

      1. Know enough about the trail and you can find an .onion site. El Reg covered this previously.

      2. If the host country is friendly to the US, chances are they'll be willing to cooperate.

    2. Anonymous Coward
      Anonymous Coward

      Re: OK, but where was it hosted ??

      They had enough access to put a page on the actual server if they wanted to, or to carry out whatever admin tasks they needed to to create a redirect. Not a classic domain seizure but end result is the same.

      As for finding the server(s), a few options:

      - ask the guy after his arrest.

      - find invoices etc. for the hosting

      - (most likely) just found the remote login details he was using - the server(s) were set to only accept admin login from a particular IP which means he was going direct (maybe via VPN) not through TOR which would give a trail which would have led to a host and a machine.

      What I haven't seen so far is any real signs of Tor itself being compromised in this case. Just cockups in security - like posting a personal email account - leaving breadcrumbs to follow, leading to a person and in turn to the rest of the setup. Not that I would trust Tor but I can't see the blame yet.

      I also haven't seen any particular sign that DPR was particularly bright. He apparently generated lots of income but most of his operation seems quite naive. The 'murder-for-hire' bit reads like he got hacked then scammed by the hacker pretending to be someone else too - he got paid and it was probably the plan (or part of it) the whole time.

      And of course what no-one has mentioned - they arrested him in July. They took the site down in October. What do you think happened in between? Nothing beyond what I would have suspected the whole time but others may find out the hard way about trusting unknown third parties.

  20. John Smith 19 Gold badge
    FAIL

    Note the Feds *always exagerate the damage.

    But honestly, hosting those servers in the US these days?

    Silk Road may have been the most well known and (possibly) the most successful to date.

    Smart successors will study their mistakes and do better.

    It won't be the last.

  21. Anonymous Coward
    Anonymous Coward

    The principal operational mistake was basing himself in the USA. With that much cash available you'd think he'd be clever enough to locate himself in a non-extradition country.

    I mean, using an IP address of a coffee shop in California? Really?

  22. Henry Wertz 1 Gold badge

    sell them straight away?

    "Would they be allowed to sell them straight away? I know they can seize and sell proceeds of crime, but wouldn't they have to hold them until a court convicts Ulbricht before they can be disposed of?"

    Depends on the jurisdiction. Some dirty police departments (mainly in Texas and Florida...) have used and probably still do use trumped up drug charges as a fund raiser, basically to steal people's property. They'll pull someone over, seize the car and throw their ass in jail. Then the victim has their trial. Oh, they were found "not guilty"? Whoops we already auctioned the car off sorry about that! These departments usually then claim the law as written doesn't require them to refund anything, and once they are dragged into court end up paying what they auctioned the car for rather than anything resembling replacement value -- astoundingly, the court usually doesn't even require the police department involved to make the victim whole! And then they wonder why the locals are not ever so helpful towards the local police department...

    Maryland is not Texas so I assume they'll hold onto his stuff during trial. I really don't know how it works with currencies, though. Are they obligated to hold onto the bitcoins throughout the trial? Or can they exchange them all for dollars and hold dollars in escrow? It's more of an issue than normal, since bitcoin exchange rate is pretty volatile, and they are after all cashing in BTC30,000-40,000 all at once if they exchange them.

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