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 …
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.
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.
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?
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?
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.
>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.
>>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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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.
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?
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.
"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'.
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."
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.
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!
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.
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.
"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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