Andy Greenberg, Forbes Staff
After two and a half years running the booming anonymous narcotics bazaar known as the Silk Road, the drug kingpin who called himself the Dread Pirate Roberts has allegedly been unmasked.
On Wednesday, the FBI announced that they arrested 29-year-old Ross William Ulbricht, the Silk Road’s accused administrator, in the Glen Park branch of the San Francisco Public Library at 3:15 Pacific time on Tuesday. Ulbricht has been charged with engaging in a money laundering and narcotics trafficking conspiracy as well as computer hacking. The Department of Justice has seized the Silk Road’s website as well as somewhere between $3.5 to 4 million in bitcoins, the cryptographic currency used to buy drugs on the Silk Road.
Earlier this summer, the Silk Road’s administrator calling himself by the Dread Pirate Roberts pseudonym gave his first extended interview to Forbes over the same Tor anonymity network that has hosted the Silk Road and its users since the site’s creation in early 2011.
Forbes estimated at the time that the Silk Road was earning between $30 and $45 million in annual revenue. In fact, the number may have been far larger: The criminal complaint against Ulbricht states that the Silk Road turned over $1.2 billion in revenue since its creation, and generated $80 million commissions for its operator or operators.
“This is supposed to be some invisible black market bazaar. We made it visible,” says an FBI spokesperson, who asked not to be named. “When you interviewed [Ulbricht], he said he would never be arrested. But no one is beyond the reach of the FBI. We will find you.”
The FBI hasn’t yet revealed how it managed to track down Ulbricht in spite of his seemingly careful use of encryption and anonymity tools to protect his identity and those of his customers and vendors who visited Silk Road as often as 60,000 times per day. The FBI spokesperson declined to offer details about the investigation, but told me that “basically he made a simple mistake and we were able to identify him.”
One clue mentioned in the criminal complaint against Ulbricht was a package seized from the mail by U.S. Customs and Border Patrol as it crossed the Canadian border, containing nine seemingly counterfeit identification documents, each of which used a different name but featured Ulbricht’s photograph. The address on the package was on 15th street in San Francisco, where police found Ulbricht and matched his face to the one on the fake IDs.
The complaint also mentions security mistakes, including an IP address for a VPN server used by Ulbricht listed in the code on the Silk Road, mentions of time in the Dread Pirate Roberts’ posts on the site that identified his time zone, and postings on the Bitcoin Talk forum under the handle “altoid,” which was tied to Ulbricht’s Gmail address.
The follow statement is from the Bitcoin Foundation:
We received several requests to comment on the shutdown of Silk Road. First and foremost, it is important to note that the sanctity of the Bitcoin protocol remains intact and it was not a weakness of the core protocol that led to the apprehension of Mr. Ulbricht. Although Bitcoin is not anonymous by default, Bitcoin addresses were not a factor in solving the case.
“The FBI was able to capture an alleged criminal without any new investigative methodologies being needed and without having to get into changing the nature of the Bitcoin protocol,” Bitcoin Foundation General Counsel Patrick Murck said. “They caught him the same way they would catch somebody using cash.”
This is good for the Bitcoin economy in general and the reputation in specific because it proves that Bitcoins are in and of themselves a neutral store of value or medium of exchange and that privacy does not necessarily have to be compromised for law enforcement purposes.
Bitcoin’s principal attributes of irreversibility and user-defined privacy continue to provide benefits for bitcoin users globally. The Bitcoin Foundation would like to reaffirm that financial privacy sits on a sliding scale expressed differently by different individuals. However, within the Bitcoin transaction network, the specific level of that privacy is determined, managed, and set by the user.