- By Shane Harris
Shane Harris is a senior staff writer at Foreign Policy, covering intelligence and cyber security. He is the author of The Watchers: The Rise of America's Surveillance State, which chronicles the creation of a vast national security apparatus and the rise of surveillance in America. The Watchers won the New York Public Library’s Helen Bernstein Book Award for Excellence in Journalism, and the Economist named it one of the best books of 2010. Shane is the winner of the Gerald R. Ford Prize for Distinguished Reporting on National Defense. He has four times been named a finalist for the Livingston Awards for Young Journalists, which honor the best journalists in America under the age of 35. Prior to joining Foreign Policy, he was the senior writer for The Washingtonian and a staff correspondent at National Journal.
It was the Amazon.com of the illegal drug trade. An online black market in which cocaine, marijuana, heroin, and LSD were bought and sold by anonymous customers and dealers, using untraceable digital currency. U.S. authorities called it "the most sophisticated and extensive criminal marketplace on the Internet…" And today, they announced they’ve taken it down.
In a criminal complaint unsealed Tuesday, the Justice Department announced that the online market Silk Road has been wiped off the Internet and its profits seized. Since its inception in 2011, Silk Road has been the bane of federal drug enforcement agents, who knew full well what the illicit marketplace was selling but were largely powerless to do anything about it. As of last month, there were more than 13,000 listings for illegal drugs of all varieties on Silk Road, the government said in its complaint.
Silk Road, which operates through an extensive network of routers that lets users remain anonymous, enabled several thousand dealers to distribute hundreds of kilograms of illicit substances, as well as other illegal goods and services, to more than a 100,000 buyers, federal prosecutors allege.
The site, which also sold hacker services and even advertised murder for hire, obscured transactions by requiring they be conducted in Bitcoin, an electronic currency "designed to be as anonymous as cash," prosecutors charge.
The marketplace was a well-known, if not widely visited, corner of the so-called Deep Web, a part of the World Wide Web that is not indexed by search engines. Visitors to the Deep Web have to know what they’re looking for and cannot find their way to its sites through traditional means, such as Google searches.
Silk Road "has sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream e-commerce websites," prosecutors allege.
Silk Road was designed to let its customers remain anonymous in two ways. The first was by using the Tor router network, which makes it practically impossible to locate computers that are hosting or accessing websites on the network.
The second form of anonymity came from Bitcoins. The electronic currency has been a favored means for procuring illegal goods and services online, because Bitcoins can be extremely difficult, if not impossible, to trace to their owners. There is no central bank that generates Bitcoins or regulates their use. People can buy and sell Bitcoins through exchanges set up by independent parties.
Skeptics of Bitcoin say its value fluctuates too wildly to be a useful currency and that its greatest value is to criminals and black market buyers. But proponents say Bitcoins have the potential to revolutionize commerce by making it easier for customers to make purchases and vendors to get paid. A small but growing number of individual vendors, nonprofit organizations, and companies accept Bitcoin.
The government has seized 26,000 Bitcoins from Silk Road, which it estimates are worth approximately $3.6 million. This would constitute the largest-ever seizure of Bitcoins, prosecutors say.
Silk Road has allegedly generated sales totaling more than 9.5 million Bitcoins and has collected commissions totaling more than 600,000 Bitcoins. The value of the currency has varied during Silk Road’s operations, but the government believes those transactions equate to approximately $1.2 billion in sales and $80 million in commissions for Silk Road.
The FBI arrested Ross William Ulbricht, aka "Dread Pirate Roberts," in San Francisco yesterday and accused him of overseeing Silk Road’s operations since their inception. Ulbricht "has controlled the massive profits generated from the operations of the business," prosecutors allege, adding that he "has always been aware of the illegal nature of his enterprise."
Ulbricht is charged with narcotics trafficking, computer hacking and money laundering. He was expected to appear in court Tuesday morning.
Ulbricht is accused of engaging in a "massive money laundering operation, through which hundreds of millions of dollars derived from unlawful transactions have been laundered," according to the government’s complaint.
In arresting Ulbricht, the feds have nabbed the poster boy of online black markets. But if history is any guide, some ambitious entrepreneur will try to take Ulbricht’s place, and buyers will beat another silk road to his door.