From an internet cafe in San Francisco, a 29-year-old free-market evangelist who called himself "Dread Pirate Roberts" used untraceable web services, an international network of servers and anonymous digital currency to run a global online exchange of cocaine and heroin beyond the reach of the law.
For two years, cybercrime experts from the FBI pored over the secretive online drug bazaar known as Silk Road - an underground operation that had become, by the time the FBI shut it down this week, the venue for $1 billion worth of illegal transactions, according to prosecutors. Seeking the mastermind behind it, investigators began picking up clues: an anonymous posting to a website devoted to hallucinogenic mushrooms, recurring references to an Austrian school of economics, and early clues left on public sites including Google and LinkedIn.
A big break came in July, when a routine inspection of inbound mail from Canada turned up a parcel containing nine counterfeit IDs - each with a different name, but all featuring the photograph of the same man. (Who is Ross Ulbricht)
According to a 33-page criminal complaint unsealed on Wednesday in Manhattan federal court, the man in the ID photos was Ross Ulbricht, Silk Road's alleged overseer. FBI agents arrested Ulbricht in San Francisco the same day at the Glen Park library in San Francisco, where he had gone to log onto a computer, according to a person briefed on the matter.
The criminal complaint against Ulbricht depicts the dark side of Internet commerce. In it, special agent Christopher Tarbell of the FBI's New York office described Silk Road as "the most sophisticated and extensive criminal marketplace on the Internet today" - a virtual bazaar where buyers could find everything from heroin and hacking software to contact information for hit men in more than 10 different countries.
The charges
Ulbricht stands accused of narcotics trafficking, money laundering, computer-hacking conspiracy and, in an indictment unsealed on Wednesday in Maryland, of attempted murder.
The genius of Silk Road's design and the reason it eluded the FBI's grasp for so long, according to the complaint, was its impenetrability. The site was accessible only on a so-called tor network, which is designed to conceal the true Internet addresses of computers using it. Its exclusive reliance on Bitcoin, an anonymous digital currency, added another layer of protection for its buyers and sellers.
Since November 2011, Tarbell's team made more than 100 purchases of drugs from Silk Road vendors, accepting shipments of ecstasy, cocaine, heroin, LSD and other drugs posted from 10 different countries, including the US, according to the complaint.
Magic mushrooms
In the FBI's bid to identify the individual behind Silk Road, an agent on Tarbell's team combed through Internet postings and discovered the earliest mention of the site on shroomery.org, an informational website for consumers of "magic mushrooms," in January 2011.
The posting, from someone with the username altoid, alerted the site's visitors to Silk Road and asked if anyone had tried it. Two days later, someone using the same username posted a similar message on "bitcointalk.org," a discussion forum for the virtual currency.
"The two postings created by 'altoid' on Shroomery and Bitcoin Talk appear to be attempts to generate interest in the site," Tarbell wrote. "The fact that 'altoid' posted similar messages about the site on two very different discussion forums, two days apart, indicates that 'altoid' was visiting various discussion forums…and seeking to publicise the site among the forum users - which, based on my training and experience, is a common online marketing tactic for new websites."
Austrian connection
In October 2011, altoid surfaced again on the Bitcoin forum, seeking an "IT pro" to help build a Bitcoin startup company and directing potential job candidates to the Gmail account of someone named Ross Ulbricht.
From a Google profile associated with the account, the FBI learned that Ulbricht had an interest in the Austrian school of economics and the Auburn, Alabama-based Ludwig von Mises Institute. According to the group's website, it functions as a centre of Libertarian political and social theory.
Similar sentiments are voiced on a page of professional networking site LinkedIn that also attributed to Ulbricht, according to the complaint. In a LinkedIn profile accessed yesterday, a user identified as Ross Ulbricht describes himself as an "investment adviser and entrepreneur" and lists his interests as "trading, economics, physics, virtual worlds, liberty."
Austrian connection
Agents made a connection between Ulbricht and Silk Road: The site's webmaster, who identified himself as Dread Pirate Roberts, made regular references to Austrian economic theory and the teachings of Ludwig von Mises to justify Silk Road's existence.
The New York FBI agents weren't the only lawmen gunning for Silk Road. In April 2012, a federal agent in Maryland began communicating with Dread Pirate Roberts in an undercover capacity, posing as a drug dealer.
In January, the undercover agent completed the sale of a small quantity of cocaine to a Silk Road employee and was paid the equivalent of $27,000 in Bitcoin currency. According to the Maryland indictment, Dread Pirate Roberts subsequently asked the undercover agent to murder an employee the site overseer believed to have stolen money from Silk Road.
During this time, Tarbell's team in New York tracked the Silk Road webmaster's online logins to an Internet cafe on Laguna Street in San Francisco, near an apartment where Ulbricht had moved.
Intercepted mail
Meanwhile, on July 10 of this year, customs officials intercepted the package from Canada as part of what the complaint characterized as a routine inspection. The package, addressed to an apartment on 15th Street in San Francisco, contained nine counterfeit IDs, each in a different name, but all featuring a photo of the same person.
Agents from Homeland Security Investigations arrived on July 26 at the 15th Street address. There, according to the complaint, they encountered Ross Ulbricht, whose photo matched those on all nine fake IDs.
Confronted with a fake California driver's license bearing his photo and birthdate but a different name, Ulbricht avoided answering questions about the purchase of false IDs, according to the complaint. Instead, he volunteered that "hypothetically" anyone could go onto a website named Silk Road and purchase any drugs or counterfeit IDs they wanted. Ulbricht then produced his real ID, a Texas driver's license, according to the complaint, and explained that he was subletting a room in the apartment for $1,000 a month. According to the complaint, he also said the roommates knew him as "Josh."
Fake ID
Following the confrontation, Tarbell and his team learned that in the weeks leading up to the discovery of the counterfeit identity papers, Dread Pirate Roberts had sent a series of private e-mails suggesting that he "needed a fake ID," according to the complaint.
All the while, word of Silk Road and its bazaar of illicit goods and services spread around the Internet. In August, Forbes.com posted an interview with Dread Pirate Roberts that it said was conducted via messages sent through the site. "The highest levels of government are hunting me," the cyber entrepreneur said, adding: "I can't take any chances."
Wednesday afternoon, Ulbricht surfaced at San Francisco's Glen Park library, a small branch facility where public computers are located in front of the check-out desk. There, according to the person familiar with the matter, he was arrested by the FBI.
