Silk Road bitcoin drugs ross ulbricht

“People should have the right to buy and sell whatever they wanted so long as they weren’t hurting anyone else.”

That was Ross Ulbricht’s vision when he launched the Silk Road, but it soon turned from a utopian ideal to the world’s most notorious dark-web marketplace. What emerged was an “anonymous amazon.com” attracting drug dealers across the planet, all transacting in bitcoin.

It drew mainstream media attention to bitcoin and cryptocurrency, but ultimately the website was shut down, leading to the arrest and imprisonment of Ross Ulbricht, a 34-year-old now serving a double life sentence plus 40 years without parole.

But this story is not straightforward. It’s a story of drugs, aliases, corruption, conspiracy, and the dark web.

Outlined below are the many twists and turns on the road to justice (or injustice). Rebecca Campbell reports:

The Beginnings of Silk Road

Launched in February 2011, the Silk Road website, created by American Ross Ulbricht, was envisioned to be a “free-market economic experiment” that focused on user anonymity. 

Using two key pieces of technology, bitcoin and Tor – a network of computers that makes it impossible to trace by routing internet traffic through servers by anonymizing IP addresses, Ulbricht believed that “people should have the right to buy and sell whatever they wanted so long as they weren’t hurting anyone else.”

ross ulbricht silk road
Ross Ulbricht: the founder of Silk Road

However, while counterfeits, weapons, pedophilia and anything that could be used to defraud or harm others were prohibited, what could be listed for sale was left open to interpretation. 

As time went on many vendors began to realize that Silk Road was a safe haven for the sale of drugs. Of course, while Ulbricht may have envisioned an open market platform driven by the community, it wasn’t long before it started to gain the attention of the media.

“The Underground Website Where You Can Buy Any Drug Imaginable”

In June 2011, shortly after it was launched, an article was published on Gawker. Titled The Underground Website Where You Can Buy Any Drug Imaginable, the exclusive report detailed how Silk Road enabled people to buy drugs of any kind – cannabis, weed, hash, ecstasy – and that it was like Amazon, “if Amazon sold mind-altering chemicals.” 

Silk Road marketplace screenshot
A screen capture of the Silk Road website before it was shut down

At the time, however, while many embraced Silk Road and what it stood for, others believed that it would tarnish the emerging cryptocurrency, bitcoin, attracting the attention of the federal authorities.

Unsurprisingly, it wasn’t long before an American politician called for federal authorities to shut down Silk Road. Not long after the Gawker article was published, Senator Charles Schumer called for the Drug Enforcement Agency (DEA) and the Department of Justice to shut the site down now that it had become public knowledge.

At the time, Schumer said in a report to NBC New York: “It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by lightyears.”

He also added that “I’d bet my bottom dollar in this instance [an investigation] is underway.”

Who is Dread Pirate Roberts?

The person operating the site did so under the pseudonym Dread Pirate Roberts, named after a character in the 1973 novel The Princess Bride. 

The name is often used to refer to Ross Ulbricht, but that’s not entirely accurate. There’s good evidence to suggest that Ulbricht handed over the site to someone else, and that person is the Dread Pirate Roberts.

Ross Ulbricht
Ross Ulbricht: Ulbricht reportedly sold the Silk Road website to someone else, the infamous Dread Pirate Roberts

Ulbricht Reportedly Sells Silk Road

With the website growing, Ulbricht initially turned to Richard Bates, a college friend, who had studied computer science and was working for PayPal and eBay. According to a court transcript filed in 2015, Bates offered help with the site but distanced himself over concerns with law enforcement.

Over time, Ulbricht turned to an anonymous person he met through the site who eventually took control of it. 

This person then operated under the pseudonym Dread Pirate Roberts (DPR).

In a 2013 Q&A interview with Forbes, Dread Pirate Roberts confirmed that he was not the original owner, confirming that Ross Ulbricht had sold the site.

DPR spoke about how the torch was passed to him from Ulbricht and that Ulbricht was fairly compensated for the site. The interviewee mentioned that he had discovered a major vulnerability in Silk Road and that while Ulbricht ignored him at first, DPR eventually got his trust.

Back in 2011, Ulbricht is reported to have told Bates that he had sold the website to someone and that it was no longer in his hands to shut down.

In was in 2012, that Dread Pirate Roberts first announced his screen name on the site, which, would become the main point of interest for the authorities.

If Not Ulbricht, Who Else Could Be Dread Pirate Roberts?

French-born Mark Karpeles, former-owner of the now-defunct Mt. Gox Bitcoin exchange, was, at one time, a suspect in connection with Silk Road.

Karpeles ran a DNS registrar and a web hosting company during the time the Silk Road launched, and it was this connection that aroused suspicion.

Investigator Jared Der-Yeghiayan, who went undercover to help bring down Silk Road, discovered that www.silkroadmarket.org was registered to a domain name server (DNS) called XTA.net. 

He then discovered that this DNS was registered with Mutum Sigillum, a company owned and operated by Mark Karpeles. 

Mark Karpeles suspect in Silk Road case
Mark Karpeles: at one time, a suspect in the Silk Road case

In a report dated 6th July 2012, Der-Yeghiayan claimed: 

“I believe since KARPELES has used his [email addresses redacted] to register with a few internet companies that he may have received record of registering, paying for or owning certain aspects of the www.silkroadmarket.org website.”

Mark Karpeles has denied the accusation and the judge in the investigation asked the jury to ignore it because it was based on Der-Yeghiayan “beliefs” rather than hard evidence.

Investigators Went “Rogue”

The case was supposed to be kept as quiet as possible, in order to make sure suspects were not aware of the investigation.

However, information was ultimately leaked to two Baltimore agents – DEA agent Carl Mark Force and Secret Service agent Shaun Bridges.

Bridges then went “rogue,” according to court documents.

As part of their rogue investigation, Bridges and Force hijacked a number of Silk Road accounts and arrested one Silk Road administrator named Curtis Green. At the same time, around $350,000 disappeared from Silk Road vendors, tracing back to Green’s account.

Dread Pirate Roberts heard about the missing money, and turned to another Silk Road colleague, “Nob.” But “Nob” had also been hijacked by Carl Force.

It’s alleged that DPR asked Nob to track Green down and retrieve the stolen money. Green was still in custody at this time, but Force played along, and even pretended to kill him.

In the end, the rogue pair were discovered. Force was sentenced to 6 ½ years. Bridges was initially sentenced to nearly six years in prison; however, in 2017 he was sentenced to an additional two years after admitting to a new crime.

Ross Ulbricht on trial for Silk Road case
Ross Ulbricht in courtroom sketch during Silk Road trial. Credit: STRINGER/Reuters

Conspiracy?

As Der-Yeghiayan continued to pursue Karpeles, who he believed to be Dread Pirate Roberts, another Silk Road account by the name “notwonderful” was reportedly feeding DPR inside information about the investigation.

According to the defense, this insider information gave Dread Pirate Roberts enough time to get get a plan in place that “incriminated Mr. Ulbricht falsely.”

In other words, they claim Ross Ulbricht was set up by the new Dread Pirate Roberts.

Connecting Ross Ulbricht to Silk Road…

It wasn’t long before the government then apprehended Ulbricht. Yet, it had to provide an explanation as to why Ross was DPR. 

An IRS agent, Gary Alford, found a forum post on bitcointalk.org by a user named Altoid. It was posted in January 2011 and read:

“Has anyone seen Silk Road yet? It’s kind of like an anonymous Amazon.com.”

Alford then tracked everything written by Altoid and eventually found a post where he revealed an email address. Altoid asked for programming advice and gave the address: [email protected]

ross ulbricht altoid post on bitcointalk forum

Of course, with Ulbricht’s email and a plausible explanation linking him to Silk Road, it was only a matter of time before the authorities found him.

The Arrest of Ross Ulbricht – October 2013

Ross Ulbricht was arrested in a San Francisco library while logged in to Silk Road as the Dread Pirate Roberts admin. He was unknowingly talking to an undercover agent at the time.

Why was Ulbricht logged in as DPR even though he had allegedly sold Silk Road and moved on? The defense claims that someone convinced him to briefly get involved again. DPR then gave him access to all accounts, files, software, and records. 

When he was arrested on 1st October 2013, all this information was on his laptop, including a bitcoin wallet containing 144,000 bitcoins.

Dread Pirate Roberts Logs On Again, While Ulbricht is Locked Up…

Notably, at the time of Ulbricht’s solitary confinement, it was reported that someone accessed DPR’s Silk Road account before it was eventually taken down. 

According to Motherboard, “the logical conclusion is that someone else had access to the account that was said to belong to the mastermind of the massive Dark Web drug bazaar.”

It confirmed what many believed: Ross Ulbricht might have started Silk Road, but he wasn’t the only one operating as Dread Pirate Roberts.

Ulbricht Appears in Court

Ross’s first courtroom appearance was in front of Judge Kevin Fox, who ultimately denied his Eighth Amendment right to bail. On the 4th February 2014, Ulbricht was indicted. In another case in front of Judge Katherine Forrest, who had been recommended to the bench by Schumer, she said in her ruling that Ulbricht was acting as a “sort of godfather.”

Ross Ulbricht in court Silk Road trial
Ross Ulbricht stands trial. Credit: Wall Street Journal

At one stage during the trials, Ulbricht’s defense lawyer was to call Andreas Antonopoulos, a best-selling author and someone with the technical expertise to explain complex matters, and Steven Bellovin, Computer Science professor at Columbia University and leading expert on computer networking and internet security. However, the court precluded these two experts.

Yet, Judge Forrest was more flexible with the prosecuting side.

Two Life Sentences, with No Possibility of Bail

Before his sentencing, one hundred people who knew Ulbricht wrote to Forrest asking for her to apply the shortest sentence. In a court transcript, it said: “The district court was confused by the letters which showed Mr. Ulbricht to be a different man than the one [Forrest] thought him to be.”

Ultimately, though, Forrest gave Ulbricht two life sentences plus 40 years in prison without the possibility of parole for non-violent charges. In this case, it was not in her power to give him the death penalty.

Following the verdict, even Curtis Green tweeted: “Ross Ulbricht got a raw deal. There is so much more to the Silk Road story than people know, and I can’t yet talk about. I don’t believe Ross is dangerous or that it’s in his character to order a hit on anyone. He should never have gotten that horrible sentence.”

Seven weeks after Ulbricht’s trial, Force and Bridges were indicted for corruption. Compared to Ulbricht’s sentence, though, they got off lightly. 

An appeal was filed to a Second Circuit panel consisting of Judges Jon Newman, Gerard Lynch, and Christopher Droney in 2016. However, the Second Circuit judges decided in 2017 to deny Ulbricht’s appeal.

Last December, a petition was filed to the Supreme Court by Williams and Connolly LLP, led by Kannon Shanmugam, who was representing Ulbricht. It was arguing questions on constitutional law, focusing on the impact of the Fourth and Sixth Amendments. The petition was supported by 21 groups. On 28th June 2018, the petition was denied.

The Fight Continues

Silk Road remains a complicated story that has more twists and turns in it than a cheap garden hose. 

Corruption, deception, and intrigue are wrapped up in this case. Yet, despite the truth coming out about several of those involved in the investigation, the sentence against Ulbricht still stands.

After five years in prison and unable to communicate with the outside world, Ulbricht is speaking through his family at the @RealRossU Twitter account that was set up in June 2018. The first tweet went out in July. There is also the FreeRoss.org website that has been set up by “friends, family and supporters who are working to free Ross Ulbricht from a barbaric, double life sentence for all non-violent charges.”

A petition, which was launched by his mum, Lyn Ulbricht, has received over 100,000 signatures. The goal is to hit 150,000 as his family seeks clemency for him.

His next hope of clemency lies with the President of the United States.

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Initial coin offerings (ICOs) are proving to be the investment of the day, with over $9 billion so far raised in the first six months of 2018.

Despite a drop in cryptocurrency prices, interest in ICOs doesn’t appear to be waning. Figures from CoinSchedule indicates that within the first half of the year, more than $9.6 billion has been invested into this form of fundraising. March saw the highest amount raised, coming in at $3.8 billion from 59 ICOs.

When it comes to the top-ranked ICOs, in terms of return on investment (ROI) against the U.S. dollar, which ones make it in the top 10.

The following is in no way an endorsement of ICOs, and potential investors should always conduct their own research before investing their money.

This handy infographic by ico_analysis details what those top 10 ICOs of 2018 are.

Credits

Back in February Credits launched its public crowdsale, hitting its hard cap of $22 million within 17 hours. As an open blockchain platform with smart contracts and an internal cryptocurrency, Credits is reported to have fast transactions up to one million per second and unlimited scalability of the network.

Matrix Chain

The Matrix Chain is also a blockchain platform that supports smart contracts as well as machine learning services. Its public sale launched in mid-January, with a fundraising goal of $12 million. Rated as the next generation blockchain that leverages AI with the blockchain, Owen Tao, CEO of MATRIX, claims it’s a ‘game changer in blockchain technology.’

Switcheo

Built on the NEO blockchain, Switcheo is a decentralized exchange (DEX) that allows for trustless exchange of NEP-5 tokens. It launched its public crowdsale in March with a hard cap of $8 million. It aims to be the first multi-chain DEX for cross-chain token exchange.

Nucleus Vision

Nucleus is an end-to-end technology solution that captures and provides previously inaccessible data to retailers and other ‘brick-and-mortar’ businesses. It achieves this through its proprietary blockchain and real-time sensor technology. In January it reached its hard cap target of $40 million from the backing of prominent blockchain-focused investment companies. It also canceled its public ICO due to rising ethereum prices, deciding instead to list its token directly on exchanges.

Bluzelle

This data service brings together a sharing and token economy. The platform enables people to rent out their unused computer storage space while developers pay to use it with a token. Bluzelle’s token sale ended in January with a target of $19 million.

Zebi

Zebi is a blockchain service that is aiming to become the blockchain network of India. In February, it reached its ICO goal for 30 percent of the token total. It aims to provide individuals, businesses, data requestors, and data providers with a platform to exchange information.

Tomocoin

This is a blockchain infrastructure for the Internet of Value, where people can trade assets, such as stocks, votes, and securities, securely. It will connect to Tomocoin and Ethereum to support cross-chain protocols. Its ICO ended in March with a target of $8 million for 40 percent of token total reached.

Holochain

Holochain is a cloud storage solution provider that is aiming to deliver a decentralized hosting ecosystem. Its token sale ended in April where it had a target of $20 million.

Zilliqa

This is a new blockchain platform that is designed to scale in an open, permissionless distributed network securely. A core feature of it is sharding, which enables it to scale and is a problem it is attempting to solve in the industry. Its public sale was at the beginning of the year with a hard cap of $22 million to raise.

Ontology

Built on the NEO blockchain, Ontology is a network that connects ‘distributed identity verification, data exchange, data collaboration, procedure protocols, communities, attestation, and various industry-specific modules.’ Unlike conventional ICO sales, Ontology didn’t have one, but instead only airdropped to subscribers in March. Distributed by the NEO Council, 20 million ONT tokens were sent to the community.

Featured image from Shutterstock.

Blockchain

A joint survey by PwC and VeChain has found that most enterprises prefer to setup their own in-house research and development (R&D) teams to investigate the blockchain.

The survey, 2018 Market Survey Report for (Non-Financial) Application of Blockchain in Chain, was conducted between November and December 2017, taking the form of online questionnaires and focus group discussions.

The research found that among the companies that have already introduced the blockchain, 53.3 percent have setup in-house blockchain technology R&D teams. Those who corporate with blockchain startups was at 30 percent; corporation with well-known large businesses was at 13.3 percent; and investing in or acquiring external blockchain startups was at 3.3 percent.

The authors of the study, Chun Yin Cheung from PwC and Kevin Feng from VeChain, wrote:

When it comes to technologies that have impact on the underlying architecture of the business model, an enterprise usually prefers to build a R&D of its own. On the one hand, in-house R&D team can facilitate system maintenance, information security and cost reduction. On the other hand, enterprises prefer to keep the underlying architecture of the business model under their control.

According to the findings, it also found that management plays a significant role in driving the technology to maturity. This accounted for 35.1 percent, followed by a lack of industry standards at 18.9 percent of the findings. Notably, 10.1 percent indicated that it was down to having no budget that was preventing them from implementing the technology.

Yet, when it comes to the application that best applies to the distributed ledger, security traceability was the most recognized at 85.70 percent.

Most respondents believe the core features of blockchain technology are tamper-resistance and distributed system. Obviously, security traceability becomes one of the fields most demonstrating the features of blockchain technology, the authors wrote.

Second and third to that were distributed data storage and identity authentication, which came in at 68.40 percent and 63.90 percent, respectively. Out of the 10 listed applications that best apply to the technology, market forecasting was last at 15.80 percent.

With the distributed ledger now being used across a wide range of industries it is showing its potential to change the way systems work. The findings show the fields were it has a promising future are logistics, government, and the medical field at 63.3 percent, 47 percent, and 44.4 percent.

With respondents mainly clients from PwC and VeChain, they received more than 130 questionnaires while two focus groups engaged over 40 respondents. Respondents were from around 20 industries, involving more than 10 functional departments.

Featured image from Shutterstock.

Bitcoin Pineapple Fund

An anonymous donor who set up a philanthropic project using bitcoin for charitable causes has announced that it’s time to say goodbye.

In December 2017, the Pineapple Fund was set up by an unknown individual with the intention of giving cryptocurrency donations around the world. It has also been claimed to be among the 250 largest holders of Bitcoin in the world. Known simply as ‘Pine’, the anonymous person announced via Reddit last year that they were setting up the Pineapple Fund to donate 5,057 BTC, worth about $86 million at the time, to charitable causes.

According to the website, it states:

Pineapple Fund was an experiment in philanthropy with cryptocurrency wealth. What happens when your ‘play-money’ becomes a treasure chest, and you’re past the satiety point of money?

Now, five months later Pine has come back to say that it’s time to say farewell, as well as taking the time to thank those who have supported or made charity suggestions. In the end, and timed with the 2017 cryptocurrency price surge, the Pineapple Fund managed to raise 5,104 BTC, representing $55 million for charities.

Some of the causes the donations have funded include $2 million to Watsi, an innovative charity building technology to finance universal healthcare; $1 million to the Water Project, a charity that is providing sustainable water projects to suffering communities in Africa; $5 million to the Multidisciplinary Association for Psychedelic Studies (MAPS), which develops medical, legal, and cultural contexts for people to benefit from the careful uses of psychedelics and marijuana; and $500,000 to TreeSisters, a grassroots network of women planting over two million trees a year in the tropics, to name but a few.

In December, BitGive.org, a nonprofit organisation that solicits bitcoin donations for its charitable causes, announced it had received $500,000 from the Pineapple Fund. According to the fund’s website, it has since donated $1 million to BitGive.org.

Amazingly, in such a short space of time the fund has demonstrated the good that can come from people’s generosity. As one Reddit user said:

I really hope this sets an example. If by any chance a raise in Bitcoin value happens again to a point many of us will have a fortune, I really expect people doing exactly what the Pineapple Fund did and, who knows, maybe leave the world a better place than it was before crypto.

Interestingly, even though the fund has come to an end, Pine has said that they won’t be revealing their identity.

I’m going to remain anonymous, because the point of the Pineapple Fund is not me.

This, essentially, sums up what charitable giving means. At the end of the day people who give money to charity shouldn’t need to feel like they should be thanked. They should donate because they want to and because they want to bring about the change that will make the world a better place.

Featured image from Flickr via Kyle McDonald.

Even the Federal Reserve understands about Bitcoin’s potential now. Bitcoin could eventually become a contender to replace fiat as a means of payment as it rapidly drives out the use of cash, according to a report from the St. Louis Federal Reserve Bank.

Even though cash has its advantages the end of it may be near due to political reasons, reports the St. Louis Fed. This is primarily down to three reasons: it’s inefficient and more expensive than electronic means, it promotes crime and aids money laundering and tax evasion, and it hinders monetary policy.

Technological reasons also apply, such as the growth of cryptocurrencies like bitcoin. Consequently, the report predicts a transition from fiat to digital currencies, arguing:

In the near future, a close cash substitute will be developed that will rapidly drive out cash as a means of payment. A contender is bitcoin or some other cryptocurrency.

It adds that cryptocurrencies have drawbacks, namely high payment fees, scaling issues, and low adoption rates. Yet, these are issues that can be remedied with the use of large-scale off-chain payment networks, such as bitcoin’s lightning network.

The report from the St. Louis Fed that cash may eventually be replaced by a cryptocurrency is nothing new. Yet, it adds to the way of thinking that many people view and the eventual expectation that cash will get left behind. Another proponent who believes that cash is on the way out is venture capital investor Tim Draper, the founding partner of Draper Associates and DFJ.

He’s said that in five years no one is going to be using fiat to pay for things, as people turn to cryptocurrencies to make purchases. Taking to social media last month, Draper also projected that the price of bitcoin would be worth $250,000 by 2022. Furthermore, such is his faith in the way bitcoin is heading that he has predicted that it will be bigger than Tesla, Hotmail, and Skype combined.

In the grand scheme of things five years is a relatively short amount of time for cash to be replaced by a cryptocurrency. Nonetheless, it will be interesting to see if such an outcome does actually come to fruition. Yet, for those who may not be particularly tech-savvy or feel comfortable paying with something that isn’t tangible, what does that mean for them?

It may be true that cash will see its supply dwindle – Sweden could become one of the first to eliminate it and rely solely on electronic payments – but more certainly needs to be done between now and five years if digital currencies are to be a contender for cash’s replacement.

Featured image from Shutterstock.