Silk Road Founder Arrested

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The FBI has arrested the founder of Silk Road, perhaps the most notorious online marketplace for illegal products and services.

Ross William Ulbricht, 29, was arrested in San Francisco, Calif., on Tuesday. Also known as Dread Pirate Roberts, Ulbricht is charged with conspiracy to distribute narcotics, computer hacking and money laundering, according to court documents posted by security writer Brian Krebs.

During the more than two years that the online black market is said to have operated, authorities estimate that Silk Road generated over $1.2 billion in sales and $80 million in commissions, paid in the cryptographic currency of Bitcoins.

Silk Road, according to the complaint, offered a variety of illicit goods, including a wide variety of narcotics, hacking tools, forged documents, services for hacking accounts at social networking sites such as Facebook and Twitter, and resources for obtaining stolen account data and for getting in touch with arms dealers and assassins.

[ Google continues to face legal headaches over its email scanning and Wi-Fi data collection practices. Read Google Wiretapping Lawsuits Can Proceed, Judges Say. ]

Ulbricht is also alleged to have solicited the murder of a Silk Road user, "FriendlyChemist," who hacked the service, obtained information about customers and then threatened to publish the data unless paid $500,000, according to the complaint filed in a New York court. "FriendlyChemist" ostensibly wanted this money to pay off a narcotics debt.

Based on email messages described in the complaint, Ulbricht asked "FriendlyChemist" to have the people who were owed money get in touch. When someone identified as "readandwhite" did so, Ulbricht allegedly offered a bounty for the execution of "FriendlyChemist," though he has not been charged with soliciting murder.

Faced with a hit estimate of $150,000 to $300,000, depending upon the level of professionalism employed, Ulbricht is said to have tried to bargain the price down, noting, "Not long ago I had a clean hit done for $80K." The negotiation for a lower fee appears to have been unsuccessful: The complaint indicates that Ulbricht dispensed 1,670 bitcoins, about $150,000, for the job.

But Ulbricht might not have gotten what he supposedly paid for: Despite "redandwhite's" assurance that the job was done, with a picture sent as proof, FBI special agent Christopher Tarbell says in the complaint that he spoke with authorities in Canada where "FriendlyChemist" was said to live and that there's no record of a resident of the town of White Rock, British Columbia, who went by the name provided to "readandwhite" and there is no record of a murder in the town during the period in question.

Ulbricht's arrest appears to have been made possible by "a routine border search" conducted in July by U.S. Customs and Border Production of a package containing fake identity documents sent from Canada to Ulbricht's address in San Francisco.

Robert Graham, founder of Errata Security, notes in a blog post that recent revelations about government data collection, particularly the activities of the DEA's Special Operations Division and the NSA, underscore the difficulty of challenging the constitutionality of government evidence gathering.