Articles on Silk Road – drug peddling site in the ‘dark web’ – part 1

This page gathers together a series of posts written over a period of several years describing the dark net world of Silk Road, a place where you could by any drugs, weapons, explosives, or body parts you might be interested in. This venture did not end well for the founder/operator of the site. He now has free federal housing for the remainder of his natural life.

Follow along as I explored this world I’ll never enter:

2 worlds explored that I’ll never enter

There are two Forbes articles this year that are quite fascinating because they take me into worlds I’ll never see which are far away in a solar system that I’ll never approach.

An Interview With A Digital Drug Lord: The Silk Road’s Dread Pirate Roberts (Q&A) details a digital world of selling drugs that many (most? all?) governments consider illegal. Even in Mr. Roberts’ world there are ethical boundaries.

Inside Mega: The Second Coming of Kim Dotcom tells of the new massive online storage site developed by Kim Dotcom after the feds shut down his first version. This one, it is asserted, will be legal because all data is encrypted by the user thus the host has no idea what is being stored.

I find these articles fascinating because they are in-depth views inside worlds I’ll never see, let alone get the chance to try to understand. They are a great stretching exercise.

posted 9/23/13

Followup on one of the worlds I’ll never visit

I previously mentioned 2 worlds explored that I’ll never enter.

One of those worlds has been closed until further notice.

The alleged mastermind behind the website Silk Road is now in federal custody. The person known publicly as Dread Pirate Roberts was arrested last week. His site is alleged to be the vehicle for sales of large amounts of illegal drugs.

The feds seized what is reported to be 600,000 Bitcoins in his personal folder along with 26,000 Bitcoins of customer funds. That’s reportedly around $80M worth of bitcoins.

Business Insider reports FBI Struggles To Seize Alleged Silk Road Founder’s 600,000 Bitcoins Worth $80 Million. The FBI is having trouble getting to the money since they don’t have the private key to the wallet. Here’s how the article describes the situation:

The Bureau is in a position equivalent to having seized a safe belonging to a suspect with no idea of the combination – and no hope of forcing it open any other way.

The Guardian has more: Silk Road shutdown: how can the FBI seize Bitcoins?

If you don’t want to get caught, don’t be stupid

The Guardian also reports Five stupid things Dread Pirate Roberts did to get arrested.

Looks like Mr. Pirate Roberts wasn’t so smart.

According to the article, he dropped not-so-subtle hints on his LinkedIn site that he was doing nefarious stuff. He posted his real name in conjunction with asking for help with coding and used his real picture on 9 fake IDs. Why so many? So he could show ID to rent servers. I doubt you have to appear in person to rent servers from across the country, or in another country (at least that’s my guess, never having had exposure to that world) so a fake picture on your fake idea would really reduce your risk.

Check out the article for all the not-so-smart alleged moves made by the alleged drug peddler.

All of this is interesting to me as a glimpse into another world that is several light years removed from the world I live in. The technology angle is interesting, again as a glimpse into high-end tech that I never deal with.

posted 10/9/13

Another glimpse into a world I’ll never visit

Fun thing about reading widely on the ‘net is I get to look into worlds that I’ll never, ever visit on my own. Like the world of buying guns and dope online.

Worlds far away I’ll never visit

11/1 – Economist – The Amazons of the darknet – If you thought the days of buying dope and illegal guns on the ‘net ended when the feds took down Silk Road a year ago, think again.The article describes the world of crypto-markets, another world I’ll never get to see.

There is actually an outfit that tracks the offerings in 18 crypto-markets. This group says the number of listings grew from 41k in 1/14 to 66k in 8/14. The three largest vendors reportedly have more listings than Silk Road.

Biggest offerings apparently are drugs, either otherwise prescription or flat-out illegal. You can also reportedly find weapons, fake IDs, and stolen credit & debit cards.

As with other on-line venues for buying stuff, there is a ratings system to provide feedback on the quality of product and service levels. That way you can have a comfortable level of trust in the illegal vendors selling you illegal products who commit wire fraud by taking your order and commit mail fraud by shipping your stuff via first class mail. As I think about it, leaving a one-star rating is more recourse against your drug peddler than you would have on the street corner. Sorta’ wierd though.

Amazing. An entire other world that I had no idea even existed.

Remember, the ‘net and all the other cool technology is only a tool. As with all tools, the nifty, neato gizmos can be used for good or ill.

11/7 – Wall Street Journal – Arrests Signal Breach in “Darknet” Sites – Good followup to above article – Police in the US and Europe busted a number of ‘darknet’ sites and arrested some operators.

Biggest news is officials have been able to identify Tor users. That is a big deal because that encryption technology is supposed to not only use unbreakable encryption but also completely hide all users by routing messages all around the world before getting to the destination. That means your message is secure and you aren’t even associated with the traffic.

Like I’ve said, these are glimpses of worlds I’ll only learn about by what I read online.

posted 12/2/14

We can change alleged to confessed when talking about the corrupt DEA investigator of Silk Road

This post continues the coverage of worlds far away I’ll never visit.

It is also in the you can’t make this stuff up category.

I previously discussed a federal DEA agent investigating Silk Road who allegedly got $100K from Dread Pirate Roberts for information about the investigation the agent was conducting and allegedly stole $297K from a customer of a bitcoin dealer. He allegedly invested in and was allegedly working for that company as their compliance officer.

Well, we can now drop the alleged and change it to confessed.

Oh, he had a movie deal too.

I will describe a few tidbits from news reports and then go deeper into the plea agreement.

7/1 –Arstechnica – Corrupt Silk Road investigator pleads guilty, admits to $240K movie deal – The agent appeared in court on July 1 to enter a guilty plea on extortion, money laundering, and obstruction of justice charges. He admitted that he took $370K from a customer’s account and only turned over $37K to the government. (Article has an incorrect amount. Should be $337K stolen from the innocent customer, $37K turned over to the government, with the agent stealing net of $300K.)

Also revealed in court is the agent had a $240K contract with 20th Century Fox for his story which is going into a movie about Silk Road. It is not clear whether he has been paid anything yet or not.

Sentencing will be in October. He has agreed to repay $500K in restitution.

The Secret Service agent who is alleged to have separately stole $820K of bitcoins has reportedly agreed to plead guilty.

Seriously, I’m not making this up.

I’m not that creative.

A Forbes article gives more details: Corrupt DEA Agent Pleads Guilty To Extorting Bitcoins From Silk Road Creator Ross Ulbricht. He took about $100,000 from Mr. Ulbricht in each of two separate incidences and netted $300,000 theft from a private account. For no legitimate reason at all he froze a person’s account, seized it, and stole $300K.

That is how the restitution gets to $500,000.

Plea agreement

The Forbes article points to the plea agreement here.

The agent plead guilty to three counts. The agreement, as usual, is rather heavy-handed and includes explicit statements which appear to be the specific elements of sundry felonies.

There are multiple explicit references to contact having been made by phone, video link, or electronic mail from him while he was in Maryland to another person (Dread Pirate Roberts or FBI agents interviewing him at different times) who was physically in another state. Those comments seem weird until you realize those are explicit confessions to the elements of wire fraud.

Maximum sentence for each count is 20 years. Maximum fine for each count is $250K or double the gross gain.

The agent agreed to a $500,000 restitution. Payment will start with $290,544 in five specific bank accounts. He will also turn over 683 Bitcoins in six different wallets plus another 200 bitcoins previously seized.

Something I’ve not seen before (but then I don’t spend a lot of time reading plea agreements even though it seems like that may be the case), is that the signed plea deal shows agreement between the prosecutors and the agent as to the adjusted offense level for each of the counts. For count one it is 24 or 26, depending on how one variable is resolved. For count two it is 18 and for count three the agreed level is 27.

Wikipedia has a great article on United States Federal Sentencing Guidelines. The article has the full sentencing guidelines. To get to a recommended sentence, you determine the criminal history category, calculate an adjusted offense level, and look up the two results in the table.

If I understand the criminal history category correctly, I’m guessing the agent would be in category I.

Combining that history level with those negotiated adjusted offense levels shows the following as sentencing guideline:

46-57 months – assumed 24 – count 1
27-33 months – level 18 – count 2
70-87 months – level 27 – count 3

The high range would be something in the range of six or seven years.

A fine for level 27 offense would be a minimum of $12,500 and a maximum of $125,000.

I don’t know if these sentences would all be concurrent or it would be the largest one plus some fraction of a small one in some variation of consecutive. Or perhaps they will be consecutive. I will watch sentencing for my learning.

An idea for my first novel

Hmm. If I want to write a best-seller novel someday, maybe I could just weave together a bunch of these weird stories I read and post about.

How’s this sound? A dirty space cop extorts dark net operators hosted on asteroid mining spaceships that are selling codes to 3D print human organs and customized synthetic dope that have been banned by all terrestrial governments.

Nah. That’ll never work. Too much like yesterday’s headlines.

posed 7/3/15

Second federal agent pleads guilty to stealing bitcoins from Silk Road

image courtesy of DollarPhotoClub.com

Two federal law enforcement officers have now entered guilty pleas to charges they stole bitcoins from the Silk Road site while they were part of the investigation of the site.

Other articles on Silk Road and the we-don’t-have-to-say-allegedly corrupt federal agents can be seen on the tag worlds far away I will never visit.

The Department of Justice announced the second agent’s plea on August 31: Former Secret Service Agent Pleads Guilty To Money Laundering And Obstruction.

DoJ said the agent pled guilty to the two felony charges brought against him:

On June 16, 2015, Bridges was charged by information with money laundering, in violation of 18 U.S.C. § 1956, and obstruction of justice, in violation of 18 U.S.C. § 1512. In today’s plea agreement, Bridges pleaded guilty to both charges.

The two guilty pleas will have “enhancements”, which I think will increase the severity of the sentence. The announcement continues:

In connection with his guilty plea, Bridges acknowledged his actions compromised a District of Maryland grand jury investigation into Ulbricht and the Silk Road. Bridges also acknowledged he made multiple false and misleading statements to both prosecutors and investigators in connection with an investigation being conducted by a San Francisco grand jury. In addition, Bridges tried to get other government employees to tell false stories to prosecutors and investigators. In his agreement with the government, Bridges agreed his sentence for money laundering will include enhancements for abuse of trust and obstruction of justice.

A brief summary of his scheme is provided in the announcement, which I quote freely since it is a public document:

In the plea agreement filed today, Bridges admitted he used an administrator account to reset passwords and pins of various accounts on the Silk Road. This enabled Bridges to move bitcoin into a “wallet” he controlled and which he used to fraudulently move and steal approximately 20,000 bitcoin from Silk Road accounts. At the time Bridges stole the bitcoin in January 2013, 20,000 bitcoin would have been worth approximately $350,000. Shortly after Bridges stole the bitcoin, he moved it into an account at Mt. Gox, an online digital currency exchange based in Japan. Between March and May of 2013, he liquidated the bitcoin into $820,000 of U.S. currency and had the funds transferred to the United States to a personal investment account at Fidelity. He owned the Fidelity account under the name of Quantum International Investments, LLC. Later, in June 2014, Bridges transferred money from the Quantum Fidelity account into a personal bank account that he shared with another person.

Short version: he took over the count of an administrator when the administrator was busted, stole Bitcoins worth $350K from customers which appreciated to $820K by the time he converted them to cash.

The feds claim he is getting ready to run, according to the Ars Technica article, Secret Service agent pleads guilty to stealing money from Silk Road dealers.

In court when the plea was entered, federal prosecutors told they judge they had information indicating the agent was trying to change his first and last name. They assert he is a flight risk and wanted him taken into intermediate custody. The judge declined. Sentencing is scheduled for December 7, 2015, so he will be free for another three months.

Seems to me there is a measurable chance that he took over accounts of other people who have not yet been identified. If that’s the case he could possibly, just maybe, have enough money stashed away to make flight worthwhile. If you had several hundred grand parked somewhere and were facing 10 or 25 years in prison, you would be thinking of getting outta’ Dodge. I would imagine there is a reasonable chance he knows how to create a false identity.

I’ll keep my ears open for the sentencing of both of the now confessed crooks.

posted 9/7/15

More good stuff on the open frontier – 1/17

A few articles on technology, energy, and publishing that are worth a read and a brief comment. Efforts for soft landing to recover a first stage came amazingly close to success.

Worlds far away I’ll never visit

1/9 – Wired – Why the Silk Road Trial Matters – Some background on the upcoming trial of Ross Ulbricht, the alleged mastermind behind Silk Road, which is allegedly one of the first dark markets to sell all sorts of illegal stuff.

Since that is a world I’ll never get within a few light years of, following the case is only way I’ll get hints of what is that planet is like.

(Remainder of post omitted since it deals with the positive world of space exploration and not the dark world of the dark net.)

Posted 1/17/15

Silk Road: Felony conviction in a world far away

I’ve previously discussed Silk Road as one of the worlds far away from me that I’ll never visit. Learning about stuff is why I’m writing this blog.

Last week Ross Ulbricht was convicted of multiple felonies for his role in running Silk Road, a place where you could buy all sorts of illegal stuff.

Some recent articles that help me better understand this bizarre alternate universe.

2/2 – Silk Road – The feds claim that Ross Ulbricht is the so-called Dread Pirate Roberts who ran Silk Road. That was an on-line dark market where you could buy anything you want, especially a huge selection of illegal stuff. His trial has been underway for a while. I’ve not made many comments.

Today’s developments were a very brief defense concluding with announcement Mr. Ulbricht will not testify. Closing arguments expected Wednesday, 2/4.

I’ll have more comments when the verdict comes back and especially when the feature articles appear after the trial.

2/4 – Wall Street Journal – Silk Road Creator Found Guilty of Cybercrimes – In just 3.5 hours of deliberation, the jury found Ross Ulbricht guilty on seven felony counts. Unexplained is how the FBI was able to penetrate the Tor software. From the superficial reading I’ve done, I thought that was supposed to be an impenetrable wall of privacy on the ‘net. Another interesting comment in the article is that the FBI was able to link him to specific Bitcoin transactions in Silk Road sales. That is way over my head, but trying to figure out things way beyond me is why I’m reading and writing. Missing from the charges and testimony are the oft-discussed six contract murders he allegedly asked an informant to carry out.

2/4 – Wired – Silk Road Mastermind Ross Ulbricht Convicted of All 7 Charges – A bit deeper coverage of the conviction.

From the article:

More broadly, the case represents the limits of cryptographic anonymity tools like Tor and bitcoin against the surveillance powers of the U.S. government. In spite of his use of those crypto tools and others, Ulbricht couldn’t prevent the combined efforts of the FBI, DHS, and IRS from linking his pseudonym to his real-world identity.

There are a few small lessons for us common, everyday folk going about our (legal) business.

First, there is no absolute privacy on the ‘net, in spite of what the first paragraphs of so many articles may say.

Second, if national level police and security agencies want inside your computer, they will get there.

For people who live in worlds I’ll never visit (places like online dope sales), there are deeper lessons that wouldn’t cross my mind:

If the feds do find the administrators of the next generation of dark web drug sites, as they found Ulbricht, don’t expect those online drug lords to let their unencrypted laptops be snatched in a public library, or to have kept assiduous journals of their criminal conspiracies. The Dread Pirate Roberts’ successors have no doubt been watching his trial unfold and learning from his mistakes. And the next guilty verdict may not be so easy.

posted 2/9/15

More on weird worlds far away I’ll never visit. Two federal agents allegedly stole big bucks from Silk Road; one of them allegedly did shake down Dread Pirate Roberts. No, this is not an April 1st story.

Sometimes things go so weird you just gotta’ laugh. Satire site Onion is yet again outdone by reality. Would you otherwise think this was satire? Two federal agents allegedly ripped off Silk Road, allegedly ripped off Dread Pirate Roberts, and otherwise allegedly stole a ~~ton~~ ~~stack~~ ~~pile~~ ~~truckload~~ whole bunch of bitcoins.

3/30 – Wall Street Journal – Former Federal Agents Charged With Stealing Bitcoin During Probe

Ecclesiastes 1:9 says

What has been will be again, what has been done will be done again;

there is nothing new under the sun.

God’s wisdom has been proved yet again by two former federal law enforcement agents when they ripped off some money they found while conducting a criminal probe of Silk Road.

A former DEA agent allegedly tried to sell info to Dread Pirate Roberts, allegedly didsell him info, and allegedly moved some bitcoins into his personal account. A former Secret Service officer picked up, um, pocketed, um, walked out with, um, allegedly transferred to his alleged personal account over $800K. Both were charged recently and were scheduled to appear in court Monday.

This isn’t just a case of failing to resist temptation and pocketing a bag of dope or a wad of currency on a street bust. Check out some of the things the DEA agent allegedly did, all of which info is according to the complaint:

Offered to trade info to Dread Pirate Roberts for $250K.
Separate from the above attempted shakedown, he allegedly received $100K from Silk Road in exchange for information about the investigation.
Diverted an unspecified amount of bitcoins from the probe which were in federal custody to his personal account
Wired $235K to an account in Panama.
Invested $100K in a bitcoin company
Served as the compliance officer for the company
Told his investee company to freeze a customer’s account and then moved about $297K from the frozen account into his personal account

All of that is alleged by the feds. By my count, that is an allegation of at least $400K, calculated as $235K moved out of the country, $100K invested in a bitcoin dealer, rounded up for paying off some loans and bills as alleged in the complaint.

Here are a few things the former Secret Service agent is alleged to have done, according to the sworn complaint:

Created a shell company and opened an account at a brokerage firm in that shell’s name.
Moved $820K into his newly opened brokerage account in a series of 9 wires from a Mt Gox account. Affidavit hints but does not say there may be a link between those funds and a theft from Silk Road, which proceeds were moved to Mt. Gox. Later the affidavit says the agent filing the complaint believes the former SS agent was “associated” with the theft from Silk Road.
Moved $250K from his brokerage account to another account after the FBI interviewed him.

Again, those are the allegations. By my count that would be an allegation of about $800K. So total for these two players is alleged to be at least $1.4M.

The DEA agent worked there 15 years and was earning $150K a year. The SS agent had 6 years experience.

The two agents were charged with:

Theft of Government property
Wire fraud
Money laundering
Conflict of interest

That should be enough to hold them in custody for a while.

Hopefully both of these alleged gentlemen will soon be long-term residents of free federal housing.

For future reference: Case 3-15-70370 MEJ. Northern District of California’

posted 3/30/15

More worlds far away I’ll never visit, including a fraud education tidbit for CPAs.

Image of in-person illegal drug sale courtesy of Adobe Stock. I don’t quite know what image to use for an illegal on-line sale.

There are many dark places on the underside of life that I will never see. One item on the long list of reasons why I blog is to look into those places by explaining what I read on the ‘net. I describe those places as worlds far away that I’ll never visit.

Two topics for today:

Deep background on Silk Road, the marketplace for anything
Selling positive pregnancy tests online

From 2013 through 2015 I wrote about 10 articles on Silk Road and the Dread Pirate Roberts who ran that dark world where you could buy anything you wanted. You could buy drugs, weapons, forged passports, poison, anything. You can find my old posts here.

Turns out Dread Pirate Roberts (an unfortunate choice of names that sullies the reputation of one of the best slap stick movies ever!) is Ross William Ulbricht. He is currently serving a life sentence at the New York Metropolitan Correctional Center. The Bureau of Prison website lists his release date as “Life.”

Now there is a full length book describing his assent to the peak of the dark world and descent into a life of free federal housing for the rest of his natural life. At a current age of 33, that will be a looooong time.

6/13/17 – Wall Street Journal – The Dark Web’s Dark Prince – Review describes American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road.

Review summarizes the origin of Silk Road, its rapid growth, and challenges of running an organization with a billion dollars of illegal sales.

Reviewer suggests there is not really that much unusual about Mr. Ulbricht: he suggests people who love Ayn Rand, have extreme confidence, and can build a competent website are on both sides of each street at every corner of Silicon Valley.

All of what happened took place on-line, so the drama we usually see in criminal stories isn’t present. (Although the way the feds physically grabbed his opened laptop while he was using it is quite entertaining.) One of the ripple effects is that Mr. Ulbricht left a massive paper trail, albeit in electronic bits and bytes.

The review says the book didn’t go into a lot of technical detail. In contrast, one of the positive reviews at Amazon said the book provided a lot of tech info on the case.

I’ve added the book to my wish list – don’t know if I will ever make the time to read it.

And in another dark corner of the underside of life…

12/19/16 – Huffington Post – Woman Claims She’s Paying College Bills With Positive Pregnancy Tests – I would never think of this scam on my own but having had my brain stretched far enough to grasp the concept, it makes sense.

A pregnant woman looking at her college tuition costs came up with the idea of selling positive pregnancy tests. Or if you prefer, she can sell you some urine, which will obviously be off the chart on key hormones since she is three months along.

The Huffington Post investigated her listing, reporting that she doesn’t care if you are pulling a prank or blackmailing some executive for whom you are his on-the-sly-mistress. Price is $25 for 1, discount price of $35 for two if you are driving a long way to pick up your fake test results.

Yeah, I can see you might want to buy two in case you need to pretend to do a retest to persuade your mark that you really are pregnant. Also might be a good idea not to get the results in the mail – – couldn’t risk getting discovered.

I’m not sure whether to put this in the positive “there is a market for everything”category or the negative “worlds far far away I’ll never visit” bucket.

One thing I do know – this is a scheme that this little ol’ CPA would never dream up, but having read about it this CPA needs to file it away in my real-life fraud education lessons.

My tweet described the story this way:

File this away in the same category as buying-an-envelope-full-of-blank-restaurant-and-taxi-receipts …

As an auditor, I am constantly amazed at the dark creativity of the human mind.

posted 6/19/17