Silk Road stunner: Ulbricht admits founding the site, but says he isn’t DPR | Ars Technica

Silk Road stunner: Ulbricht admits founding the site, but says he isn’t DPR

Ulbricht made the site, left, and was "lured back" to be the "ultimate fall guy."

by Joe Mullin - Jan 14 2015, 8:50am +0800

NEW YORK—Once they got the chance, it took prosecutors less than a minute to point the finger—literally—at Ross Ulbricht.

The jury of six men and six women were assembled in Manhattan's federal courthouse to hear a story about a "dark and secret part of the Internet," government lawyer Timothy Howard explained. The story was about "a website called Silk Road, where anybody, anywhere could buy and sell dangerous drugs with the click of a mouse."

"That man," Howard said, turning to look straight at Ulbricht and extending his arm towards him. "The defendant—Ross Ulbricht—he was the kingpin of this criminal empire."

Slowly, silently, Ulbricht shook his head back and forth. Howard simply turned back to the jury and laid out the government's case.

“Caught red handed”

"His idea was to make online drug deals as easy as online shopping," continued Howard. "And that's exactly what he did."

It was all available on Silk Road: heroin, cocaine, crystal meth, and other hard drugs. "More than one million drug deals took place on the site before the government shut it down," Howard said. "He [Ulbricht] set the rules the dealers had to follow. And like any other drug boss, he took a part of every single deal that took place on Silk Road. And with that, he amassed a fortune—$18 million."

Ulbricht ran the site since its inception in 2011, and he was planning for it since 2009, Howard told the jurors. With no goods on the site, Ulbricht kicked off the supply by growing his own hallucinogenic mushrooms in a cabin outside Austin.

Like any street-level drug boss, "he was willing to use violence to protect his turf," Howard continued.

The defendant controlled everything about Silk Road, from top to bottom. A global network of drug dealers paid for the privilege of being on the site. He gave them a way to prevent themselves from being caught. He gave dealers a whole new way to find, and keep, customers.

We are here to pull back the curtain on this dark and secret world. Behind the curtain was one man—Ross Ulbricht—and his laptop.

Howard went on to explain some of the details of how the site was run: it used bitcoin, a digital currency that the jury would hear more explanation about later. Silk Road could only be accessed through the "Tor" network, which allowed his customers to make illegal transactions "without leaving a digital trail." Howard said Ulbricht took commissions of between 10 and 12 percent. That's where the $18 million in bitcoins came from, Howard said.

Silk Road was not without rules. Most importantly, users weren't supposed to identify any of the site's sellers, whom Howard carefully referred to only as "drug dealers" throughout his opening. When someone violated that rule, Ulbricht began trying to have people killed—six in all, Howard said.

"This rule was so important, he was willing to use violence to enforce it," Howard said. "He was willing to stop at nothing to protect his criminal empire."

For users who followed the rules, though, Ulbricht was helpful. He gave advice on how to avoid getting caught and how to package shipments. When disputes arose between dealers and users, it was Ulbricht who reigned as judge.

"He kept most of his friends and family in the dark about his digital life," Howard explained. "His friends complained that he didn't have any free time."

Howard acknowledged Ulbricht didn't live large. He kept his money, not spending much of it. "He deliberately kept a low profile, planning for a day in the future when he might move to another country, in the Caribbean, and begin spending it," Howard said. 

One October day, though, his luck ran out. That's the day he went to a public library, just five minutes from his house, and was seized by federal agents—right in the middle of an online chat with one of his 10 Silk Road employees, a member of his "customer support staff." But this one was an agent himself. "As the defendant typed away, he had no idea agents in the public library were watching his every move," Howard said.

Ulbricht was seized before he could close his laptop. It was open to a "mastermind" page made to manage Silk Road.

"The defendant was caught red handed," Howard continued.

He gave a short lineup of some of the witnesses jurors would hear from. One was a friend of Ulbricht's who talked about programming with him frequently—and whom Ulbricht ultimately confided in.

Another was a drug dealer who sold heroin on Silk Road, who would provide "an inside view of how Silk Road operated," promised Howard. "He ran his own business but it was overwhelmed by his addiction." The man turned to selling drugs on Silk Road and was soon making serious cash. "Almost overnight he was able to become a big time drug dealer on Silk Road," said Howard. "The defendant made it possible for this man, who had never sold drugs before in his life, to sell to literally thousands of around the country."

“He was lured back... Ross is no kingpin”

Defense Attorney Joshua Dratel was next. He got up and made the first substantial statement about Ulbricht's defense in over a year, and it was a bombshell—he admitted it was true. Ulbricht founded the site. But he was no drug kingpin.

"Ross is a 30-year-old, with a lot at stake in this trial—as you could imagine," said Dratel, speaking throughout his statement in a low key voice. "This case is about the Internet and the digital world, where not everything is as it seems. Behind a screen, it's not easy to tell...you don't know who's on the other side. You don't know who to trust."

Dratel didn't spell out exactly what he meant by those first cryptic sentences. Instead, he proceeded to make a stunning admission.

"Silk Road was Ross' idea," Dratel said.

He created it. As a free-wheeling, free market site, that could sell anything, except for a couple items that were harmful. It was an economic experiment. After a few months, it was too much for him. He handed it off to others.

In the end, he was lured back by those operators, lured back to that library, that day. They had been alerted that they were under investigation, and time was short for them. Ross was the perfect fall guy. Silk Road was his idea.

[Silk Road created] a digital contrivance that left him holding the bag when the real operators of Silk Road knew their time was up.

The idea that Ross was the Dread Pirate Roberts is "a contradiction that's so fundamental, and dramatic," Dratel said.

DPR was meticulous. "DPR studiously avoided revealing his identity to anyone involved in the site," Dratel pointed out—but investigators say they found Ulbricht's name all over the Web.

Ulbricht's lifestyle was modest, not the lifestyle of someone who ran a multi-million dollar drug business. The bitcoins found by authorities was "just a fraction" of the commissions estimated to have been earned by Silk Road, he noted.

Dratel avoided talking about how much Bitcoin Ulbricht actually had; even if the authorities did find millions, though, the estimated Silk Road take was around $80 million, a big discrepancy. Ulbricht was interested in Bitcoin and traded in it; Dratel acknowledged that the defendant made money from it, noting the digital currency had seen its price soar from just several dollars per Bitcoin in 2011 to several hundred in 2013.

Finally, Dratel asked: Would DPR have gone to the public library that morning and used the website on a public network, at a public library? Would DPR have sat there with his laptop open, with a BitTorrent client operating, as Ulbricht had been? BitTorrent was "a program that allows anyone on a network worldwide access to his computer," Dratel explained. That was the same computer that had Ross' private information going back for years. Would DPR have taken such a risk? "It defies common sense," Dratel proposed. "And this is the DPR the government says ran the most profitable drug dealing site in history."

The Homeland Security investigators found ID's  (pictured in a recent Ars story) being delivered to Ulbricht's San Francisco apartment, and he talked to them. "Does he run?" asked Dratel.

No. He's still living in the same apartment in San Francisco. Does he move any bitcoin? No. Does he destroy the stuff on his laptop, that's supposedly so incriminating? No.

Contrast that to what you hear about the real Dread Pirate Roberts. How he's extra sensitive to security, extra sensitive to law enforcement on the site.

As for the allegations of violence, Dratel was quick to emphasize that there's no actual violent charges brought by the government. "There no evidence these people even existed," he said.

Then Dratel made some vague remarks suggesting there may have been some elaborate role-playing.

"The Internet is an unusual place," Dratel said. "People create and fabricate profiles of themselves and others, in ways we weren't able to imagine 20 years ago. It's like a dating site. You get all kinds of information—then you meet someone in person, and it may not be the same."

By September, DPR was worried that law enforcement knew who he was, said Dratel.

"That's what compelled the real DPR to put his plan into action—and put the blame on Ross," he said. "The real Dread Pirate Roberts is still out there... Silk Road Two was online within weeks."

"Ross is not a drug dealer. Ross is not a kingpin. Common sense will tell you that Ross is not guilty on all counts against him."

It was almost four o'clock Eastern time when the opening statements finished. After a short break, the first witness took the stand: Homeland Security special agent Jared Deryeghiayan, who would talk about how he'd first gotten on the path of tracing Silk Road through finding pills in the mail.

US District Judge Katherine Forrest stopped testimony just before 5:00pm. She gave the jury standard instructions, not to talk about the case with anyone.

Ulbricht turned as they filed out of the room. He had seemed emotional during opening statements, and his eyes were red. He watched the jurors file out until they were completely out of the courtroom, perhaps pondering the power this group of strangers now had over his future.