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Bitcoin Crime

Silk Road Shut Down, Founder Arrested, $3.6 Million Worth of Bitcoin Seized 620

New submitter u38cg writes Ross William Ulbricht, known as 'Dread Pirate Roberts,' was arrested in San Francisco yesterday and has been charged with one count each of narcotics trafficking conspiracy, computer hacking conspiracy, and money laundering conspiracy, according to a court filing. Silk Road has been shut down and some $3.6m in Bitcoin (26,000 Btc) seized. The question is — how?" onyxruby submitted a link to the criminal complaint (PDF; coral cache might work better). The court filing indicates that they seized the actual servers and recovered their contents, making numerous references to the private messaging system. Also according to the court filing, the Silk Road was used to sell ~$1.2 billion in illicit goods since being founded in 2011.
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Silk Road Shut Down, Founder Arrested, $3.6 Million Worth of Bitcoin Seized

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  • Tor compromised (Score:5, Insightful)

    by MetalliQaZ ( 539913 ) on Wednesday October 02, 2013 @12:44PM (#45015513)

    I think it can be argued that Silk Road practiced the use of Tor as well as anyone could have. They still got pinched. Although it may come out that an insider turned informant, it seems that the Tor system is compromised by the snoops.

    • Re:Tor compromised (Score:5, Insightful)

      by Anonymous Coward on Wednesday October 02, 2013 @12:51PM (#45015613)

      *(Maybe. We don't know really.)

      Silk Road, however, is exceptionally well known as an illicit enterprise, so despite anonymity of packet data (or not...) they're targeted anyway.

      If known to be engaging in criminal activity, Tor is not really going to save you or be the critical flaw in your plan, either.

      • Re:Tor compromised (Score:5, Insightful)

        by jonbryce ( 703250 ) on Wednesday October 02, 2013 @01:50PM (#45016573) Homepage

        The main thing is that you have to turn your stash of illicit bitcoins into real cash for most things. Someone trying to sell a load of bitcoins is going to attract attention from the authorities, and from that, they can figure out if you got them from selling drugs, which is definitely illegal, or from running a massive mining rig, where arguably legal, and it would be financial services regulators that would consider it rather than drugs enforcement people.

      • Re:Tor compromised (Score:5, Insightful)

        by Anonymous Coward on Wednesday October 02, 2013 @02:51PM (#45017383)
        What we can learn from this as well as history, is they can take down the silk road site all they want, there will be 5 more to take its place and learn from its mistakes before you can say drug war.

        Even after all these years I find it hard to accept that so many people have a problem with people they don't even know doing things they never would have heard about had it not been for the theft and abuse of their own rights and money. Strange world we live in...
    • Re:Tor compromised (Score:5, Informative)

      by Bulge Temptingly ( 982649 ) on Wednesday October 02, 2013 @12:52PM (#45015635)
      Nope, apparently Canadian authorities turned up some fake ID in a routine postal search.
      • Re:Tor compromised (Score:5, Interesting)

        by gl4ss ( 559668 ) on Wednesday October 02, 2013 @01:09PM (#45015917) Homepage Journal

        ...a canadian routine postal search? sounds a bit of fabrication(you know, finding evidence illegally and then fabricating something for a bust). I seriously doubt they have fakeid smelling dogs.

        but was he really hosting the operation from san fransisco? why, why on earth? why have anything tying him to it at home??

        • I buy a lot of stuff online, and always look for postal delivery. Every few months I will get a package that has been opened by Canada Customs. Since my purchases are all legal, it is not a big deal, and they even tape the container closed with "Inspected by Canada Customs" tape.
          So it is possible.
        • by sirwired ( 27582 ) on Wednesday October 02, 2013 @01:50PM (#45016579)

          Every incoming (or, I guess, in the case of Canada, outgoing) mail parcel goes through an x-ray (I'm not saying they actually pay a lot of attention to each one; it's kind of luck-of-the-draw.) If the inspector sees a package containing a bunch of plastic cards and something that looks like a passport, they are naturally going to wonder what that's doing being sent via international mail. It's not as if you can accidentally leave your passport at home when leaving the country.

          Because customs facilities are on international borders, they don't need anything but the barest suspicion to take a peek in your package, certainly not a warrant.

          But yeah, hosting SR in SanFran was not very bright. Of course, given that what he was doing would get him arrested in pretty much every country in the land, there's not really any good location for the servers. Even in Russia, you would have needed some pretty good underworld connections to keep those servers out of govt. hands.

      • Re:Tor compromised (Score:5, Insightful)

        by TheSpoom ( 715771 ) <slashdot.uberm00@net> on Wednesday October 02, 2013 @01:18PM (#45016065) Homepage Journal

        Wait, so after all the NSA bullshit, he was caught by Canada? Oh, the irony.

    • Re: (Score:3, Informative)

      by i kan reed ( 749298 )

      Tor isn't a magic bullet. It's still fundamentally putting your trust in someone else. There's always a human element to relay communications. Any complicit person can yield some useful information. You can encrypt what you're saying, but someone has to know who you're talking to.

      • Re:Tor compromised (Score:5, Informative)

        by JesseMcDonald ( 536341 ) on Wednesday October 02, 2013 @03:27PM (#45017817) Homepage

        You can encrypt what you're saying, but someone has to know who you're talking to.

        Actually, no. Someone has to know who you are, and someone has to know who's being talked to, but they needn't be the same person. The way Tor works is that there are at least two "interior", routing-only nodes. Let's call the sender A and the receiver D; the interior nodes are B and C. A opens an encrypted connection to B, and tells it to connect to C. A then opens an encrypted channel to C using B as a relay, and yet another encrypted channel to D relaying through both B and C. B knows about A and C; C knows about B and D; and D knows about C. Unless the nodes are sharing information, none of B, C, or D know that A is communicating with D.

        Note that this bust didn't result from compromising Tor; the SR operator was discovered through old-fashioned customs inspections.

    • Re:Tor compromised (Score:5, Informative)

      by Anonymous Coward on Wednesday October 02, 2013 @12:55PM (#45015701)

      it appears that agents found Ulbricht after Canadian border authorities routinely checked a package intended for his San Francisco home and discovered nine fake identification cards within, which Ulbricht allegedly was seeking to obtain to rent more servers to power Silk Road as it massively expanded.

      source: []

    • Re:Tor compromised (Score:5, Interesting)

      by Drachs ( 29694 ) on Wednesday October 02, 2013 @12:55PM (#45015705) Homepage

      If I was guessing, I'd guess it was bitcoin, not Tor that did him in. He was moving way too much volume to hide all that. After all, the block chain is public. The FBI only has to lean on the various organizations that turn bitcoin into cash. If it gets the addresses of all their wallets, all their customer account information, and the identity of some coins that were spent on the silk road, it only has to work backwards to see who turned those coins into cash. People think bitcoin is anonymous, but it keeps a record of every transaction. This is probably the beginning of the end for bitcoin. I'm not sure it's mature enough to sustain itself without the black market support.

    • Re: (Score:3, Informative)

      by Anonymous Coward

      On reddit it was reported that a parcel containing fake IDs (presumably to buy servers) mailed to DPR was intercepted at the Canadian border, and this is what lead to the arrest.

    • Re:Tor compromised (Score:5, Informative)

      by Anonymous Coward on Wednesday October 02, 2013 @12:57PM (#45015737)

      Nope. []
      TLDR version:
      A user named altoids advertised SR on various forums very early on.
      Later the same user wanted some dev work done, used a gmail address as contact.
      Same gmail address leads to a LinkedIn profile ... and a name and address.
      Seize that dudes computers.
      Find keys to the kingdom for the SR servers.

    • It's was almost certain that Silk Road would be shut down from the moment it was started. Money has to trade hands, eventually you'll be able to trace it to the source.
    • Re:Tor compromised (Score:5, Interesting)

      by circletimessquare ( 444983 ) <> on Wednesday October 02, 2013 @01:05PM (#45015845) Homepage Journal

      it seems that the Tor system is compromised by the snoops.


      tor was MADE BY the snoops, FOR the snoops

      it started as a us naval research lab project to allow spies and dissidents in hostile countries to communicate with the us spy network without fear of being spied on by hostile governments

      let me repeat: tor was made by the american government

      of course it's been decentralized since then, but you're an idiot if you don't think they still don't have their hooks in it []

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        correct, TOR is owned. look at this screenshot of prism:

        right tab...

    • Re:Tor compromised (Score:5, Insightful)

      by Dunbal ( 464142 ) * on Wednesday October 02, 2013 @01:06PM (#45015853)

      it seems that the Tor system is compromised by the snoops.

      The safest option is to assume that EVERYTHING is compromised nowadays. Your OS. Your security certificate server. Your ISP. Your VPN. SSL. Your webcam. Everything.

    • Re:Tor compromised (Score:4, Interesting)

      by blueg3 ( 192743 ) on Wednesday October 02, 2013 @01:14PM (#45015991)

      That is an enormous logical leap. Silk Road was running a high-profile, long-running Tor service, which is inherently dangerous and certainly more dangerous than many other applications of Tor. Is there evidence that suggests they were particularly skilled in doing so safely? There are also a number of well-known (and nearly-unavoidable) attacks against the Tor design. They are difficult, but then, they've been running a high-profile site for a long time, which makes it a lot easier to be targeted by even difficult attacks.

      Finally, there are plenty of ways for an operation that large to be undone that are much more likely compromise of Tor itself. Most of these things are solved by conventional police work because (a) "real" evidence looks a lot better in a trial and (b) people are a lot better at making mistakes than most security technologies.

    • by jovius ( 974690 )

      Bitcoin is not an anonymous system, so the transactions should be trackable. I'd guess that's one of the weak links. Probably most of the users don't anonymize their Bitcoin usage. Silk Road may have accepted Bitcoins as a tip for example - it anyway gets a percentage of the transactions, and from all of the BC traffic a couple of hotspots can be identified.

      The owner himself probably created a noticeable trail of real money. An Infomant is a good guess - when money and drugs are involved some of it is real

    • Re:Tor compromised (Score:5, Interesting)

      by amicusNYCL ( 1538833 ) on Wednesday October 02, 2013 @01:29PM (#45016237)

      I don't know if Tor is compromised or not, but according to the complaint they were on to him since 2011. He used an account called "altoid" on the regular net to both promote the launch of the site, and elsewhere to solicit IT help directing people to his personal Gmail address (with his name right there in it).

  • by Rafał Łoś ( 3361257 ) on Wednesday October 02, 2013 @12:45PM (#45015523)
    So this begs the question - Are we winning the war on drugs yet?
    • No it does not beg the question "Are we winning the war on drugs yet?". The war on drugs cannot be won as long as there exist people creating demand for illicit products since these very same people will find a way to obtain it. The only way to win that war is by exterminating humanity as a species and that would be the definitive Pyrrhic victory.
    • by Richy_T ( 111409 ) on Wednesday October 02, 2013 @01:29PM (#45016235) Homepage

      It depends. Do you make money from the prison industry?

    • by gandhi_2 ( 1108023 ) on Wednesday October 02, 2013 @01:32PM (#45016277) Homepage

      War on Drugs? Don't know.

      The War on Incorrect Usage of "Begs the Question" however, we are obviously losing.

  • by SgtKeeling ( 717065 ) on Wednesday October 02, 2013 @12:47PM (#45015577) Journal
    I just finished reading Gwern's guide to the Silk Road the other evening. If you weren't familiar with the goods for sale, or how it worked, this is a great article: []
  • by EMG at MU ( 1194965 ) on Wednesday October 02, 2013 @12:51PM (#45015615)
    This guy had to convert some of the bitcoin into real $ at some point, he had to eat and live somewhere right? Money laundering investigations might have been the vector through which he was compromised instead of a computer based trace.
  • by Anonymous Coward on Wednesday October 02, 2013 @12:53PM (#45015671)

    According to the complaint, they tracked him by intercepting fake id's he sent to his actual home address. Whether they breached TOR and just set him up, or just hit the stupid mistake of a lifetime by him using his actual address I doubt we will ever know. In any case, they traced things back to him in the end it seems.

  • by Em Adespoton ( 792954 ) <> on Wednesday October 02, 2013 @12:58PM (#45015747) Homepage Journal

    So how long will it be before the Silk Road is back up and running under the management of the Dread Pirate Roberts? I presume he had a cabin boy prior to being arrested... or was that how he got nabbed?

  • by Anonymous Coward on Wednesday October 02, 2013 @12:59PM (#45015763)

    It's an open secret that Silk Road was THE primary driver of demand for bitcoin in the beginning. Adoption by the Silk Road transformed bitcoin from a technical curiosity to a real currency backed by a valuable physical commodity (drugs).

    Bitcoin has a life of its own now. Even Wall Street is involved. But without Silk Road, 99% of slashdot would have never heard of bitcoin. And the end of Silk Road is certain to impact bitcoin in a big way, even today.

    • by Ultra64 ( 318705 )

      Expect to see bitcoin lose half its value

      Sweet. When that happens it will be time to buy.

  • Ya, Sure. (Score:5, Funny)

    by fahrbot-bot ( 874524 ) on Wednesday October 02, 2013 @01:00PM (#45015771)

    Everyone knows the real Dread Pirate Roberts [] has been retired +15 years in Patagonia ... But, of course, no one would care about arresting the Dread Pirate Ulbricht.


  • How he was caught. (Score:4, Informative)

    by YesIAmAScript ( 886271 ) on Wednesday October 02, 2013 @01:08PM (#45015897) []

    I didn't write it.

    Link to indictment contained within too.

  • by CanadianRealist ( 1258974 ) on Wednesday October 02, 2013 @01:09PM (#45015903)

    Will the government try to redeem these bitcoins? Wouldn't that be like saying that they accept that bitcoin is valid? (Of course they could be hypocrites and say that bitcoin is completely invalid and redeem them anyways.)

    It would be neat if all the seized bitcoins could be identified and recorded as being worthless now.

  • by RevWaldo ( 1186281 ) on Wednesday October 02, 2013 @01:19PM (#45016089)
    Steve Ballmer: It is very strange. I have been in the CEO business so long, now that it's over, I don't know what to do with the rest of my life.

    Ross William Ulbricht: Have you ever considered black marketing? You'd make a wonderful Dread Pirate Roberts.

  • by MadCow-ard ( 330423 ) on Wednesday October 02, 2013 @01:39PM (#45016403)
    It sure doesn't read like TOR was compromised. It was the Gmail account DPR left when first advertising SR on a shrooms site. The FBI (if they aren't just covering for the NSA) do seem to have caught DPR through old fashioned sleuth work. Yes, they managed to copy a server but they still couldn't get the names out of it, only link the messages and transaction dates to other events they tracked down to DPR after tentatively identifying him using Gmail, Google+ and LinkedIn. Ouch.
  • by ErichTheRed ( 39327 ) on Wednesday October 02, 2013 @01:51PM (#45016581)

    An interesting side point that comes out of all this is that services like Silk Road wouldn't exist if there wasn't a market for them.

    I'm about as far from Libertarian as you can get, but one thing I do think they have right is the idea that the "war on drugs" should be stopped. It can't be won, that has been proven. Every single defense that's put up to stop drug trafficking is worked around shortly after it comes on the scene. Drug cartels basically run large parts of Mexico and Central America. US citizens get tossed in prison for drug use and sales, which basically turns them into a wasted resource (good luck getting a normal job with a prison record) and this ends up costing more in the long run.

    Prohibition basically gave birth to organized crime, simply because enough of the population wanted to keep drinking alcohol and was willing to break the law. As a result, we saw what we see now with other drugs -- the price of alcohol shot up, other ancillary crime increased, violent gangs brutally wiped each other out neighborhood by neighborhood in big cities. With drugs it's the same thing -- I have no desire to use drugs, but there are plenty of others who do. And they'll do whatever it takes to do so, and pay whatever street price is prevalent. Econ 101 -- inelastic demand (more like infinite demand) in the face of constrained supply means prices keep going up no matter what you do.

    I believe drug use is a completely victimless crime -- it's the other stuff that happens alongside it (stealing to pay for expensive drugs, drunk/high driving, etc.). If everything were readily available, sold in safe doses and taxed appropriately (like tobacco and alcohol,) prices would be low and people wouldn't have to steal to pay for their habits.

    The other thing to consider is that we're rapidly heading towards a sci-fi dystopian future where human labor is no longer as important as it is now. When the unemployment rate shoots up to 85%, wouldn't you rather fill their free time with something other than random crime sprees? Yes, it sounds very "Brave New World"-ish, but it's rapidly coming true. Unless society just drops the use of labor and money as measures of productivity, which will never happen, this is the inevitable future!

  • Wow (Score:4, Interesting)

    by m.dillon ( 147925 ) on Wednesday October 02, 2013 @02:00PM (#45016689) Homepage

    Wow, if people read the criminal indictment there's one, possibly even two murder-for-hires in the wings linked to (allegedly posted by / conversation with) this guy.


  • by halcyon1234 ( 834388 ) <> on Wednesday October 02, 2013 @02:30PM (#45017127) Journal

    Article: 11:36am: US Government seizes $3.6 million worth of bitcoins

    Update, 11:45am: US Government seizes $1.75 million worth of bitcoins

    Update, 12:03pm: US Government seizes $8.3 million worth of bitcoins

    Update, 12:54pm: US Government seizes $766 thousand worth of bitcoins

    Update, 3:27pm: US Government seizes Eight Dollars worth of bitcoins

    Update, 5:55pm: US Government seizes $15 million worth of bitcoins

God made the integers; all else is the work of Man. -- Kronecker