Silk Road
Template:Infobox Market Silk Road was an online black market that operated as a Tor hidden service, such that online users are able to browse it anonymously and securely without potential traffic monitoring. The website launched in February 2011; development had begun six months prior.<ref>https://www.smh.com.au/technology/technology-news/drugs-bought-with-virtual-cash-20110611-1fy0a.html</ref><ref>https://forum.bitcoin.org/index.php?topic=3984.msg57086#msg57086</ref> Although Silk Road was an underground website, sometimes called the "Amazon.com of illegal drugs" or the "eBay for drugs," the site also sold apparel, art, biotic materials, books, collectibles, computer equipment, digital goods, along with dozens of other categories of merchandise.
On 2 October 2013, the FBI shut down Silk Road. They arrested Ross William Ulbricht on charges of alleged murder-for-hire and narcotics trafficking violation and identified him as the founder and chief operator "Dread Pirate Roberts." On 6 November 2013 Forbes and Vice reported that Silk Road 2.0 was online and being run by former administrators of Silk Road and that a different user was now using the name, Dread Pirate Roberts.
Characterized as humanitarian, idealist, and criminal, alleged mastermind and founder Ulbricht pled not guilty to charges of drug trafficking, computer hacking, money laundering, and running a continuing conspiracy in a Manhattan court on 7 February 2014.
On 6 November 2014, authorities with the Federal Bureau of Investigation, Europol, and Eurojust announced the arrest of Blake Benthall, allegedly the owner and operator of Silk Road 2.0 under the pseudonym "Defcon", the previous day in San Francisco. He is to be presented in United States federal court in San Francisco on 6 November before Magistrate Judge Jaqueline Scott Corley.<ref>https://www.businessinsider.com/fbi-silk-road-seized-arrests-2014-11</ref>
Ulbricht was convicted of all seven charges in U.S. Federal Court in Manhattan relating to Silk Road, and was sentenced to life in prison.<ref>https://www.nytimes.com/2015/05/30/nyregion/ross-ulbricht-creator-of-silk-road-website-is-sentenced-to-life-in-prison.html</ref>
History
Silk Road was founded in February 2011. The name "Silk Road" comes from a historical network of trade routes, started during the Han Dynasty (206 BC – 220 AD), between Europe, India, China, and many other countries on the Afro-Eurasian landmass. Silk Road was operated by "Dread Pirate Roberts" (named after the fictional character from The Princess Bride), who was known for espousing libertarian ideals and criticizing regulation.
Initially, buyers could register for free, but there were a limited number of new seller accounts available; new sellers had to purchase an account via an auction. Later, a fixed fee for each new seller account was chosen to mitigate the possibility of malicious individuals distributing tainted goods.
In June 2011, Gawker published an article about the site, which led to "Internet buzz" and an increase in website traffic. Once the site was known publicly, U.S. Senator Charles Schumer asked federal law enforcement authorities such as the DEA and Department of Justice to shut down the website.
In February 2013, an Australian cocaine and MDMA dealer became the first person to be convicted of crimes directly related to Silk Road, after authorities intercepted drugs he was importing through the mail, searched his premises, and discovered his Silk Road alias in an image file on his personal computer. Australian police and the DEA have targeted Silk Road users and made arrests, albeit with limited success at reaching convictions. In December 2013 a New Zealand man was sentenced to two years and four months' jail after being convicted of importing 15 grams of methamphethamine he had bought on Silk Road.
In May 2013, Silk Road was taken down for a short period of time by a sustained DDoS attack. On 23 June 2013, it was first reported that the United States Drug Enforcement Administration seized 11.02 bitcoins then worth $814, which the media suspected was a result of a Silk Road honeypot sting.
Arrest and trial of Ross William Ulbricht
On 2 October 2013, Ross William Ulbricht, alleged by the FBI to be the owner of Silk Road and the person behind the pseudonym "Dread Pirate Roberts," was arrested in San Francisco<ref>https://news.yahoo.com/fbi-raids-alleged-online-drug-market-silk-road-153729457.html</ref><ref>https://www.theguardian.com/technology/2013/oct/02/alleged-silk-road-website-founder-arrested-bitcoin</ref> at 3:15 p.m. PST<ref>https://www.forbes.com/sites/ryanmac/2013/10/02/who-is-ross-ulbricht-piecing-together-the-life-of-the-alleged-libertarian-mastermind-behind-silk-road/2/</ref> in Glen Park library, a branch of the San Francisco Public Library.<ref>https://www.forbes.com/sites/ryanmac/2013/10/02/who-is-ross-ulbricht-piecing-together-the-life-of-the-alleged-libertarian-mastermind-behind-silk-road/2/</ref>
Ulbricht was indicted on charges of money laundering, computer hacking, conspiracy to traffic narcotics,<ref>https://www.forbes.com/sites/ryanmac/2013/10/02/who-is-ross-ulbricht-piecing-together-the-life-of-the-alleged-libertarian-mastermind-behind-silk-road/2/</ref><ref>https://www.ibtimes.co.uk/sillk-road-operator-ross-ulbricht-denies-dread-512799</ref> and attempting to have six people killed.<ref>https://www.theguardian.com/technology/2013/nov/21/silk-road-founder-held-without-bail</ref> Prosecutors alleged that Ulbricht paid $730,000 to others to commit the murders, although none of the murders actually occurred.<ref>https://www.theguardian.com/technology/2013/nov/21/silk-road-founder-held-without-bail</ref> Ulbricht ulitmately was not charged for any of the alleged murders.<ref>https://www.dailydot.com/crime/silk-road-murder-charges-ross-ulbricht/</ref>
The FBI initially seized 26,000 bitcoins, worth approximately $3.6 million at the time, from accounts on Silk Road. An FBI spokesperson said the agency would hold the bitcoins until the Ulbricht's trial finished, after which the bitcoins would be liquidated.<ref>https://www.forbes.com/sites/kashmirhill/2013/10/04/fbi-silk-road-bitcoin-seizure/</ref> Later, in October 2013, the FBI reported that it had seized 144,000 bitcoins, worth $28.5 million, and that the bitcoins belonged to Ulbricht.<ref>https://www.forbes.com/sites/andygreenberg/2013/10/25/fbi-says-its-seized-20-million-in-bitcoins-from-ross-ulbricht-alleged-owner-of-silk-road/</ref>
Ulbricht's trial began on 13 January 2015 in Federal Court in Manhattan.<ref>https://arstechnica.com/tech-policy/2015/01/ulbricht-admits-he-founded-silk-road-but-says-he-isnt-dread-pirate-roberts/</ref> At the start of the trial, Ulbricht admitted to founding the Silk Road website, but claimed to have transferred control of the site to other people soon after he founded it.<ref>https://arstechnica.com/tech-policy/2015/01/ulbricht-admits-he-founded-silk-road-but-says-he-isnt-dread-pirate-roberts/</ref> Ulbricht's lawyers contended that Dread Pirate Roberts was really Mark Karpelès, and that Karpelès set up Ulbricht as a fall guy.<ref>https://arstechnica.com/tech-policy/2015/01/defense-bombshell-in-silk-road-trial-mt-gox-founder-set-up-ulbricht/</ref> However, Judge Katherine Forrest ruled that any speculative statements regarding whether Karpelès or anyone else ran Silk Road would not be allowed and would be stricken from the record.<ref>https://techcrunch.com/2015/01/28/recapping-week-two-of-the-silk-road-trial/</ref> In the second week of the trial, prosecutors presented documents and chat logs from Ulbricht's computer that, they said, demonstrated how Ulbricht had administered the site for many months, which contradicted the defense's claim the Ulbricht had relinquished control of Silk Road. Ulbricht's attorney suggested that the documents and chat logs were planted there by way of BitTorrent, which was running on Ulbricht's computer at the time of his arrest.<ref>https://techcrunch.com/2015/01/28/recapping-week-two-of-the-silk-road-trial/</ref>
On 4 February 2015, the jury convicted Ulbricht of all seven charges,<ref>https://arstechnica.com/tech-policy/2015/02/ulbricht-guilty-in-silk-road-online-drug-trafficking-trial/</ref> including charges of engaging in a continuing criminal enterprise, narcotics-trafficking, money-laundering and computer-hacking. He faces 30 years to life in prison.<ref>https://www.nytimes.com/2015/02/05/nyregion/man-behind-silk-road-website-is-convicted-on-all-counts.html?hp&action=click&pgtype=Homepage&module=first-column-region®ion=top-news&WT.nav=top-news&_r=0</ref><ref>https://www.wsj.com/articles/silk-road-creator-found-guilty-of-cybercrimes-1423083107?mod=WSJ_hp_RightTopStories</ref> He will be sentenced on 15 May 2015.<ref>https://www.nytimes.com/2015/02/05/nyregion/man-behind-silk-road-website-is-convicted-on-all-counts.html?hp&action=click&pgtype=Homepage&module=first-column-region®ion=top-news&WT.nav=top-news&_r=0</ref>
During the trial, Judge Katherine B. Forrest received death threats. Hackers posted her personal information, including her address and Social Security number, on an underground site called The Hidden Wiki. Ulbricht's lawyer, Joshua Dratel, said he and his client "obviously, and as strongly as possible, condemn" the anonymous postings against the judge. "They do not in any way have anything to do with Ross Ulbricht or anyone associated with him or reflect his views or those of anyone associated with him," Dratel said.<ref>https://nypost.com/2014/10/24/hackers-threaten-federal-judge-in-silk-road-founder-case/</ref>
In late March 2015 a criminal complaint issued by the United States District Court for the Northern District of California led to the arrest of two former federal agents who had worked undercover in the Baltimore Silk Road investigation of Ulbricht.<ref>https://www.ft.com/intl/cms/s/0/81ed8e70-d710-11e4-97c3-00144feab7de.html#slide3</ref> The agents are alleged to have kept funds Ulbricht transferred to them in exchange for purported information about the investigation.<ref>https://www.nytimes.com/aponline/2015/03/31/us/ap-us-agents-charged-silk-road.html</ref> The agents were charged with wire fraud and money laundering.<ref>https://www.nytimes.com/aponline/2015/03/30/us/ap-us-agents-charged-silk-road.html</ref>
Silk Road 2.0
On 6 November 2013 admins from the shuttered Silk Road, led by a new pseudonymous Dread Pirate Roberts, relaunched the site. Dubbed "Silk Road 2.0" it recreated the original site's setup and promised improved security. The new DPR took the precaution of distributing encrypted copies of the site's source code to allow the site to be quickly recreated in the event of another shutdown.
On 20 December 2013 it was announced three alleged Silk Road admins had been arrested; two of these suspects, Andrew Michael Jones and Gary Davis, were named as the admins "Inigo" and "Libertas" who had continued their work on Silk Road 2.0. Around this time the new Dread Pirate Roberts abruptly gave up control of the site and froze its activity, including its escrow system. A new temporary administrator under the screenname "Defcon" took over and promised to bring the site back to working order.
On 13 February 2014, Defcon announced that Silk Road 2.0's escrow accounts had been compromised through a vulnerability in Bitcoin's protocol called "transaction malleability". While the site remained online, all the bitcoins in its escrow accounts, valued at $2.7 million, were reported stolen. In April, Vice magazine reported that the vulnerability was actually in the site's "Refresh Deposits" function, and that the Silk Road administrators had used their commissions on sales since 15 February to refund users who lost money, with 50 percent of the hack victims being completely repaid as of 8 April.
On 6 November 2014, authorities with the Federal Bureau of Investigation, Europol, and Eurojust announced the arrest of Blake Benthall, allegedly the owner and operator of Silk Road 2.0 under the pseudonym "Defcon", the previous day in San Francisco. He is to be presented in United States federal court in San Francisco on 6 November before Magistrate Judge Jaqueline Scott Corley.<ref>https://www.businessinsider.com/fbi-silk-road-seized-arrests-2014-11</ref>
Products
As of March 2013, the site had 10,000 products for sale by vendors, 70% were drugs that are considered contraband in most jurisdictions. 340 varieties of drugs were being sold, including heroin. The site's terms of service prohibit the sale of "anything who's [sic] purpose is to harm or defraud.This includes ***** *****ography, stolen credit cards, assassinations, and weapons of mass destruction. There were also legal goods and services for sale, such as apparel, art, books, cigarettes, erotica, jewelry, and writing services. A sister site, called "The Armory", sold weapons (primarily guns) during 2012, but was shut down due to a lack of demand.
Buyers can leave reviews of seller's products on the site and in an associated forum where crowdsourcing provides information about the best sellers and worst scammers.
Sales
Based on data from 3 February 2012 to 24 July 2012, an estimated $15 million in transactions were made annually on Silk Road. Twelve months later, Nicolas Christin, the study's author, said in an interview that a major increase in volume to "somewhere between $30 million and $45 million" would not surprise him. Buyers and sellers conducted all transactions with bitcoins (BTC), a cryptocurrency that provides a certain degree of anonymity. Silk Road held buyers' bitcoins in escrow until the order had been received and a hedging mechanism allowed sellers to opt for the value of bitcoins held in escrow to be fixed to their value in US$ at the time of the sale to mitigate against Bitcoin's volatility. Any changes in the price of bitcoins during transit were covered by Dread Pirate Roberts.
The criminal complaint published when Ulbricht was arrested included information the FBI gained from a system image of the Silk Road server collected on 23 July 2013. It noted that, "From February 6, 2011 to July 23, 2013 there were approximately 1,229,465 transactions completed on the site. The total revenue generated from these sales was 9,519,664 Bitcoins, and the total commissions collected by Silk Road from the sales amounted to 614,305 Bitcoins. These figures are equivalent to roughly $1.2 billion in revenue and $79.8 million in commissions, at current Bitcoin exchange rates...", according to the September 2013 complaint, and involved 146,946 buyers and 3,877 vendors. According to information users provided upon registering, 30 percent were from the United States, 27 percent chose to be "undeclared," and beyond that, in descending order of prevalence: the United Kingdom, Australia, Germany, Canada, Sweden, France, Russia, Italy, and the Netherlands. During the 60-day period from 24 May to 23 July, there were 1,217,218 messages sent over Silk Road's private messaging system.
Criticism
Due to its criminal activities, Silk Road is held as instrumental in the demonization of technology and, more specifically, Tor. While allegations against Silk Road are indeed serious, commentators assert that not all activities in the encrypted browser be deemed as suspicious; rather, that Tor’s encryption and anonymization techniques be viewed under its original conception, i.e., as a tool for uncensored speech to Internet users.
Similar sites
The Farmer's Market was a Tor site similar to Silk Road, but which did not use bitcoins. It has been considered a 'proto-Silk Road' but the use of payment services such as Paypal and Western Union allowed law enforcement to trace payments and it was subsequently shut down by the FBI in 2012.Other sites already existed when Silk Road was shut down and The Guardian predicted that these would take over the market that Silk Road previously dominated. Sites named Atlantis, closing in September 2013, and Project Black Flag, closing in October 2013, each took their users' bitcoins.In October 2013 the site named Black Market Reloaded closed down temporarily after the site's source code was leaked.
See also
- Agora
- List of darknet drug markets
- Ross Ulbricht
- Judge Katherine Bolan Forrest
- Bitcoin
- BlueSky
- The Marketplace
- Pandora
- Evolution
- Cannabis Road
- Black Market Reloaded
- Sheep Marketplace
References
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