Silk Road owner arrested over money laundering charges and allegations of ordering hit on man from Canada

By Christine Duhaime | October 2nd, 2013

Ross Ulbricht, allegedly the Dread Pirate Roberts and owner of the website Silk Road, was arrested by the FBI in San Francisco today at a public library and his popular website was shut down. Silk Road was an Internet-based website that accepted Bitcoin. Ulbricht was charged with money laundering conspiracy, computer hacking conspiracy and drug trafficking.

Alleged to have ordered a hit on Canadian drug dealer

Ulbricht is alleged to have paid $150,000 for the murder of a drug dealer from White Rock, British Columbia, Canada, known as “Friendly Chemist” who tried to extort him for $500,000 to ward off a drug gang. The man from Canada was married with three children. The FBI consulted with Canadian law enforcement who apparently informed the FBI that they do not believe the murder took place because no body was located. The indictment says that the Bitcoin payment was made for the hit and recording on the Blockchain, the hitman confirmed the murder and supplied photos to Ulbricht of a deceased person when the mission was accomplished.

Transactions totalling $1.2 billion in two years

Allegedly, Ulbricht’s transactions using Bitcoin totalled $1.2 billion and generated commissions of $80 million since 2011. The FBI monitored, tracked and collected transactional data on Silk Road since 2011. The majority of the buyers on Silk Road were from the U.S., U.K., Australia, Germany and Canada. About 6% of the Silk Road transactions that involved illegal transactions came from Canada, both on the supply and purchase side meaning that Canadians supplied drugs and other things illegally and bought illegal goods and services on Silk Road.

The allegations

According to the criminal complaint, Silk Road operated like something akin to a Turkish bazaar, only virtual, and is described as a “sprawling, black market bazaar where drugs and other illegal goods and services were bought and sold over the Internet …[in essence], an extensive and sophisticated criminal marketplace.” The marketplace was designed for anonymity, according to the complaint, by allowing transactions only by Bitcoin and on TOR. The purpose of both was so that the identities and locations of users transmitting funds and buying and selling illegal product could be concealed.

The allegations note that Ulbricht provided the online platform that offered the sale of illegal services and goods, in other words, that facilitated illegal commerce on the Internet. The site was only accessible on the TOR network, a software web browser that hides IP addresses.

According to the criminal complaint, Silk Road sold, or facilitated the sale of, hundreds of kilograms of illegal drugs to well over 100,000 buyers and laundered the proceeds of crime. One could buy heroin, crystal meth, ecstasy, cocaine, and LSD, among others. Many of those vendors were from Canada.

According to the complaint, Silk Road also provided other goods and services including lists of murderers for hire, counterfeit currency, fake IDs and hacking experts who could hack into any Facebook or other social media account. The latter was apparently popular with suspicious married couples.

Ulbricht is also alleged to have bought several fake IDs from Canada that were intercepted by US customs and border agents during a routine search. The package ultimately helped FBI agents locate Ulbricht because the package was sent to his apartment in San Francisco.

The money laundering charges against Ulbricht allege that he violated §1956(a)(1)(A)(i) and §1956(a)(1)(B)(i) of Title 18, USC by engaging in foreign and interstate trade knowing that the financial transactions involved proceeds of crime from illegal activities (murder, hacking, fake ID trafficking and drug trafficking), and did so purposely to allegedly onceal the location, source, ownership, and control of the proceeds of the criminal activity.

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