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

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.

Comments

Tor compromised

[MetalliQaZ]

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

[Anonymous Coward]

*(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

[Dunbal]

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

[Maxo-Texas]

I'd guess it was being too big which did him in.

Greed and hubris-- always risky when doing illegal activities.

In fact- if I were doing something illegal- when regular articles about the silk road started being posted, I'd shut things down and take my profits.

If nothing else, those articles are embarrassing for law enforcement so they focus on that issue to stop the embarrassment.

Re:Tor compromised

[TheSpoom]

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

Re:Tor compromised

[Anonymous Coward]

Not a surprise, they routinely open whatever packages the NSA tells them to.

Re:Tor compromised

[jonbryce]

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

[93 Escort Wagon]

Incidentally, this case shows exactly why all this invasive, unconstitutional NSA monitoring is actually unnecessary. By all accounts this guy was nabbed using good old-fashioned investigative work by the various authorities.

It can be done. Sure, it's just harder that way - but our personal liberties are worth that cost.

Re:Tor compromised

[girlintraining]

Do you have any evidence that this happened, or are you confusing Silk Road with Freedom Hosting?

You mean besides the criminal complaint posted in the article you were supposed to read before shoving your foot in your mouth?

Page 6: "as well as forensic analysis of computer servers used to operate the Silk Road website that have been located and imaged during the investigation"

Page 11: "... instructs vendors to 'vacuum seal' packages containing narcotics, in order to avoid detection..." "use a different address from the user's own address to receive shipment... friend's house or P.O. box"

"Since November of 2011, law enforcement agents participating in this investigation have made over 100 individual undercover purchases..."

Thanks to the Silk Road taking a percentage of all proceeds, they've been able to locate the ledger for the entire website; Every transaction made, as well as the so-called "tumbler" used to anonymize bitcoins used to make purchases on the website... as the transaction logs for "tumbled" bitcoins was also amongst the items recovered.

When you dig into the complaint it becomes painfully clear how sloppy this guy was: He had a Google+ page, a LinkedIn profile, youtube, etc., -- there is considerable captured traffic between the Silk Road webserver sent outside the Tor network, including e-mails and other accounts authorities are now using to collect the realworld identities of many of the administrators and regular contributors to the site. He didn't encrypt anything on the servers -- they didn't even need a fucking password to get this information.

Backup servers which had SSH keys to login to were also recovered, so what little was encrypted... well, let's just say the root password of the Silk Road might as well have been "1234".

Every PO box, every ship-to address... he kept it all. There was no data retention policy this guy used... he was a data hoarder, and the only reason it took the government this long wasn't because of how hard it was to track him down in real life, but because of the sheer crapflood of forensic data bogged down their entire cybercrime division. And get this... they bought the malware later used to infect Freedom Hosting off Silk Road!.

Someone should built a monument to this guy's stupidity... Tor might anonymize your IP address, but this guy fucked over the privacy of everyone that visited with gross incompetence and greed all on his own. The government didn't need to go the extra mile... all that stuff with Freedom Hosting getting infected (Hey, check out that malware sometime; It records which Tor sites you visit and when. Can't think of how Silk Road might have been affected there!) was just testing out their toys. It wasn't necessary, but you know... if you're gonna do it, might as well overdo it.

Re:Tor compromised

[kermidge]

From reading an article on this before coming here, I'm still flabbergasted that he was using servers in the U.S. Color me naive but I don't see where that made sense.

Second thing, after reading more, is why the blazes did he have anything to do with SR sent directly to himself?

I realize 20-20 hindsight and all, but c'mon, seems to me that's all 'security 101' stuff, no?

Re:Tor compromised

[Anonymous Coward]

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

[runeghost]

Why was he even in the U.S. at all?

Re:Tor compromised

[ancientt]

He promoted the website using his real name attached to a gmail account with his real name as part of the address. They may not have found that out until they were ready to make a bigger case against him, but as I was reading the criminal complaint and saw that, I was dumbfounded that anyone could actually be that dense about security. Reading an older article, I see where he was asked if he was worried about law-enforcement agencies trying to track him down. He said "I have confidence in our security measures."

Might not be via TOR

[EMG at MU]

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.

Re:Might not be via TOR

[stewsters]

At least, that's what the "Parallel Construction" will say. Remember that TOR was released by the NSA. Perhaps it was released because they believed that only they had enough of a surveillance budget to monitor all the messages in route.

Re:HOW??

[i kan reed]

Or more specifically, monitoring known(or complicit) tor entry nodes, looking for quantity of activity corresponding to activity by roberts, back tracking to the origin IP address, getting a warrant for a full-on-monitoring of that address, verifying their target, then going for a bust.

Encryption and anonymyzing technology only works in as much as no one with any resources actively wants to figure out who you are. You might be able to hide your message, but you'll never hide your existence.

Re:HOW??

[Anonymous Coward]

Yup. NSA -> FBI -> Parallel Construction Filter -> Arrest.

Tor was not designed to protect against an adversary that has a global view of all traffic.

Expect to see bitcoin lose half its value

[Anonymous Coward]

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.

Re:HOW??

[vivaoporto]

Actually, considering what was revealed on a previous article (DEA Program "More Troubling" Than NSA)

"The undated documents show that federal agents are trained to "recreate" the investigative trail to effectively cover up where the information originated"

it is more likely than not that a very clear paper trail will be shown that it all happened by good old fashioned police investigation as you described.

It doesn't mean it was not obtained with an illicit program to begin with, only that they were able to cross the "t"s an dot the "i"s later.

DEA & parallel construction?

[Valdrax]

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

Welllll, maybe...

Do you remember the recent stories about the DEA and "parallel construction," where the DEA was getting phone records from the NSA and then using them to identify suspects from which they could reverse engineer a false "lead" to let the police just happen to find other incriminating evidence to build a case on?

I'm not saying that's clearly what happened here, but as others have pointed out, it's a distinct possibility given that drugs are involved.

Re:$3.6 Million Bitcoin Seized

[tftp]

When they size 20kg of cocaine "with a street value of $3.6m"[1], they don't sell it, or at least they are not supposed to. They destroy it.

- Officer Smith, please take this pile of drugs and make it disappear!
- Sure, boss. You won't see this particular pile of drugs ever again.

Re:HOW??

[Hatta]

What value does law and order have to the slave? Law and order is nothing more than a tool, and when that tool is wielded by evil, it serves evil. A society where injustice is enforced by the government and cheered on by patriots is no society that is worth having.

Think about it, if you were the slave in your scenario, would you really care that an abolitionist had counterfeited currency? Hell no! If you thought that counterfeiting would lead to your freedom, I bet you would run the presses yourself.