After Silk Road mastermind Ross Ulbricht was arrested and charged in 2013 for operating the massive dark web black market, a question remained: where did all the money go? Now, that question may have been answered in part as a $1 billion shift in bitcoins last week has been revealed as part of a Department of Justice operation.
Silk Road Shut Down As Ulbricht Arrested
The Silk Road was once the world’s preeminent online black market. Operating on the dark web, the Silk Road was the brainchild of Ross Ulbricht, who made upward of $20,000 a day monitoring the trade in illegal products. On the Silk Road, users could purchase everything from narcotics to assassinations, and it was a big success for the Department of Justice when they nabbed Ulbricht in 2013.
Per the Fordham Journal of Corporate and Financial Law, “The noose began to tighten. On October 1st 2013, Ross went to the local branch of the San Francisco library, laptop in hand. Unbeknownst to him, federal agents were tracking his every move. Once Ross had logged into his encrypted laptop, he received a message from “cirrus,” a new moderator whose account was appropriated by the FBI. Cirrus asked Ross to check certain flagged posts, as this would require Ross to log in to the heavily encrypted inner part of Silk Road. Ross eventually replied, asking which flagged posts cirrus was referring to, signaling to the agents that he had logged in. To distract Ross and make sure he didn’t shut down his computer, two agents began fighting and arguing in the stacks behind him. As Ulbricht turned around, one agent swooped in and grabbed his open laptop, while others quickly arrested him. The game was up, and Ross Ulbricht was indicted on charges of narcotics conspiracy, money laundering, and solicitation of murder for hire. Users of Silk Road who visited the site, found an FBI emblem over the announcement: “THIS HIDDEN SITE HAS BEEN SEIZED.”
Ulbricht was sentenced to life in prison in 2015.
What Happened to the Money?
The Silk Road, which began from humble beginnings as Ulbricht began by selling his own psychedelic mushrooms, eventually traded in millions of dollars as users sought murder for hire, illegal guns, drugs, and other nefarious products.
When the Silk Road closed, what happened to all the money still in transit, and the users who relied on the intermediary to shift their cash and products? In the years following Ulbricht’s arrest, the United States government seized, liquidated, and sold off tens of millions of dollars worth of bitcoins seized either from the Silk Road or from Ulbricht himself.
$1 Billion Turns heads
Last week, the crypto-currency world was abuzz as a staggering $1 billion worth of bitcoins was moved from a wallet associated with the Silk Road. Questions initially abounded as to who and why; was it a hacker, seizing funds? Was it an owner, moving the funds to keep them safe?
Now we have an answer: it was the United States government. The Verge reports, “The Department of Justice announced on Thursday that it had seized the wallet’s contents as part of a civil forfeiture case targeting the Silk Road. The government said it retrieved the roughly 70,000 bitcoins with the help of an unnamed hacker, whose identity is known to the government but who is simply referred to as ‘Individual X’ in court documents.
‘Individual X’ allegedly hacked the Silk Road’s payments system some time in 2012 or 2013. The government says that the Silk Road’s creator Ross Ulbricht, who is currently serving a double life sentence plus 40 years for his role in the site, ‘threatened Individual X for the return of the cryptocurrency,’ but the unknown hacker refused. On November 3rd, Individual X agreed to forfeit the bitcoin to the US government and helped transfer the money. It’s unclear if Individual X has been arrested or how their cooperation was attained.”
A DOJ press statement read in part, “‘Criminal proceeds should not remain in the hands of the thieves. Through CI’s expertise in following the money, we were able to track down the illicit funds,’ said IRS-CI Special Agent in Charge Kelly R. Jackson. ‘The Washington DC Cyber Crimes Unit is uniquely specialized in tracing virtual currency transactions and we will continue to hone our skills to combat illegal activity.’”
Ulbricht Fights for Appeals, but DOJ Stands Fast
Ulbricht’s mom continues to fight his sentencing, believing he may be exonerated due to the murky legalities that are involved with online free market and free speech. However, his appeals have been denied.
Even as Ulbricht continues to fight to be freed, the DOJ makes inexorable progress against the dismantled Silk Road funds.
The DOJ statement adds, “‘Silk Road was the most notorious online criminal marketplace of its day,’ said U.S. Attorney Anderson. ‘The successful prosecution of Silk Road’s founder in 2015 left open a billion-dollar question. Where did the money go? Today’s forfeiture complaint answers this open question at least in part. $1 billion of these criminal proceeds are now in the United States’ possession.’”