A federal judge has denied bail for Ross Ulbricht, the 29-year-old man arrested last month on suspicion of running the Silk Road, an online black market that offered everything from drugs and guns to computer hackers and hitmen for hire.
The decision came after federal prosecutors in New York dumped a virtual truckload of additional incriminating evidence supporting charges that Ulbricht was the infamous Silk Road administrator known as the “Dread Pirate Roberts” (DPR), and that he was indeed a strong flight risk. To top it off, the government also now alleges that Ulbricht orchestrated and paid for murder-for-hire schemes targeting six individuals (until today, Ulbricht was accused of plotting just two of these executions).
The documents released today indicate that Ulbricht was a likely flight risk; they allege that prior to his arrest, Ulbricht had researched how to buy a citizenship in Dominica. The government said that the laptop seized from Ulbricht contained reference guides for obtaining “economic citizenship” in other countries. “In particular, the computer contained an application completed by Ulbricht for citizenship in Dominica, along with reference materials explaining that Dominica’s ‘economic citizenship’ program offers ‘instant’ citizenship in exchange for a one-time ‘$75,000 donation’ to the country’s government,’”, the government’s bail submission (PDF) notes. A copy of the application for citizenship in Dominica allegedly found on Ulbricht’s laptop is here (PDF).
In addition, prosecutors unveiled a photo showing the assortment of fake IDs that Ulbricht had allegedly ordered off the Silk Road (see image above), which included identity documents bearing his picture and various pseudonyms in Australia, Canada, and the United Kingdom, among other places.
According to the Justice Department, evidence from Ulbricht’s computer also shows that he had contemplated and prepared for a life on the run.
“For example, one file found on the computer, labeled ‘emergency,’ contains a list of apparent to-do items in the event that Ulbricht learned that law enforcement was closing in on him. It reads as follows:
encrypt and backup important files on laptop to memory stick:
destroy laptop hard drive and hide/dispose
destroy phone and hide/dispose
Hide memory stick
get new laptop
go to end of train
find place to live on craigslist for cash
create new identity (name, backstory)”
The prosecution also released several screenshots of Ulbricht’s computer as it was found when he was arrested at a San Francisco public library. According to investigators, Ulbricht was logged in to the Silk Road and was administering the site when he was apprehended, as indicated by this screenshot, which shows a Silk Road page titled “mastermind.” The government says this page provided an overview of transactions and money moving through the site:
Another screen shot shows the Silk Road “support” page as found logged in on the computer seized from Ulbricht:
Furthermore, the government alleges that Ulbricht kept on his computer a fairly meticulous diary of his criminal activity.
“Additional files from Ulbricht’s computer reflect his continued control of Silk Road up to the time of his arrest. For example, the computer contains a file titled ‘log,’ in which Ulbricht regularly recorded his activity relating to his operation of the site during the period from March 20, 2013, to September 30, 2013, the day before his arrest,” prosecutors told the judge in a filing. “One entry, for example, notes that on May 28, 2013, he ‘finished rewritting [sic] silkroad.php controller.’ Another entry, covering the period from June 5, 2013 to September 11, 2013, describes efforts to ‘develop a monitoring system for the SR infrastructure.’
Another entry, dated June 2, 2013, allegedly references a joint venture with a Silk Road user, to whom he was ‘loaning $500k’ in order to “start vending on SR.”
“Financial files stored on Ulbricht’s computer likewise confirm his continuous control of Silk Road from beginning to end,” prosecutors wrote. “For example, one spreadsheet, titled ‘sr_accounting,’ lists hundreds of expenditures relating to Silk Road, from ‘server rent’ to ‘pay off hacker,’ spread throughout 2010 to 2013. In another spreadsheet, titled ‘NetWorthCalculator,’ Ulbricht listed all of his assets and liabilities, the most notable of which was an entry for ‘sr inc,’ listed as an asset worth $104 million. Moreover, actual proceeds derived from Silk Road were found on the computer, in the form of a Bitcoin wallet containing approximately 144,000 Bitcoins, equivalent to over $20 million based on prevailing exchange rates at the time of Ulbricht’s arrest.”
Other items of interest in the journal document the Silk Road’s early beginnings, as DPR mused on what to call the marketplace and how to get it up and running.
“I began working on a project that had been in my mind for over a year. I was calling it Underground Brokers, but eventually settled on Silk Road. The idea was to create a website where people could buy anything anonymously, with no trail whatsoever that could lead back to them.”
According to prosecutors, the journal entry goes on to describe how Ulbricht allegedly set up ‘a lab in a cabin . . . off the grid,’ where he ‘produced several kilos of high quality shrooms,’ so that he would have something to sell on the website when it first opened.”
Perhaps the most shocking revelation in the Justice Department’s argument against Ulbricht’s petition for bail is that he allegedly ordered not two but six executions. Unfortunately for DPR, he appears to have gotten scammed out of the money he paid for each hit (approximately a half million dollars in Bitcoins in total). On the bright side, despite the fact that Ulbricht said he received “visual confirmation” of the executions, the government says it was unable to confirm that any of the killings were ever carried out.
The government documents leave open several questions about the Silk Road merchant DPR hired to carry out the planned killings — a user who’d adopted the nickname “redandwhite” (apparently a well-worn nickname of the Hells Angels motorcycle gang). Was he a government informant who was working with federal prosecutors to nab Ulbricht, or was he just one of many Internet predators who make a living scamming the scammers?
Nicholas Weaver, a researcher at the International Computer Science Institute (ICSI) and at University of California San Diego, believes redandwhite was probably the latter, noting that the government’s initial complaint against Ulbricht indicated he’d used redandwhite to purchase fraudulent identity documents.
That’s important because prior to his arrest in San Francisco, investigators with the U.S. Department of Homeland Security paid a visit to the address to which the fake identity cards were to be delivered — confronting Ulbricht at his residence. Weaver said that if redandwhite was acting as an informant, ostensibly DHS agents would have been warned not to spook Ulbricht and potentially tip him off that the government was investigating him as the Dread Pirate Roberts.
“There’s no way they would have had the customs and DHS agents go up to this guy if they knew he was the Dread Pirate Roberts and not just some random guy buying fake IDs,” Weaver said. “If you knew these fake IDs were going to the Dread Pirate Roberts, you would not tip him off. This is a guy with millions of dollars in liquid assets.”
Weaver said Ulbricht’s lawyers will have their work cut out for them if they can’t poke any holes in the government’s case.
“If the defense isn’t able to get the server seizure suppressed, the good ship Revenge is sunk,” Weaver said.
Weaver said Ulbricht’s attorneys have one potentially strong avenue of defense: If federal investigators somehow erred in identifying and seizing the Internet servers used to control the Silk Road.
“The one thing I think could save him is if the FBI somehow screwed up in identifying the server and didn’t dot their I’s and cross their T’s,” Weaver said. “That’s because if you look at the original complaint, everything that says DPR is Ulbricht — everything that led up to them tackling him in the library — is pretty much derived from that server.”
Interestingly, the government’s case against Ulbricht could amount to an unexpectedly massive windfall for the U.S. Treasury. Prosecutors say they found a Bitcoin wallet on Ulbricht’s computer that contained approximately 144,000 Bitcoins, or roughly $20 million at the time. Since then, the value of a single Bitcoin has skyrocketed: Today’s market price puts the value of a single Bitcoin at a whopping USD $780, meaning that seized stash of Bitcoins is now worth more than USD $111 million.