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The Silk Road

This presentation walks through the rise and fall of the world's largest online black market. How did it work? How did users of the Silk Road evade law enforcement and government regulation? How did the FBI end up apprehending the alleged creator?
by

Wes Spencer

on 24 April 2014

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Transcript of The Silk Road

to 'frosty'
I'm a faculty member in the
Telecommunications Systems Management program at Murray State University
I love bitcoin
I study cybercrime and infosec
?
Where
anyone
on the
black market
can buy and sell products and services
The Silk Road had become
"A sprawling black market bazaar"

To "Create an
online
criminal marketplace
outside the reach of law enforcement or government regulation"
Within a few short months
The Silk Road became
"the most
sophisticated
and
extensive
criminal marketplace on the internet today.
At its height of operation...
thousands of drug dealers
and other 'vendors'
distributing hundreds of kilos of drugs and goods
hundreds of thousands of buyers
all laundering
millions of dollars
In that short time...
What was for sale?
Illegal drugs of every variety
Cannabis
Dissociatives
Ecstasy
Intoxicants
Opioids
Precursors
Prescription
Psychedelics
Stimulants
Criminal Services
Full access to Facebook, Twitter and other social networks.
Black market contact lists for
Anonymous bank accounts
Counterfeit bills
Firearms and ammo
Stolen CC's
Hitmen
Digital goods
Pirated software and media
Hacked accounts for Netflix and Amazon
Hack toolz
Forgeries
Fake licenses
Passports
SSNs
Utility Bills
Credit Card Statements
How did Silk Road hide its users?
"The Onion Router", or "tor"
Conceals IP addresses
of computers
"
Practically impossible
to
physically locate
the computers hosting or accessing websites on the network."
All payments were in Bitcoin
Electronic currency designed to be "as anonymous as cash"
Silk Road also used a 'tumbler' to "frustrate tracking of bitcoin transactions through the blockchain."

How much $$$?
Sales revenue over 9.5 million Bitcoin
Commissions over 600,000 Bitcoins
As of July 23, 2013, approximately 957,079 registered user accounts
Over 1.2B USD in revenue
Approximately 1,367 transactions per day at an average of $976
The FBI has located some of the Silk Road servers
Both in the US...
And other foreign countries
"The FBI has located in a certain foreign country
the server used to host Silk Road's website
"On July 23, 2013, the FBI obtained access
to an image of the Silk Road server."
From that image, here's what we know.
Feb 2012
June 2011
2011
In 2011, Silk Road
was created.
On June 18, 2011 the site's forum was updated.
"Who is Silk Road? Some call me SR, SR admin or just Silk Road. But isn't that confusing? I am Silk Road, the market, the person, the enterprise, everything. But Silk Road has matured and I need an identity separate from the site and the enterprise of which I am now only a part. I need a name."
January 2011
In January, 2011, a user named 'altoid' posts to a forum on shroomery.org about Silk Road
In January, 2011, a user named 'altoid' posts to a forum on bitcointalk.org about Silk Road
Sept. 2013
The Silk Road grows in popularity until the FBI discover the identity of DPR and the location of Silk Road's servers
The story gets much darker
"what do u . . . think what will happen if thousands of usernames, ordr amounts, addresses get leaked? all those people will leave sr and be scared to use it again. those vendors will all be busted and all there customers will be exposed too and never go back to sr."
"Have your suppliers contact me here so I can work something out with them."
"I was asked to contact you. We are the people friendlychemist owes money to... What did you want to talk to us about?"
"Just to be clear, I do not owe him any money...
I'm not entirely sure what the best action to take is, but I wanted to be in communication with you to see if we can come to a conclusion that works for everyone. FriendlyChemist aside, we should talk about how we can do business."
"Obviously, you have access to illicit substances in quantity, and are having issues with bad distributors. If you don't already sell here on Silk Road, I'd like you to consider becoming a vendor."
Dread Pirate Roberts
FriendlyChemist
On March 13 2013, a vendor on Silk Road threatens DPR with information he'll release to the public unless DPR pays him $500,000.
On March 15 2013, FriendlyChemist provided DPR a sample of the information he was going to leak for authenticity.
redandwhite
"If you can get FriendlyChemist to meet up with us, or pay us his debt then I'm sure I would be able to get people in our group to give this online side of the business a try."
"In my eyes, FriendlyChemist is a liability and I wouldn't mind if he was executed . . . . I'm not sure how much you already know about the guy, but I have the following info and am waiting on getting his address.
Let me know if it would be helpful to have his full address."
"u leave me no choice i want 500k usd withn 72hrs or i am going to post all the info i have. . . .i hate to do this but i need the money or im going to release it all.
over 5000 user details and about 2 dozen vender identities. wats it going to be?"
On March 20, 2013, a user named redandwhite contacts DPR.
On March 26, 2013, DRP responds:
The same day, redandwhite responds:
On March 27, 2013, DRP responds:
On March 29, 2013, (nine days later) FriendlyChemist gets impatient:
"FriendlyChemist is causing me problems. I would like to put a bounty on his head if it's not too much trouble for you. What would be an adequate amount to motivate you to find him? Necessities like this do happen from time to time for a person in my position."

Hours later, DPR writes to redandwhite:
"He is threatening to expose the identities of thousands of my clients that he was able to acquire . . . . This kind of behavior is unforgivable to me. Especially here on Silk Road, anonymity is sacrosanct.
It doesn't have to be clean."
"$150,000 to $300,000. Depending on how yo want it done."
Hours later, redandwhite responds:
On March 31, 2013, DPR replied to redandwhite:
"Don't want to be a pain here, but the price seems high. Not long ago, I had a clean hit done for $80k. Are the prices you quoted the best you can do? I would like this done asap as he is talking about releasing the info on Monday."
Dread Pirate Roberts
redandwhite
DPR and redandwhite agree on 1,670BTC (Approximately $150,000)
"I received the payment... We know where he is. He'll be grabbed tonight. I'll update you."
On April 1, 2013, redandwhite says:
"Your problem has been taken care of... Rest easy though because he won't be blackmailing anyone again. Ever."
"I received the picture and deleted it. Thank you again for your swift action."
On April 5, 2013, DPR says:
Canadian authorities have
no

record
of the name DPR gave to redandwhite. Also, there is
no

record
of a homicide occuring in White Rock, British Columbia on or about March 31, 2013.
On February 5, 2012, he announced: "drum roll please.......... my new name is Dread Pirate Roberts"
How did DPR
get caught?
But, this was the only post on shroomery by altoid.

Probably to promote the site itself?
Just two days later, another post by a user named 'altoid'.

This time on BitcoinTalk.org.
The FBI now has a lead.
Both postings end with
Let me know what you think...
Investigators get a major lead
Both DPR's post signatures
and
Ulbricht's Google+ accounts
had
Direct links to YouTube
videos posted by the
Ludwig von Mises Institute.
FBI have records of a user
accessing the SR server from
an internet cafe in San Francisco
Interestingly, records obtained from a Google subpoena show that Ulbricht regularly logged into his Google account
Less than 500 feet away.
In July , 2013, Customs and Border Protection
intercepts a package from the mail
inbound from Canada as
part of a routine search
Package had nine IDs
All counterfeit
All had Ulbricht's picture
Different names
When questioned by Homeland Security, he said:
"hypothetically" anyone could have purchased these documents
on a website named
On March 5, 2012, a user created an account on stackoverflow.com
with a username of "Ross Ulbrict"
And posted this message:
Hours Later...
The username is changed
Several weeks later, frosty also changed his email on stackoverflow.com to: frosty@frosty.com
SSH public keys obtained from the Silk Road
server contain the substring
frosty@frosty.com
On Tuesday, October 1, 2013, federal agents arrested Ulbricht in the science fiction section of this public library and charged with
The Silk Road itself was subsequently shut down.
engaging in a money laundering and narcotics trafficking conspiracy
computer hacking
The FBI siezed Bitcoin worth 3.5 - 4 Million USD
So the real question is
What's
next
?
And this is what Law Enforcement is now parading as a victory? Over two years of investigation, millions of dollars spent and for what so a couple of armchair programmers can build it again in a few days while in the meantime vendors simply move to other site’s
[sic]
The Silk Road 2.0
- Heisenberg2.0
5 other Silk Road competitors are already in the works.
Did the Silk Road shutdown end the era of
anonymous online black markets?
Or did it serve as a
catalyst
For explosive new growth?
-- Sherlock Holmes
"What one man can
invent
another man can
discover
.
And so the hunt continues.
Proof that he knew about Silk Road
(These 'texts' are all direct
quotes, typos included)
Full transcript