How the Feds Took Down the Silk Road Drug Wonderland

The dramatic takedown of the Silk Road drug market and the arrest of its alleged owner on drug trafficking and murder-for-hire charges last month began in part with an offhand tip to Department of Homeland Security investigators in Maryland in mid-2011.

The informant told DHS investigators in Baltimore about an online drug bazaar where international sales of illicit drugs and other contraband were conducted with impunity and with the ease of buying cocktail stirrers or underwear on Amazon.

"You guys are in law enforcement. You might want to look at this," the informant told DHS investigators, according to federal law enforcement officials familiar with the case who asked not to be identified.

The informant directed investigators to the site, accessible only through the Tor anonymizing network, and explained how transactions for the sale of heroin, cocaine and LSD went down using the digital currency Bitcoin.

But that wasn't all Silk Road was selling -- there were stolen credit and debit card numbers, fake IDs, counterfeit currencies, hacking tools and login credentials for hacked accounts.

The tip, which arrived about six months after Silk Road was launched and coincided with the emporium's growing notoriety following a June 2011 Gawker story, spawned a multi-agency task force based in Baltimore -- dubbed "Marco Polo" in reference to the drug market's historical namesake -- that eventually included investigators from the FBI, DEA, DHS, the IRS, U.S. Postal Inspection, U.S. Secret Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

Simultaneously, other investigations were launching in New York and Chicago. In the wake of the Gawker story, Senators Charles Schumer (D-NY) and Joe Manchin (D- West Virginia) sent a letter to Attorney General Eric Holder and the head of the DEA urging them to crack down on Silk Road and Bitcoin exchangers. The DEA and FBI launched an investigation and task force out of New York, and in Chicago, U.S. postal inspectors and DHS Customs and Border Protection agents were already seizing suspicious packages from an international mail center that they would later tie to Silk Road buyers and sellers, evidence that is now playing a role in cases in New York and other jurisdictions.

WIRED reviewed court documents and spoke with a number of law enforcement officials who say that the investigation so far has led to more than a dozen arrests in multiple countries -- and more are in the works.

While investigators in New York focused on gathering evidence around the drug sales, law enforcement in Maryland began mapping the operation. They focused on identifying and nabbing two groups connected to Silk Road: the top 1 percent of sellers and the moderators and system administrators, whose computers and credentials, once seized, could open the door to the site’s private communications and account details.

"Moderators and admins were our main objects," one law enforcement official says. "We identified some of them. That led to some information to help us understand the inner circle of Silk Road. We also took down drug traffickers and those selling IDs and guns. From there we gained a lot of intelligence about the people involved."

The real target in their sights, though, was the mysterious Dread Pirate Roberts, the brazen owner and operator of the site who they now say was 29-year-old Ross Ulbricht.

To get to him, they made a number of initial arrests that were kept quiet from the media or handled in ways to prevent co-conspirators from learning of the arrests. They won't say how they did this, but it's known that in some of the cases they refrained from filing charges against some suspects until after Ulbricht was arrested in October 2013. Other known law enforcement tactics include sealing documents, eliminating key information from public documents that point to the investigation -- for example, the name Silk Road -- or filing state charges instead of federal ones to keep a suspect's records out of the more-easily searched federal court database.

About six months after the investigation began, they swooped in on their first target -- Jacob Theodore George IV in Baltimore. The 32-year-old first appeared on the Silk Road forums in June 2011 under the name "digitalink" and quickly became a top seller on the site thanks to savvy marketing gimmicks like free drug samples and "buy two get one free" specials.

Jacob George's Harford County booking photo.

His alleged inventory included heroin and "scramble" -- a mix of heroin and quinine -- that he bought from local dealers. He also offered methylone, a synthetic drug known on the streets as bath salts that he imported from China.

It wasn’t the first time George had been accused of illegal activities. He'd been arrested in 2005 for operating an eBay scam and was sentenced to 27 months in prison. On Silk Road, there were hints of new trouble on the horizon almost as soon as he joined the site.

On July 6, 2011, shortly after authorities in Baltimore began looking at the drug emporium, digitalink revealed in a post to a Silk Road forum that a U.S. Postal inspector had contacted him about a package addressed to him that contained a suspicious white substance (that was in fact methylone) spilling from it. The postal authorities refused to deliver it. Fellow Silk Roaders warned George to ignore the agent and let the package go, but digitalink wouldn't listen. Methylone, he reasoned, wasn't strictly a banned substance if not used for human consumption, and he felt confident he could get it back. It was also the principle of the matter, he said. Seizing his package was illegal.

"It is not banned from where im from.. so they have no right to discard out shit correct? Wouldn't that be against the law?" he wrote. "It's not about losing a small amount of Methylone, this is about standing up for my rights and making it clear in the future they will not hold any of my Methylone shipments without a piece of me."

In a note to the forum, he described smooth-talking the agent to retrieve his package.

"I apologized sincerely and talked about how bad the world is and sorry for this mishap, explained that's the reason why I called to make sure they didn't worry that it was toxic and told them it was Methylone, we were going to use it for our garden," digitalink wrote. "Almost felt to a point they were relieved to know what it was and was told they will be re-packaging it up and sending it shortly if that is what it was."

Then he added, "Well that's that. As to my address being watched, no worrys gentlemen/women, I guess I'm lucky my gf lives about a five minute drive from me."

The next day he claimed victory, asserting that he was so "slick" and his methylone had arrived. Some fellow Silk Roaders weren't impressed though.

"Oh wow, the idiocy is unmatched!," wrote a user named itmux. "It seems very possible that digitalink will be busted sometime soon.... Judging by his behavior so far it wouldn't surprise me at all if he rolls over and gives them full access to his accounts here. It also wouldn't surprise me if he keeps the addresses of past customers around."

More problems were brewing. In early 2012, some digitalink buyers posted complaints that their orders never arrived.

On January 14, 2012, apparently fed up with the ingratitude of Silk Road buyers, digitalink wrote testily: "I have been burned 4 times, robbed once and put up with Silk Road drama and all the trolls on the boards. We put our freedom on the line to bring you our products. You know, I have a family, children and I'm not a pixel."

On January 19, just six months after he’d joined Silk Road, he announced he was taking a break from the marketplace. Six days later he was arrested in Maryland.

Law enforcement officials say they weren't yet investigating George at the time he says postal inspectors contacted him about the suspicious package in July and won't confirm whether postal inspectors actually did contact him. The court documents only touch on his involvement on Silk Road beginning in November 2011.

The real value in arresting George wasn't in removing a drug seller from the streets, but in amassing more intelligence that took them deeper into the drug site and a little closer to Dread Pirate Roberts.

Once they had access to George’s Silk Road seller’s account -- rich with emails, shipping records, and the financial details of his drug transactions -- investigators were able to identify other potential targets. By posing as drug buyers, they gathered evidence against still more.

To keep the arrest secret, investigators refrained from filing charges against George until after Ross Ulbricht was arrested on October 1. George pleaded guilty early this month in Maryland to conspiracy to distribute drugs.

Authorities in the U.S. and abroad continued to pursue Silk Road’s top sellers. In July 2012, officials in Australia nabbed Paul Leslie Howard. The 32-year-old had only been on the site a few months, trafficking in cocaine, MDMA, LSD, methamphetamine and marijuana, when he was caught.

"Hey guys, I'm just starting out here," he wrote upon registering as a vendor. "I'm Aus based and only shipping to Aus as not to roach on anyone's turf. I'll be basically doing dutch speed and Peruvian Charlie to start and branch into more as I get coin back in my pocket."

Customs and Border agents in Australia intercepted packages sent to the 32-year-old's home from the Netherlands and Germany, and when agents arrested him, they say they found marijuana, digital scales, $2,300 in cash, a money counter and 35 stun guns disguised as mobile phones. Investigators also found nearly 20,000 messages on two real phones that were seized from him, leaving a digital trail of his activities.

"I got 5 grand worth if you want," read one text message. "... promote the LSD I got more in. I sold 200 cubes last week," read another. "no cubes left atm but some other 'things' u might like!"

Howard's attorney told an Australian court that his client joined the site after a business website he was running failed. To support his family he made the "naive, stupid and foolish" decision to import and deal drugs, his attorney said.

Howard pleaded guilty in January 2013 to possessing a controlled weapon and importing and trafficking in controlled substances, making his the first conviction in the Silk Road saga.

In the meantime, beginning in April 2012, an undercover agent on the task force in the US was working to build a relationship with Dread Pirate Roberts. In December that year, the agent told DPR he was looking to sell large quantities of cocaine. DPR referred him to a Silk Road administrator who was to help the seller locate a vendor who could handle the sale. The vendor eventually did purchase a kilo of cocaine from the undercover agent, but the delivery address he gave the undercover agent led to the home of Curtis Clark Green, who authorities say was the Silk Road administrator who had been tasked with finding a vendor for the deal. Green, a 47-year-old grandfather in Utah who went by the monikers "Flush" and "chronicpain" joined the site in 2011.

Green has acknowledged in a court document (.pdf) that he received a salary beginning in November 2012 to take on customer service duties for Silk Road, but he was in that role just two months before the feds raided his home on January 17, 2013. The first arrest of a Silk Road administrator was a huge boon to investigators, who say they gained privileged access to private messages that Silk Road users sent each other as well as the details of sales transactions and information about the Bitcoin accounts of users and administrators -- including the account of Silk Road's alleged owner, Ross Ulbricht.

But DPR somehow found out about his former admin's arrest -- authorities who spoke with WIRED say they don't know how, though it's possible the admin told DPR out of a sense of loyalty -- opening the door to a bizarre murder-for-hire episode in the Silk Road drama. Fearing his admin would spill details about their operation, and claiming that the admin also stole money, authorities say Dread Pirate Roberts asked the undercover agent posing as a drug dealer to murder "chronicpain". (The initial deal was for torture, but he later decided to up the ante.) DPR agreed to pay $80,000 for the admin's death -- $40,000 up front and $40,000 when the deed was done. Investigators staged the torture and killing -- which included mock waterboarding according to officials -- and sent Dread Pirate Roberts about half a dozen pictures, including photos depicting what they said was his corpse.

Law enforcement officials won't acknowledge that Green is the admin that Ulbricht allegedly paid to have killed, but when asked to describe how the "dead" admin, "chronicpain", looked in the staged images, one official says, "He looked very pale."

Asked about the incident, Green's attorney referred WIRED to a statement of facts (.pdf) submitted to a federal court in Maryland last week and to a recent statement acknowledging that agents took photos of his client while they faked his murder.

Green pleaded guilty in Maryland last week.

Additional arrests followed. In July 2013, Steven Sadler and Jenna White were arrested in Seattle, Washington, though charges were not filed until after Ulbricht was arrested. Sadler was identified as the top seller on Silk Road known as "Nod."

Around the same time that Sadler was arrested, authorities were closing in on Ulbricht. After authorities intercepted some fake ID's that they say he ordered online, investigators from HSI visited Ulbricht's home in San Francisco. Ulbricht, agents say, had by then made a number of mistakes that allowed them to tie him to Silk Road, including using the name "altoid" to post messages advertising Silk Road to a forum and then using that same name to post to a Bitcoin forum seeking workers for a Bitcoin startup. In the latter message, "altoid" told would-be job applicants to contact him at rossulbricht@gmail.com. A subpoena to Google provided information about the accountholder. Last July, authorities identified an overseas hosting company used to host the Silk Road site and obtained an image of the server, giving them access to all the private messages on the site.

They finally arrested Ulbrict in October in San Francisco, charging him out of New York with conspiracy drug and money laundering charges. Ulbricht also faces a grand jury indictment in Maryland for conspiracy to commit murder, the most serious charge against him. Following his arrest, four other suspects were arrested in the UK, one in his 50s and the others in their 20s. Two others were arrested in Helsingborg, Sweden, on suspicion of selling pot.

Investigators say there are at least half a dozen other arrests currently in the works. In addition, U.S. Postal Inspectors and Customs and Border Protection agents have seized at least 3,000 suspicious packages that authorities say can be tied to Silk Road.

Federal agents say the use of Tor and Bitcoin were major obstacles for them and that investigating the site was "uncharted territory" that involved a reversal of their usual investigative methods. Instead of starting with probable cause against a specific suspect who is already identified and then obtaining a search warrant to collect more evidence, the investigation of Silk Road involved collecting evidence from the site first and then trying to identify individuals.

"Even though we had these obstacles, we were able to still make these arrests," one official says.

In addition to the arrests, investigators have also turned their attention to Bitcoin exchangers -- not only the major exchangers like Tokyo-based Mt. Gox, but individual sellers on Silk Road who provided exchange services to buyers and sellers on the site, targeting them as unregistered money transmitters. This led to two separate seizures against Mt. Gox last May and June amounting to $5 million.

The seizures included $2.9 million from a Dwolla account that was controlled by a U.S. subsidiary of Mt. Gox and $2.1 million seized from two Wells Fargo accounts, one controlled by the same subsidiary, the other by Mt. Gox CEO Mark Karpeles.

In the meantime, Ulbricht, who is being held in Brooklyn, New York, has denied through his lawyer that he's Dread Pirate Roberts.

His attorney Joshua Dratel plans to seek bail for his client at a hearing on November 21st and told WIRED that Ulbricht is "in good spirits," despite the circumstances.

"He recognizes the gravity of the situation, and that's appropriate," Dratel says. "I found him well-oriented, considering the odyssey he's been on for the last month."

Homepage image: Casascius/CC