This case involves several cyber and organized crime related offences of the creator of Silk Road, a massive online marketplace which sold illicit goods and services, in particular drugs. The defendant, Ross William Ulbricht, created Silk Road in January 2011, and owned and operated the website until it was shut down by law enforcement authorities in October 2013.
The defendant deliberately operated Silk Road as an online criminal marketplace with the intent to facilitate its users to buy and sell illegal goods and services anonymously and under the radar of law enforcement. The defendant aimed at anonymizing transactions on Silk Road by operating Silk Road on “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses, and hence identities of its users; and by including a Bitcoin-based payment system that concealed the identities and locations of the users.
The defendant controlled and oversaw every aspect of Silk Road, and managed a staff of paid, online administrators and computer programmers who assisted with the day-to-day operation of the site. The defendant reaped commissions worth over USD 13 million generated from the illicit sales conducted through the site.
The U.S. government learned of Silk Road in 2011, after intercepting a drug package in Chicago's O'Hare airport, and commenced an investigation into the online marketplace. Agents discovered that the Silk Road was run and managed by someone with the screen name of “Dread Pirate Roberts” (D.P.R.). In 2012, law enforcement agents investigated several individuals believed to be “Dread Pirate Roberts,” including Ross Ulbricht, Anand Athavale, and Mark Karpeles. Ultimately, Ulbricht became the primary suspect in 2013 after a series of “pen/trap” orders, which led U.S. law enforcement agents to collect evidence in the form of I.P. address data from Ulbricht’s home wireless network. Additional evidence came from undercover investigations, in which law enforcement agents took over low-level Silk Road administrators’ accounts and interacted with D.P.R. online, in an attempt to expose Ulbricht. In October 2013, at the San Francisco public library, agents arrested Ulbricht after catching him while he was logged in as the administrator of Silk Road and its D.P.R.
The defendant was charged with and convicted of distributing narcotics, distributing narcotics by means of the Internet, conspiring to distribute narcotics, engaging in a continuing criminal enterprise, conspiring to commit computer hacking, conspiring to traffic in false identity documents, and conspiring to commit money laundering. He was further accused of soliciting six murders-for-hire in connection with operating the site, although there was no evidence that these murders were actually carried out.
澳大利亚
奥地利
加拿大
法国
德国
冰岛
爱尔兰
意大利
荷兰
西班牙
大不列颠及北爱尔兰联合王国美利坚合众国The laptop of the defendant was seized by law enforcement and was used to provide evidence before trial.
18 U.S.C § 981(a)(1)(A)
In addition to over USD 183 million the defendant was ordered to forfeit, the government seized USD 18 million worth of Bitcoins from Ulbricht’s Bitcoin wallet accessed through his laptop. The government was able to trace the transaction history of the coins using blockchain records, most of the Bitcoins seized came from Silk Road servers located in Iceland. Only Ulbricht had access to these servers. In addition, over one billion dollars of Bitcoin linked to the website was seized by the U.S. Department of Justice in connection to the Silk Road in 2015.
In 2011, U.S. law enforcement agents intercepted a package containing narcotics at Chicago's O’Hare airport. From this package, the government learned of the illicit Silk Road website and a large-scale multiagency investigation began. Upon investigation, the Department of Justice identified “Dread Pirate Roberts” as the administrator of the “Silk Road.”
In 2013, agents identified Ross Ulbricht as “Dread Pirate Roberts.” In September 2013, five “pen/trap” orders (18 U.S.C. §§ 3121-27) were authorized, allowing agents to collect IP addresses from Ulbricht’s home wireless network.
[Pen/trap orders are under a legal standard much lower than the “probable cause” required for a typical phone-tapping warrant because only phone numbers used to connect the call are collected and not the content of the phone call itself. Ulbricht argued that this violated his Fourth Amendment rights since no warrants were issued, allowing law enforcement to enter his home. Ultimately the “pen/trap” orders allowed agents to match Ulbricht online acting as “Dread Pirate Roberts.” His argument was unfounded in trial and subsequent appeal.]
Law Enforcement Agents used some innovative tactics to gather pertinent evidence against Ulbricht. Agents created usernames to access the site and posed as drug buyers and sellers to interact with “Dread Pirate Roberts.” Agents also identified low-level administrators of the site, encouraged cooperation, and took over their usernames to gather further evidence. Along the way, some agents involved became corrupt, leading to the conviction of two agents who were initially involved in the undercover investigation.
On 1 October 2013, Ulbricht was arrested in the San Francisco Public library. His laptop contained evidence that Ulbricht was “Dread Pirates Roberts” and thus the owner of the Silk Road.
澳大利亚法国冰岛爱尔兰美利坚合众国United States District Court for the Southern District of New York
The District Court had to address the following novel legal issues which had not yet been litigated:
1) whether the agreement required to support conspiracy charges could be established when the parties only interacted through automated, anonymous transactions;
2) whether it can be shown that buyers and sellers in an online marketplace are acting in concert at the direction of a person in a position of management; and
3) whether financial transactions can be conducted with Bitcoins, and thus, be used in money laundering.
The District Court reasoned that conspiracy agreements do not necessarily require an express agreement with all of the details of the conspiracy. It is sufficient to agree on the objective, or the unlawful end, of the conspiracy. Circumstantial evidence demonstrating knowledge of the criminal conduct contemplated or of the objective of the conspiracy will suffice. For example, demonstrating that a conspirator was present during certain conversations or that a conspirator received or expected profits can establish proof. In the present case, the government was able to show that Ulbricht collected tens of millions of dollars in commissions on illicit drug transactions, as well as transactions for malicious computer software and fake identification documents. The Court found that Ulbricht created Silk Road with the express purpose of facilitating anonymous, unlawful transactions, and that without third parties agreeing to use the site and participate in those unlawful transactions, there would be no use for the Silk Road. The fact that these agreements occurred over the computer does not mean that a meeting of the minds could not occur – the actions taken by the computer are carried out by a human. Hence, the District Court found that the required agreement could be established in cases of automated, anonymous transactions.
Similarly, the Court held that it was not required that Ulbricht engaged in a particular form of conduct with each of those he was acting in concert with in his continuing criminal enterprise. It was enough to show that thousands of drug dealers conducted transactions on the Silk Road with thousands of buyers. Further, Ulbricht not only designed and created the Silk Road, but he controlled the day-to-day operations including setting rules for buyers and sellers, determining commission rates, and policing rules violations, etc. The Court found that Ulbricht was operating at a position of organizer and management over the drug trafficking occurring on the Silk Road.
As far as Bitcoins are concerned, the Court found that the only value for Bitcoin is to pay for things. Bitcoin can be used directly to pay for things, or it can be converted to currency and then used to pay for things. Bitcoins were specifically designed to shield the proceeds from third party discovery of their unlawful origin. While Bitcoins may not have been included in traditional definitions of “currency” or “financial transactions,” the Court held that they are functionally equivalent, and thus, can be used to launder money.
Additionally, the District Court had to address the implications of the legal provision defining the U.S. Constitution’s Fourth Amendment’s nature when dealing with digital media and information exchange. Ulbricht argued that the evidence collected through the pen/trap orders and the warrants to search his laptop violated the Constitution and motioned to suppress the evidence collected in relation to the order. The district court denied this motion.
In addition to the seven nonviolent charges (distributing narcotics, distributing narcotics by means of the Internet, conspiring to distribute narcotics, engaging in a continuing criminal enterprise, conspiring to commit computer hacking, conspiring to traffic in false identity documents, and conspiring to commit money laundering), the defendant was suspected of ordering multiple murder for hire killings against those that threatened the privacy of himself and his Silk Road users. The evidence to indict him on these charges was not sufficient.
For the above reasons, the Court convicted the defendant of the seven nonviolent charges and sentenced him to life in prison.
United States Court of Appeals for the Second Circuit
The defendant appealed against the judgment of the district court, arguing that :
1) the district court erred in denying his motion to suppress evidence obtained in violation of the Fourth Amendment;
2) the district court committed several errors that deprived him of his right to a fair trial, and incorrectly denied his motion for a new trial; and
3) his life sentence was both procedurally and substantively unreasonable.
The Court of Appeals did not find any errors in the district court’s judgment and affirmed it in all respects. In relation to the pen/trap orders and warrants, the Court argued that Ulbricht had no privacy expectation for information he turned over to third parties voluntarily on his website, and that they did not violate the Fourth Amendment.
Ulbricht grew up in Austin, Texas. He attended the University of Texas, and in 2006, he received a bachelor’s degree in Physics. In 2009, he earned a Masters’ degree in Material Science and Engineering from Pennsylvania State University. Throughout his academic career, Ulbricht was known for his radical libertarian economic views.
21 U.S.C. § 812, § 841(a)(1), § 841(b)(1)(A) and 18 U.S.C. § 2
Distribution and aiding and abetting distribution of narcotics
21 U.S.C. § 812, § 841(h) and § 841(b)(1)(A)
Using the Internet to distribute narcotics
21 U.S.C. § 846
Conspiracy to distribute narcotics
21 U.S.C. § 848(a)
Engaging in a continuing criminal enterprise
18 U.S.C. § 1030(a)(2) and § 1030(b)
Conspiring to obtain unauthorized access to a computer for purposes of commercial advantage and private financial gain and in furtherance of other criminal and tortious acts
18 U.S.C. § 1028(f)
Conspiring to traffic in fraudulent identification documents
18 U.S.C. § 1956(h)
Conspiring to launder monetary instruments
The defendant was sentence to life imprisonment.
United States Court of Appeals for the Second Circuit
United States of America v. Ross William Ulbricht, No. 15-1815-cr (2d Cir. May 31, 2017)
United States of America v. Ross William Ulbricht, No. 1:13-cv-06919-KBF (S.D.N.Y Sept. 29, 2017)
The significance of this case lies in the size and international scope of the operations of the online marketplace Silk Road. While in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to more than 100,000 buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions. From 2011 to 2013 alone, the U.S. government estimated that buyers operating on the Silk Road sold approximately USD 183 million worth of illegal goods and services.
Most of the items for sale were illicit drugs, which were openly advertised as such on the site. As of 23 September 2013, Silk Road contained nearly 13,000 listings for controlled substances, listed under such categories as “Cannabis,” “Dissociatives,” “Ecstasy,” “Intoxicants,” “Opioids,” “Precursors,” “Prescription,” “Psychedelics,” and “Stimulants.” The website also provided for hacking services, malicious software as well as offers to produce false identification documents.
From November 2011 to September 2013, law enforcement agents made more than 60 individual undercover purchases of controlled substances from Silk Road vendors, making the case a significant example of special investigative techniques under Art. 20 of the Organized Crime Conventions. Undercover agents purchased several illegal drugs, from vendors being located in more than ten different countries including Austria, Canada, France, Germany, Ireland, Italy, the Netherlands, Spain, the United Kingdom, the United States, demonstrating the international scope of the operations of Silk Road and the inherently transnational nature of cybercrime.
Further illustrating the seriousness of the offences, the narcotics distributed via Silk Road have been linked to at least six overdose deaths across the world.