Transcript
Silk Road - The Amazon of Drugs Part 1
At the time of his arrest Ross Ulbricht was 29 years old and living in San Francisco.
An all-around great guy, his prison mates said: he got along with everybody. A former boy scout and outdoors enthusiast, he was a big fan of dungeons and dragons, yoga, recreational drugs and meditation. An avid libertarian that preached free market and wrote essays about minimizing state regulation of individual liberties. Always the smartest guy in the room.
When Ross was bent and handcuffed over a desk at the Glen Park Public Library, his arrest warrant stated that he was being charged with seven counts of money laundering, computer hacking, trafficking narcotics and continuing a criminal enterprise – also known as the “kingpin charge”: a charged usually reserved for leaders of drug cartels and mafia organizations.
That is because 29-year-old Ross Ulbricht, at the time of his arrest, was the world’s biggest online drug vendor. His $1.2 Billion dark web operation was called The Silk Road and it will go down in history as the first major darknet market.
Testing The Limits
Born in Austin, Texas to Kirk and Lyn and brother to Cally, Ross showed high levels of intellectual and emotional intelligence from an early age. A very easy kid to raise, his mother said in one of the many interviews she gave since his incarceration.
He had a thing with testing his limits, like showering with cold water for a month or living off rice for a week. His college girlfriend said that when she first visited the dank basement where he was living, it only had a mattress and two garbage bags: one for clean clothes, the other for laundry. After graduating from the University of Texas with a bachelor’s in physics, Ross moved to Penn State to study an advanced degree in materials science and engineering. When he didn’t pass the entrance exam for a PhD program, he went back home to Austin and moved in with his then girlfriend.
Back in his hometown, 25-year-old Ross was unclear as to how to proceed. Having been raised on the libertarian ideals of individual liberty, private property, free market and entrepreneurship, Ross decided to invest his time in the creation of something meaningful.
After a series of failed ventures such as day trading, an investment fund and a video game, he joined a friend as a part-time operator and then partner of Good Wagon Books, an online used book store. He managed five employees that collected books door-to-door across Austin, and resold them online. They regularly donated part of their profits to a local charity and gave unsold books to a prison literacy program.
But it wasn’t enough. Fresh out of college, intelligent and enthusiastic Ross just wasn’t doing the world changing he thought he should be. That is until the summer of 2010, when he came up with the idea to build a free market, non-government regulated website, where anybody can buy and sell anything anonymously. The ultimate experiment in individual freedom.
Silk Road
After about a year of reading books and online articles, asking questions on tech forums and talking to friends, Ross realized that the required technologies for a free and anonymous marketplace already existed.
The first was Tor, short for The Onion Router: a network of servers – ‘relays’ – run by thousands of volunteers. Encrypted packets of information are randomly bounced between these relays, so that when they finally reach their destination, it’s much more difficult – not impossible, mind you, just more difficult – for an eavesdropping entity to uncover the identities of the users and their online activities. The second technology was Bitcoin, which in 2010 was barely a year old.
Ulbricht’s Silk Road combined and harnessed these two technologies. A user would first download the Tor browser: a modified version of Mozilla’s Firefox, which automatically routes web traffic through the Tor network. He or she would then create an account in Silk Road, specifying a real world PO Box where the goods would be delivered to.
Bitcoins could be bought, using real world currency, at Bitcoin exchanges such as Mt.Gox, which were just beginning to appear at that time. The user would then transfer these bitcoins to his or her Silk Road account, and initiate a transaction with a merchant on the website. Payments were held in escrow until the actual goods were delivered to the said PO Box. Simple, secure and anonymous – a perfect solution to the problem Ulbricht was trying to solve. He taught himself how to code and developed the system, enlisting the help of a more experienced friend when needed.
Meanwhile, In a dilapidated rental cabin in Austin, between coding and selling used books, Ross began another side project – his own magic mushrooms indoor farm. It was a sweet yet very professional setup: there were petri dishes, tape and glue guns, peat, gypsum, rye, a pressure cooker and kitchen timer. All in all, he produced 100 pounds of magic mushrooms that he wanted to sell. When The Silk Road finally launched in February 2011 – Ross became not only its creator and administrator, but also its first seller. He had only one problem: this being a new and secretive website, he was the only one there.
And so Ross began an advertising campaign for Silk Road. On a website called The Shroomery, using the handle Altoid he posted the following on one of the forums:
“I came across this website called Silk Road. It’s a Tor hidden service that claims to allow you to buy and sell anything online anonymously. I’m thinking of buying off it but wanted to see if anyone here had heard of it and could recommend it.”
In his book “American Kingpin: The Epic Hunt for the Criminal Mastermind Behind the Silk Road” author Nick Bilton writes that Ross went on to post similar comments on other drug and bitcoin related forums, and even initiated a paid ad campaign. Slowly but surely the site’s customer and seller base grew, reaching a few hundred sellers and a few thousand customers, and peddling most – if not all – illegal drugs known to the FDA.
The Gawker Article
And then, five months after the launch, came the Gawker article.
In the chronicles of the Silk Road, Adrian Chen’s June 1st, 2011 Gawker article “The Underground Website Where You Can Buy Any Drug Imaginable”, has a place of majesty. It was the tipping point, the moment that Ross’s experimental free market project went ballistic. It is still, a decade later, referred to as THE GAWKER article in documentaries, podcasts, articles and websites. Its opening paragraph has been quoted so many times it has reached literary status:
“Making small talk with your pot dealer sucks. Buying cocaine can get you shot. What if you could buy and sell drugs online like books or light bulbs? Now you can: Welcome to Silk Road.”
Chen goes on to explain how the website works: how to get to it, how to convert your traceable cash to untraceable Bitcoin and how sellers on the site are rated by customer service, professionalism, discretion, delivery time and product quality – just like any other amazon customer review, which gave the service its moniker: “Silk Road – The Amazon of drugs”. He even managed to get a quote from the Silk Road’s Admin via email:
“Our community is amazing…They are generally bright, honest and fair people, very understanding, and willing to cooperate with each other.”
Seizing the opportunity, Silk Road’s Admin also preached some libertarian philosophy, concluding with a promise for an easy and safe narcotics shopping experience.
The story was immediately picked up by major media outlets, and went viral: I myself remember hearing about Silk Road for the first time in podcasts I was listening to back then.
Four days after the Gawker article, Silk Road went to congress. In a video which aired on all major networks, distraught Senator Chuck Schumer demanded that federal authorities shut down the Silk Road: he demonstrated how accessible and user friendly the site is by going online and reading out loud the various narcotics offered and their customer reviews, saying:
“Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identities through a program that makes them virtually untraceable… It’s a certifiable one-stop shop for illegal drugs.”
After senator Shcumer’s congressional…infomercial… enrollment for Silk Road grew so fast that Ross had to shut down new seller registration. He reopened it a few weeks later with a new bidding system which released a new seller account every 48 hours to be sold to the highest bidder. Business was booming.
Dread Pirate Roberts
Ross was elated. His utopian fantasy of a free market was a success and he was getting richer by the minute. In his first year operating the Silk Road he was charging a %6.23 flat rate commission off all sales. In his second year, he changed that to a sliding scale commission, taking 10% off the first $50 and 1.5% off sales of more than $1,000. We don’t know exactly how much money Ross made during this period – but we do know that in 2015, following his arrest, he was ordered by the U.S. government to pay no less than $183 million dollars in fines, a figure calculated from the total sales on the Silk Road using the exchange rate at the time of each transaction.
Ulbricht wasn’t the only beneficiary of the Gawker article. Bitcoin, the currency of choice for all Silk Road transactions, grew in popularity alongside the site itself. When Silk Road was launched in February 2011, one bitcoin was worth $0.52. When the Gawker article was published in June of that same year, bitcoin’s value grew sixty-fold, to about 29 dollars.
Yet, while things were going well on the site, Ross’s personal life was falling apart. His girlfriend, no longer able to handle the stress of running a drug market, asked him to move out. Realizing he can no longer be totally open and honest with anybody, Ross sought social comfort with his online cronies on the Silk Road. That is how he met the person that will greatly influence the last year of his life as a free man: his mentor/consiglieri Variety Jones.
Variety Jones – or VJ, for short – had been selling weed seeds for a few years now. He was a seasoned drug dealer and connoisseur with some jail time under his belt and the appropriate business acumen: just what a burgeoning drug baron needed. So, they got to chatting on the Silk Road forum, then Torchat; at first as seller and admin, and later as comrades on a shared journey; a protegee and his mentor. Ross wrote about Variety Jones:
“Him coming onto the scene has reinspired me and given me direction on the SR project. He has helped me see a larger vision. A brand that people can come to trust and rally behind. Silk Road chat, Silk Road exchange, Silk Road credit union, Silk Road market, Silk Road everything! And it’s been amazing just talking to a guy who is so intelligent and in the same boat as me, to a certain degree at least.”
It was VJ who suggested that Ross rebrand himself as the Dread Pirate Roberts, a character from the book turned movie “The Princess Bride”, by William Goldman. In the book, The Dread Pirate Roberts is not the name of a single person, but rather a “brand”: a mythical and much feared pirate that captains a menacing ship, until he decides to retire and hand over the ship – and the name – to his successor. It was a perfect alibi for Ross: if he was ever caught, he could claim that he sold the site to someone else.
The name change was a hit. The Dread Pirate Roberts – or DPR for short- had flare. He was a leader amongst men, the Che Guevarra of the free market. The sellers and customers were enamored with this mysterious persona and cool moniker, who provided them easy access to anything under the sun. His ever-growing pool of employees, hired after providing a picture ID for security checks, had started calling him Captain. Ross, moved by the outpour of support, decided to start a digital diary, on his encrypted laptop, chronicling his life as a libertarain trailblazer.
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It was around the time of The Gawker article that Jared der-Yeghiayan, a 30-year-old junior ICE agent at Chicago’s O’Hare Airport, noticed a suspicious-looking envelope. ICE agents are trained in recognizing suspicious envelopes, like ones with tiny bulges, or a fake return address and maybe a lot of plastic wrap. This specific envelope had all of the above, and by the power invested in him, der-Yeghiayan opened it.
What he found was a single pink ecstasy pill. Hardly the drug bust of the year. He should have thrown it in the blue plastic bin…But he didn’t. What a strange business model for a drug dealer, he thought. Why send a single pill from the Netherlands, in the mail?
So, der-Yeghiayan started looking for more single-pilled envelopes. Four months later he had amassed three blue plastic bins, full with hundreds of such envelopes. Der-Yeghiayan went to his boss and the Assistant U.S. Attorney and showed them the loot.
