US to auction 50,000 more bitcoins from Dread Pirate Roberts

Want to be the next Dread Pirate Roberts? You can get started by buying 50,000 bitcoins once owned by Ross Ulbricht (aka the Dread Pirate), who is awaiting sentencing on a litany of charges related to his operation of the Silk Road, a defunct drug marketplace.

On Wednesday, the U.S. Marshals Service announced that it will hold its next civil forfeiture auction on March 5 from 8a.m. to 2p.m. EST. The bitcoins will be auctioned off in 10 blocks of 2,000 bitcoins and 10 blocks of 3,000 bitcoins.

This will be the third such bitcoin auction. The first took place last June when Venture Capitalist Tim Draper bought approximately 30,000 bitcoins seized from the Silk Road, and was followed by another one in December in which a consortium of bitcoin investors bought another stash of 50,000 bitcoins once belonging to Ulbricht.

The new auction comes as the price of bitcoin has fallen precipitously. One unit of the virtual currency once commanded $1,200, but fell to around $600 when Draper won the first auction, and is now bouncing around $230.

The upcoming sale is likely to just about exhaust the U.S. Marshals’ supply of bitcoins. The government seized the currency after the FBI took down Ulbricht with an open laptop in a San Francisco library in 2013.

Ulbricht was convicted in New York this month after he failed to convince a jury that he had passed on the title of Dread Pirate Roberts to someone else — much as the moniker passed from pirate to pirate in the Princess Bride.

How tech trials force a choice between bad people and bad law

Of course Ross Ulbricht was guilty. Despite his far-fetched claims of mistaken identity, a New York jury confirmed the obvious: that Ulbricht (aka Dread Pirate Roberts) was the criminal mastermind who took on a villain’s name, and became rich by running an online marketplace that sold any drug imaginable.

All the same, protestors on the internet and at the courthouse still insisted Ulbricht was innocent. More broadly, the Dread Pirate (who is now awaiting sentencing) also enjoyed sympathy from many in the tech press, which often downplayed the bad things he did, and instead cast the FBI as the villain in the case.

Such moral indulgence is odd, and doesn’t extend to Ulbricht alone. Other tech rogues, including a corpulent charlatan and a Nazi sadist, also enjoy public sympathy. But why? A big part of it may lie with the government’s heavy-handed approach to internet-related crime.

Bad people

Ross Ulbricht didn’t start out bad. Indeed, accounts of his past life from his mother and Ulbricht reveal a very different sort of person: an Eagle Scout, and then a bright and sensitive physics student who worked hard to build a used books company.

But then he became someone else. He started the Silk Road marketplace, which began as a relatively benign forum for finding magic mushrooms, but then devolved into a free-wheeling playground for hard drugs, forged documents and prostitution.

The notorious bazaar also changed Ulbricht himself: FBI evidence from a seized laptop suggests that he attempted to hire hit men to murder those he believed had betrayed him (the “hit men” turned out to be government agents but Ulbricht believed they were real).

This tragic arc, which saw the Eagle Scout become the Dread Pirate Roberts, may explain some of the sympathy for Ulbricht. But that’s hardly the case for Weev, another famous figure in internet circles who is also facing prosecution by the Justice Department.

Weev, whose real name is Andrew Auernheimer, was sentenced to three years in prison for what the government describes as a hack on AT&T. But he is better known for his other legacy as one of the cruelest trolls on the internet, whose antics have exposed women to death threats. And last year, Weed reinvented himself as a Jew-hating White Supremacist.

Despite all this, many tech outlets hailed an appeals court decision last year to vacate Weev’s conviction on the hacking charges on procedural grounds, and to release him from prison. And while Weev doesn’t exactly enjoy public sympathy, stories of his legal battle often elide the bad things he has done.

Other antiheroes of the tech worlds include Julian Assange, the self-aggrandizing Wikileaks leader who faces sexual assault accusations in Sweden, and outlaw music mogul Kim Dotcom.

Dotcom has done a litany of bad things, including making millions from purloined movies and allegedly ratting on his rivals, but he is still hugely popular with many internet communities. The 300-pound fugitive is even dabbling in mainstream politics in New Zealand, where he is living while he fights U.S. efforts to extradite him to face multiple criminal charges.

The celebrity-style adulation that Dotcom and the others receive is no doubt frustrating for the law enforcement officials trying to convict them. The reason for it, however, is not just because the outlaws are good at gulling the public (though that’s part of it), but because of people’s legitimate misgivings about the laws that the U.S. is using to prosecute them.

Bad laws

Aaron Swatrz was a genius so beloved in the tech community that a film-maker made an acclaimed movie about him called “The Internet’s Own Boy.” But he was also a criminal in the eyes of the government, and some believe the Justice Department’s relentless effort to prosecute led the 26-year-old Swartz to commit suicide in his Brooklyn apartment two years ago.

What crime led to this end? In 2009, Swartz used MIT computers to download millions of academic articles from a database called JSTOR – articles whose authors are typically unpaid, but that are licensed to universities at high fees. His action may have been ill-advised, but hardly amounts to a serious crime.

Nonetheless, the Justice Department came at Swartz with a law called the Computer Fraud and Abuse Act that gave prosecutors discretion to seek a prison term of 35 years and a $1 million fine.

The CFAA is a clumsy statute dating from long ago that relies on vague concepts like “unauthorized access,” and lawmakers have tried to reform it. Yet those efforts have so far failed, and the Justice Department keeps using it in all sorts of cases — including that of Weev.

In the government’s view, Weev committed illegal hacking under the CFAA when he “accessed” the AT&T website to demonstrate a security flaw that spat out private email addresses. Skeptics, however, point out that Weev simply entered information into a public website available to anyone with an internet browser, and ask how this amounts to hacking.

The CFAA also grounded one of the seven charges– “conspiracy to commit hacking” — on which Ross Ulbricht was convicted, although that charge was overshadowed by other elements of the trial (including a theory that the government itself had violated the CFAA.)

Meanwhile, the CFAA is hardly the only questionable law that is at issue in tech-related prosecutions.

Before the Silk Road case, Ulbricht’s mother made a forceful argument that her son’s prosecution should be seen through the lens of systemic abuse by the Justice Department of surveillance and drug laws. She has a point: whatever harms caused by Silk Road drug deals, they pale in comparison to the destruction wrought by America’s ruinous “war on drugs.”

As for Kim Dotcom, his use of a mass piracy company to get rich is impossible to justify. But so too are many aspects of U.S. copyright laws, whose absurd terms and harsh penalties serve to benefit a narrow sector of the entertainment industry at the expense of the general public. Is it a surprise that knee-jerk attitudes to digital media by government and industry has led some to cheer for Dotcom instead of the industry that wants him prosecuted?

The hard choice

The cases against Ulbricht, Weev and Dotcom raise a dilemma because they can force us to choose between supporting a bad person or a bad law. A choice to convict such men may serve to legitimize unjust laws, while exonerating them amounts to giving them a free pass for unacceptable actions.

The cases can be harder still since they often involve technology (like TOR, peer-to-peer tools and bitcoin) that is unfamiliar to average people, but that the government often characterizes as inherently suspicious and related to “hacking.”

All of this helps to explain why the tech community can embrace antiheroes over Justice Department prosecutors who are apt to employ every legal tool at their disposal — even if it is one that is harsh or outdated.

The solution then is to give the prosecutors better tools, and not simply more of them. If the U.S. government is going to retain credibility in its effort to go after what it sees as online bad guys, it will have to do a better job of defining crime, and matching crime to punishment.

This story was updated on 2/15 to replace the word “charges” with “accusations” to describe the sexual assault allegations against Assange.

Ross Ulbricht found guilty of masterminding Silk Road

His attorneys admitted early on in the trial that Ross Ulbricht had created the Silk Road, the online drug bazaar that was busted by the FBI in October 2013 when Ulbricht was arrested. However, the defense strategy of claiming Ulbricht founded the site before passing it on to other operators (even accusing defamed MtGox CEO Mark Karpeles) didn’t work.

On Wednesday, a jury found Ulbricht guilty of charges related to the operation of the online drug website, including computer hacking, money laundering, drug trafficking, criminal enterprise and aiding and abetting the distribution of drugs over the internet. While the prosecution did bring up the murder-for-hire plots, where Ulbricht had solicited help from the Hells Angels to kill a Silk Road user FriendlyChemist, Ulbricht did not face any murder solicitation charges in the trial, according to Bloomberg, and there has been no evidence that the murders ever took place.

Throughout the trial, the prosecutors in the federal courthouse in Manhattan sandbagged the defense with mountains of evidence linking Ulbricht to Dread Pirate Roberts, the moniker used by the founder of the Silk Road. Ulbricht was arrested in October 2013 at a San Francisco library, with his laptop open and logged into the network. The prosecutors also brandished Ulbricht’s personal journal, where he wrote about starting the Silk Road and various life events, and compared them to chats from Dread Pirate Roberts (unsurprisingly, there was quite a bit of overlap). Even bitcoin transactions, a network that has long touted its anonymity, were able to be traced from the Silk Road to Ulbricht’s accounts.

The defense, on the other hand, had their only two witnesses thrown out by the judge. Ulbricht’s initial trial confession of founding the site seemed to only surprise his family, who had remained steadfast in their campaign for his innocence and funded much of his trial from donations.

It was a fast turnaround for the case, with the trial lasting less than a month and the jury only heading to deliberation on Wednesday morning before returning a guilty verdict later in the day. The FBI arrested Blake Benthall for being the alleged operator of Silk Road 2, the successor online market, in San Francisco on November 2014.

This story was updated several times as more information became available.

Silk Road trial to turn on true identity of “Dread Pirate Roberts”

Ross Ulbricht, a young man from Texas, created a massive online market for drugs and crime known as the Silk Road, got filthy rich off digital currency and tried to murder anyone who crossed him. And he did so under the swashbuckling moniker “Dread Pirate Roberts” — unless, that is, Ulbricht was played as a patsy by the real Dread Pirate who not only did all those things, but also set up Ulbricht to take the fall.

This, in a nutshell, is what a jury will have to sort in a month long-trial that began Tuesday in Manhattan. I wasn’t in the courtroom, but a Wired report points to the defense strategy that will be employed by Ulbricht, who chose to plead not guilty following his dramatic arrest in a San Francisco library more than a year ago.

That strategy amounts to Ulbricht conceding that he did indeed found the Silk Road website as an anonymous market where anyone could buy anything. But Ulbricht is also claiming that he is not the Dread Pirate Roberts — the person (or people) associated with the most notorious aspects of Silk Road. As Wired reports:

[Ulbricht’s lawyer] Dratel went on to explain that the site was meant merely to be a kind of ‘economic experiment’ that Ulbricht only controlled for a brief time. The eventual adoptive owners of the Silk Road, Dratel claimed, would later trick Ulbricht into serving as the ‘fall guy’ when they sensed an impending law enforcement crackdown.

‘After a few months, he found it too stressful for him, and he handed it over to others,’ Dratel told the jury, describing the Silk Road’s early days. ‘At the end, he was lured back by those operators to … take the fall for the people running the website.’

While the argument sounds improbable to those familiar with the lawsuit, Ulbricht’s strategy may succeed if he can befuddle the jurors over the many technological dimensions of the case — online aliases, Tor networks, bitcoins, faulty CAPTCHAs. Any such confusion is also likely to get compounded by what legal scholar Sarah Jeong describes as the “strange ephemerality” of much of the evidence.

Such complexity and strangeness may make it hard for the jurors to conclude beyond a reasonable doubt that Ulbricht is the Dread Pirate Roberts. On the other hand, the prosecution is arriving with strong ammunition of its own, after persuading the judge not to exclude damning evidence that suggests Ulbricht tried to arrange a series of murders to cover his tracks.

We’ll provide more updates over the coming weeks about a trial that will amount to a rare public probe of some of the darkest corners of the internet.

Bitcoin Trust the big winner in US Marshals’ auction

Of the 50,000 bitcoins up for auction, the Bitcoin Investment Trust bidding syndicate walked away with 48,000 of them. The US Marshals’ Service confirmed that the syndicate, which includes the Bitcoin Trust and the trading division of Barry Silbert’s SecondMarket, won the majority but would not disclose the winning price. Tim Draper, who swept June’s auction, pocketed the remaining 2,000 bitcoin. Last week’s auction of the bitcoin seized from Silk Road’s alleged operator drew low numbers — only 11 registered bidders participated, and now we know two of them.

FBI shuts down Silk Road 2.0 website, arrests alleged operator in dark web bust

The homepage to Silk Road 2.0, the successor website to Silk Road, an underground online drug marketplace.   REUTERS/Handout

The homepage to Silk Road 2.0, the successor website to Silk Road, an underground online drug marketplace. Reuters/Handout

The FBI and Homeland Security announced they have taken down Silk Road 2.0, an illegal drug marketplace, and arrested its alleged owner Blake Benthall, who went by the name “Defcon.” Benthall, 26, was arrested Wednesday in San Francisco and is expected to make an appearance in court here later on Thursday. The bust comes a little over a year since the alleged creator of the original Silk Road, Ross Ulbricht, was also arrested in San Francisco in October 2013. The Silk Road 2.0 site, which was nearly identical both in how it operated using Tor and in what it sold, launched a month later. Benthall then allegedly took administrative ownership as “Defcon” in late December 2013, according to the FBI.