Today, a Manhattan jury found Silk Road mastermind Ross Ulbricht guilty on all charges. The Silk Road website, also known as the Amazon.com of drugs, was a dark net black market that operated from February 2011 until October 2013, at which point it was shut down by the FBI. The website offered users a degree of anonymity by using a Tor hidden service and conducting transactions entirely in the virtual currency bitcoin.
Ulbricht, who operated Silk Road under the alias “Dread Pirate Roberts,” was arrested in October 2013 and charged with narcotics trafficking conspiracy, running a criminal enterprise, computer hacking conspiracy, and money laundering conspiracy. At the time of his arrest, Ulbricht’s website was believed to have brokered more than $1 billion in transactions for illegal goods and services, and Ulbricht had over $18 million in bitcoins on his personal laptop.
Ulbricht’s trial began on January 13, 2015. After weeks of evidence from the prosecution, Ulbricht countered with a short defense case lasting only two days. Throughout the trial, Ulbricht’s defense was that he created Silk Road in 2011, but then sold the site to another “Dread Pirate Roberts.” Indeed, Ulbricht took the “Dread Pirate Roberts” moniker from the 1987 film The Princess Bride, in which the name is passed from person to person over time.
In the end, Ulbricht’s story could not overcome the considerable evidence introduced by the prosecution, including financial spreadsheets and TorChat logs with Silk Road administrators recovered from Ulbricht’s personal laptop. The jury also heard passages from Ulbricht’s computerized journal, in which he wrote about his idea “[t]o create a website where people could buy anything anonymously, with no trail whatsoever that could lead back to them.”
Ulbricht could face life in prison for his involvement in Silk Road. He also is set to start a second trial in Maryland on charges that he attempted to hire contract killers to murder six people involved in Silk Road, one of whom was actually an undercover DEA agent.
Ulbricht’s conviction is the last in a series of high-profile Silk Road cases. In recent months, Charlie Shrem and Robert Faiella pleaded guilty for the their role in facilitating bitcoin transactions on the online marketplace. Shrem is the founder and former CEO of BitInstant, an online bitcoin exchange that, at its peak in 2013, was processing approximately 30% of all bitcoin transactions. Faiella, in contrast, turned to the bitcoin exchange business after struggling to make it as a plumber and becoming disabled from chronic back problems.
Faiella, operating under the online alias BTCKing, purchased bitcoins from BitInstant and sold them to Silk Road users at a profit. According to the complaint, Shrem knew about Faiella’s involvement in Silk Road and personally processed his transactions, and even gave him discounts on high-volume orders. Together, the pair were accused of letting more than $1 million in bitcoins reach the illicit marketplace. Shrem admitted to aiding and abetting unlicensed money transmitting and was sentenced to two years in prison. Faiella admitted to operating an unlicensed money transmitting business and was sentenced to four years.
In the immediate aftermath of the Silk Road takedown, bitcoin skeptics thought it might be the beginning of the end for the virtual currency. But, proving them wrong, 2014 turned out to be a positive year for bitcoin investment and development. Although the exchange rate has not returned to pre-Silk Road levels, the number of bitcoin transactions has increased steadily. Acceptance by major companies also has increased, with companies such as Microsoft, Dell, Expedia, and Overstock.com announcing that they will accept the virtual currency. Furthermore, 2014 was a record year for the number of bitcoin startups and the amount of money invested in bitcoin startups (around $300 million). Finally, as legitimate bitcoin usage grows, government regulators are taking notice. New York’s Department of Financial Services is currently developing a specialized BitLicense to govern bitcoin exchanges and brokers. All things considered, with the Silk Road saga drawing to an end, bitcoin is leaving its criminal past behind and is headed for an increasingly mainstream future.