Silk Road arrest exposes a hidden Internet

The end came quickly for Silk Road, when federal agents crept in to nab the alleged kingpin of the secret $1.2 billion online drug marketplace as he sat at his laptop in the sci-fi section of a San Francisco public library.

Within hours, though, many vendors and customers who said they used the "Deep Web" bazaar were back in action — moving to similar websites like Sheep Marketplace, which advertises marijuana, LSD and a multitude of prescription pills for sale in largely untraceable transactions.

The charges against Silk Road's alleged founder in Maryland and New York rank among the highest-profile Internet crime busts, but the success of the site rested on a number of technologies that remain available to almost anyone who wants to use the Internet anonymously. For example, signing up for Sheep Marketplace requires just a few minutes and the free installation of a special browser.

The events of the past week have drawn renewed attention to the underground of the Internet, where users hide their identities, bounce information around the world to obscure its origin, access hidden sites with extensions like ".onion" and spend digital currency known as Bitcoins.

But experts say the technology that allows drug dealers and child pornographers to flourish is also a legitimate protector of Internet privacy and a crucial check on government power. So-called Deep Web applications have helped activists drive forward the Arab Spring and get around China's Great Firewall.

Some of the tools used by Silk Road and its patrons were developed by the U.S. government, and observers say they could become increasingly popular here as the populace reckons with revelations of vast Internet surveillance by the National Security Agency.

"Why wouldn't you be interested in anonymity, with all the recent releases of information that the NSA has been pervasively tracking almost everything we do online?" asked Michael Taylor, a computer science professor at the University of California, San Diego. "It gets back to the fundamental freedoms that Americans tend to believe they have."

Like many of his site's users, authorities say, the founder of Silk Road operated anonymously under an outlandish nickname: Dread Pirate Roberts. Ross William Ulbricht appeared for a second time in a federal court in California on Friday and was held in custody. He has not entered a plea in court.

He is charged in New York with drug, computer-hacking and money-laundering offenses. In Maryland, Ulbricht is accused of attempting to order the torture and killing of one of his employees, a deal that was staged by an undercover agent.

Authorities say $1.2 billion in drugs and other contraband were sold on Silk Road in its 21/2 years online, earning Ulbricht about $80 million in commissions. On Sept. 23 alone, court documents say, the site had 13,000 listings for drugs.

The charges against Ulbricht point to the ways criminals can abuse systems designed to protect privacy. Chief among those technologies are Tor, a way to browse and post to the Web without being traced; Bitcoin, an online currency; and PGP, an email encryption system.

But while Silk Road relied heavily on those tools as an alleged marketplace for illegal transactions, they have a life independent of the site and of any criminal activity. Bitcoin, for example, can be used to make international payments easily, and Tor is favored by political activists seeking to protect their identities.

"People have had the ability to set up enterprises that violate laws for a long time," said Phil Zimmermann, who developed PGP, or "pretty good privacy," as a human rights tool in the 1990s. "I don't think that Silk Road is any worse than any other … conduit through which you could sell anything legal or illegal."

Federal authorities recognize that many of the tools used by Silk Road have "legitimate uses," according to a criminal complaint filed against Ulbricht in New York, but they also described in extensive detail how the online marketplace relied on them.

Silk Road operated as a hidden site on the Tor network. It was only accessible using a special browser and found at an address ending in .onion rather than the more familiar .com or .net.

Once a user logged onto the site, it was a simple step to sign up and start shopping. Images taken from the Silk Road site by the FBI show cocaine, hydroponically grown marijuana and LSD for sale.

Users and administrators from both Silk Road and Sheep Marketplace did not respond to interview requests. Sheep Marketplace had about 1,700 advertisements listing drugs Friday, up from 1,000 a day before.

To buy something from Silk Road, users needed a stash of Bitcoins. The data that makes up a Bitcoin is essentially the history of every transaction in which it has been used. The electronic currency, the FBI says, is useful for illegal transactions because — like cash — it is difficult to trace.

"I'd say Bitcoin was essential for this kind of marketplace to develop," said Sarah Meiklejohn, a doctoral candidate at the University of California, San Diego who studied the currency's criminal potential.

Silk Road added an extra layer of complexity. According to the FBI documents, it required customers to maintain a "bank" on the site. Any transaction would then be passed through a system that made it very difficult to determine which particular Bitcoins were associated with a purchase, according to the charging papers.