By Dan Kervick

The Bitcoin phenomenon has always been an interesting concoction: part radical libertarian currency scheme inspired by the anti-government monetary musings of Ron Paul and Austrian school of economics; part black market drug exchange empowered by a hackertopian computer architecture providing anonymity to its aliased participants; and part speculative Ponzi-scheme-in-the-making based on a strange built-in deflationary coding that seems designed to make its early adopters filthy rich – if they can somehow succeed in getting enough other suckers Bitcoin enthusiasts to buy in.

The speculative dimension of Bitcoin has sometimes crashed up against its alt-monetary aspirations in comical ways, as was noted earlier today by John Carney:

But now Bitcoin has really broken bad in a whole new direction, as federal prosecutors have indicted one of the Bitcoin marketplace’s star performers for a variety of crimes, including conspiracy to commit murder.  The FBI claims to have unmasked and apprehended the man behind the Bitcoin-powered online drug market Silk Road.  His name is Ross William Ulbricht, and the charges are rather amazing:

The owner of the underground drug market Silk Road was a 29-year-old Libertarian engineer living in San Francisco raking in over $80 million in 2 years, according to the indictment revealed today …

According to the indictment, Silk Road was bigger than anyone had suspected: It boasted over $1.6 billion in sales from 2011-2013, which resulted in $80 million in commissions. (Researchers had previously estimated that Silk Road was doing about $22 million in total sales per year.) According to the indictment, which claims that FBI agents obtained a mirror of the server that housed Silk Road’s business from law enforcement in an unidentified foreign country, Ulbricht “alone has controlled the massive profits generated from the operation of the business.” He used some of the profits to pay a team of administrators as much as $2,000 a week each. And yet, he only paid $1,000 a month in rent for his San Francisco apartment, according to the indictment.

The most bizarre and spectacular allegation in the indictment is that Ulbricht solicited a murder-for-hire against a Silk Road user who was attempting to blackmail him. The user, FriendlyChemist, told Ulbricht—whose alleged online persona was “Dread Pirate Roberts,” or DPR, a reference to the film The Princess Bride—that he had obtained a list of thousands of Silk Road users and was going to release them unless DPR paid off his $500,000 debt to another user, RedandWhite. Instead of paying the debt, DPR contacted RedAndWhite and paid him $150,000 in Bitcoins to off Friendly Chemist.

“In my eyes, FriendlyChemist is a liability and I wouldn’t mind if he was executed,” DPR wrote. DPR even tried to bargain down FriendlyChemist, messaging: “Don’t want to be a pain here, but the price seems high. Not long ago, I had a clean hit done for $80K.” DPR gave redandwhite the address of FriendlyChemist in British Columbia, and the indictment reports that redandwhite sent back photo evidence of the deed. But according to the indictment there is no indication the hit actually happened—”Although I believe the foregoing exchange demonstrates DPR’s intention to solicit a murder-for-hire,” Tarbell wrote, “I have spoken with Canadian law enforcement authorities, who have no record of there being any Canadian resident with the name DPR passed to redandwhite as the target of the solicited murder-for-hire. Nor do they have any record of a homicide occurring in White Rock, British Columbia on or about March 31, 2013.”

If the charges are true, then it would seem that for all of Ulbricht’s clandestine savvy, he made some fairly bad blunders on the road to drug kingpin glory in the untouchable libertarian monetary utopia of Bitcoin:

Currently the most-discussed aspect of the case on the Darknet is speculation on how Ulbricht got caught. Silk Road was hosted using the privacy-protecting Tor Network, and its brazen customers believed their digital tracks were hidden. But it appears that Ulbricht was tripped up by some security mistakes while promoting Silk Road in the early days. Tarbell found that the two earliest mentions of Silk Road were forum posts by a user called Altoid on the drug forum Shroomery.org and the semi-official Bitcoin Forum. Both were obvious astroturfing efforts to promote the Silk Road:

“Has anyone seen Silk Road yet?” goes one. “It’s kind of like an anonymous Amazon.com. I don’t think they have heroin on there, but they are selling other stuff. Let me know what you guys think.” Altoid was easily connected to Ulbricht by a post on the Bitcoin forum in which Altoid solicits programming help for a “venture backed bit coin startup” using the email address: [email protected] From there, agents surveilled Ulbricht in real life and were able to match up his locations to locations used to log into the DPR account. They noticed that both Ulbricht and DPR were fans of the Libertarian Ludwig Von Mises Institute. And a key used to log into Silk Road’s administrator account was linked to another email address Ulbricht had used.

It is possible that the arrests might not stop with Ulrich:

The feds also managed to gain access to servers belonging to Silk Road. They spied on the traffic in real time, determining that from Feb 2011 to July 2013 there were 2013 1,229,465 transactions on the site, and 957,079 total registered users. This raises the question of exactly how much information they have on Silk Road’s users, and whether more busts are to come. (Agents made over 100 undercover transactions throughout the investigation, according to the indictment.)

And who, you ask, is this criminal genius and mastermind, Ross William Ulbricht? Just your average American party boy and Ron Paul devotee:

Browsing Ulbricht’s social media accounts show a pretty normal, nerdy guy. Ulbricht graduated from the University of Texas in 2006 with a degree in Physics and went to Pennsylvania State University for grad school, where he studied engineering and wrote a master’s thesis on “Growth of EuO Thin Films by Molecular Beam Epitaxy.” According to property records, he owned a home in State College, PA, which he sold in 2010 for $187,0000.

He’s got a Facebook page full of beer pong pics and, of course, was a vocal supporter of Ron Paul, donating $200 to his campaign in 2007. “He doesn’t compromise his integrity as a politician and he fights quite diligently to restore the principles that our country was founded on,” Ulbricht told the Penn State student newspaper in 2008.

And as everyone knows, the principles on which our country was founded are narcissistic greed, anti-social duplicity and flim-flammery, the exploitative hustle and the casual murder.

Cross-posted from Rugged Egalitarianism

Follow @DanMKervick

8 responses to “Heisenderp

  1. Thanks Dan, I enjoyed the story.

  2. “The Bitcoin phenomenon has always been an interesting concoction: part radical libertarian currency scheme inspired by the anti-government monetary musings of Ron Paul and Austrian school of economics; part black market drug exchange empowered by a hackertopian computer architecture providing anonymity to its aliased participants; and part speculative Ponzi-scheme-in-the-making based on a strange built-in deflationary coding that seems designed to make its early adopters filthy rich – if they can somehow succeed in getting enough other suckers Bitcoin enthusiasts to buy in.”

    Tell me of a currency that isnt in part a black market drug exchange. Its based on the same hacktopian computer architecture that allows people to be anonymous from the prying NSA and protects whistleblowers like Snowden. You have the wrong idea about bitcoin. Your being very closed minded.

    • Tristan Lanfrey

      For sure, a lot of dodgy deals are made in legit currency cash too. I also agree Tor and anonymous browsing techs in general are good. But the link between Bitcoin and dodgy deals is also very clear, so I don’t see why stating the obvious is being close minded.

      As an aside, these anonymous browsing techs obviously are not that safe when you see what happened to Snowden or Ulbricht, regardless of their original intentions, they got caught anyway. If they want you, they’ll get you.

    • Btc has a black market that is much larger than almost any other currency. Would breaking up the largest drug dealer in the US cause the dollar to fall 20% in one day? That’s what happened to bit coin.

  3. The deflationary coding is a lame attempt at retaining value by limiting production, much like Beanie Babies. Real money circulates back to the issuer, who controls the quantity and distribution. This is true of both credit and currency. Money is constantly being issued and injected into circulation, acting as a pump. This requires old money and credit to be retired and the distribution of new money to be underwritten for the proper purpose. The main function of money is to harness the power of labor. Without a means of circulation and sufficient quantity, you have the Long Depression, when Greenbacks and silver were withdrawn, labor was idle, growth stagnant. Meanwhile, we were involved with building railroads to nowhere, railroads without customers, railroads without demand, infrastructure without economic support.

    Too much money creates the thrift paradox as concentrated savings seeks unearned yield. Bitcoin is not able to address some of these problems as the coins consolidated into fewer hands. The Beanie Baby mindset thinks their money is becoming more valuable as it disappears from circulation. As circulation drops, so does the interest, like Beanie Babies, people wake up to find no buyers. This is the typical mindset of the bullionists confusing the value of money with the value of gold based on scarcity. Gold coins made poor currency because they didn’t circulate. Money is a universal credit accounting system that is used to harness labor for socially productive purposes. The system has certain devices that direct it’s purpose, devices such as taxes, single issue and debt. Demanding interest is a device of a money-getter who avoids productive labor by money transfer. In some respects they are the enemy of society.
    New topic.
    I see the NYT has an opinion piece on State banking, including an opinion by Ellen Brown.

  4. to one of the more famous Ludwig von Mises authors, Walter Block, there’s nothing ethically wrong with BLACKMAIL. Why is blackmail illegal? You charge a price for keeping a secret. Customer pays.

    Therefore, why should it be illegal — and assuming you can afford it — to pay someone to murder a blackmailer or enemy … as long as it’s not the “evil Gubbermint” doing the murdering?

    Check out the 5-6 part Journey into a Libertarian Future on Naked Capitalism (with the imaginary “interview” culled from a book by Hans Hermann-Hoppe). HINT: TOTALITARIAN LIBERTARIANISM, but privatized totalitarianism, so that’s a good thing.

  5. White Rock is in Washington, not BC. You have to go through BC to get to it by land.

  6. Well Gary as has been said, we already tried libertarianism. It was called feudalism.