Drug Bust devalues BitCoins
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Pusher’s bust cuts value of Web money
The arrest of an alleged drugdealing Internet pirate caused a huge plunge in value Wednesday for the digital doubloons the feds say he accepted as payment for cocaine, heroin and crystal meth.
California physics geek turned swashbuckling Internet entrepreneur Ross William Ulbricht — known on the Web as “Dread Pirate Roberts” — is charged with running a secret site called Silk Road that sold massive amounts of drugs in exchange for the virtual currency called Bitcoins.
Word of Ulbricht’s arrest and the seizure of 26,000 Bitcoins worth an estimated $3.6 million — which the feds called the largest ever seizure of Bitcoins — led to a 33 percent drop in price on the Bitstamp Ltd. exchange, from $127 to $85 for each unit of the untraceable, digital money.
Jered Kenna, CEO of the Tradehill virtual currency exchange, told Bloomberg News that the record seizure and the closure of Silk Road “threw a lot of uncertainty” into the Bitcoin market.
Ulbricht, 29, was nabbed Tuesday in his hometown of San Francisco. “This guy was like the Wizard of Oz because he was impossible to find,” said a law enforcement source.
The investigation, more than two years long, was handled by New York feds jointly with the FBI’s cyber crimes unit, the DEA and the IRS. Prosecutors say Ulbricht peddled drugs on the “deep Web” from January 2011 until last week.
As of Sept. 23, there were 13,000 listings for drugs on the site, including for “cannabis,” “ecstasy” and “stimulants.”
There were also other listings, including 169 for “forgeries” placed by vendors offering fake driver’s licenses and other fraudulent documents and another 159 under the category of “services” that included “firearms and ammunition” and “hit men.”
Silk Road, which was only accessible through the anonymous Tor network that conceals users, has been shut down and replaced by an FBI notice reading: “This hidden site has been seized.”
The site generated sales revenues totaling more than 9.5 million Bitcoins (roughly $1.2 billion) and collected commissions from sales totaling 600,000 Bitcoins ($80 million).
The feds nabbed Ulbricht after tracing posts he made in late 2011 on a Bitcoin forum to his Gmail and LinkedIn accounts. Federal agents made more than 100 undercover purchases through the site, which had 957,079 registered users as of July 23, the complaint states.
The complaint also says Ulbricht solicited a Silk Road user named “redandwhite” to “execute a murder for hire” of another Web site user named “Friendly Chemist” who “threatened to release the identities of thousands of users of the site” if he wasn’t paid $500,000.
Additional reporting by Larry Celona
