FBI arrests Silk Road drugs site suspect

Watch: The BBC's Richard Taylor explains what made Silk Road so infamous

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The FBI has announced the arrest of the suspected operator of the Silk Road - a clandestine online marketplace for drugs and other illegal items.

A spokeswoman said that Ross William Ulbricht was arrested "without incident" by its agents at a public library in San Francisco on Tuesday.

She added he had been charged with conspiracy to traffic narcotics.

The FBI said it has also seized approximately $3.6m (£2.2m) worth of bitcoins - a virtual currency.

The agency described it as the biggest Bitcoin seizure to date.

The Silk Road is now offline - those trying to access it are presented with a notice saying the site has been seized. Users had previously been able to access the service through Tor - an anonymous web browsing system that requires special software.

Mr Ulbricht made an initial appearance at San Francisco federal court where a bail hearing was set for Friday.

In addition to the narcotics trafficking allegation he also faces charges of computer hacking conspiracy and money laundering conspiracy, according to court filings.

What was the Silk Road?

Silk Road took its name from the historic trade routes spanning Europe, Asia and parts of Africa.

News reports and other internet chatter helped it become notorious. However, most users would not have been able to stumble upon the site as the service could only be accessed through a service called Tor - a facility that routes traffic through many separate encrypted layers of the net to hide data identifiers.

Tor was invented by the US Naval Research Laboratory and has subsequently been used by journalists and free speech campaigners, among others, to safeguard people's anonymity.

But it has also been used as a means to hide illegal activities, leading it to be dubbed "the dark web".

Payments for goods on Silk Road were made with the virtual currency Bitcoin, which can be hard to monitor.

Court documents from the FBI said the site had just under a million registered users, but investigators said they did not know how many were active.

Earlier this year Carnegie Mellon University estimated that over $1.22m (£786,183) worth of trading took place on the Silk Road every month.

"From in or about January 2011, up to and including September 2013, the Silk Road Hidden Website... has served as an online marketplace where illegal drugs and other illicit goods and services have been regularly bought and sold by the site's users," state court papers filed in the Southern District of New York.

"The complainant further alleges, in part, that the Silk Road Hidden Website is designed to facilitate the illicit commerce hosted on the site by providing anonymity to its users, by operating on what is known as The Onion Router or Tor network... and by requiring all transactions to be paid in bitcoins, an electronic currency designed to be as anonymous as cash."

It adds that Mr Ulbricht - who is alleged to have gone by the pseudonym Dread Pirate Roberts - had generated sales of more than $1.2bn via the Silk Road.

The FBI believes he took cuts ranging from between 8% to 15% and was subsequently involved in a money laundering operation to hide the activity.

Blackmail

A second document alleges that private communications recovered from the Silk Road's computer server suggested the suspect had been willing to pursue violent means to defend his interests.

It said that messages sent in March and April indicated he had "solicited a murder-for-hire" of a Canadian Silk Road user nicknamed FriendlyChemist who had tried to extort money by threatening to release the identities of thousands of the site's users.

FBI notice It is no longer possible to access the Silk Road's website

Subsequent messages indicated he had been sent a photograph of the victim after paying $150,000 to have the blackmailer killed.

"I've received the picture and deleted it. Thank you again for your swift action," Mr Ulbricht is alleged to have written to an assassin.

However, the court documents note that Canadian law enforcers have said there was no record of a homicide taking place in White Rock, British Columbia at the time.

Publicity drive

The court documents described Mr Ulbricht, 29, as a former physics student at the University of Texas, who had gone on to study at the University of Pennsylvania between 2006 and 2010.

How bitcoins work

Bitcoin is often referred to as a new kind of currency.

But it may be better to think of its units as being virtual tokens that have value because enough people believe they do and there is a finite number of them.

Each of the 11 million Bitcoins currently in existence is represented by a unique online registration number.

These numbers are created through a process called "mining", which involves a computer solving a difficult mathematical problem.

Each time a problem is solved the computer's owner is rewarded with 25 Bitcoins.

To receive a Bitcoin, a user must also have a Bitcoin address - a randomly generated string of 27 to 34 letters and numbers - which acts as a kind of virtual postbox to and from which the Bitcoins are sent.

Since there is no registry of these addresses, people can use them to protect their anonymity when making a transaction.

These addresses are in turn stored in Bitcoin wallets, which are used to manage savings. They operate like privately run bank accounts - with the proviso that if the data is lost, so are the Bitcoins contained.

It was here, according to Mr Ulbricht's LinkedIn profile, as quoted by court documents, that his "'goals' subsequently 'shifted'".

He wrote on the social network that he had wanted to "give people a first-hand experience of what it would be like to live in a world without the systemic use of force" by "institutions and governments".

Authorities said he took to online forums to publicise Silk Road as a potential marketplace for drugs back in January 2011.

In one such message, a user believed to be Mr Ulbricht allegedly said: "Has anyone seen Silk Road yet? It's kind of like an anonymous Amazon.com."

Investigators said he used the same channels months later to recruit help - starting with a search for an "IT pro in the Bitcoin community".

'Shock and disbelief'

Visitors to the discussion site Reddit have reacted to the news on a forum dedicated to Silk Road.

"I'm still in a bit of shock and disbelief," wrote one.

Others expressed anger that money they said they had deposited with the site would now be seized.

Some speculated that copycat sites were likely to appear soon.

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