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Silk Road shut down after FBI arrests founder and confiscates 26,000 Bitcoins

Ross William Ulbricht, the founder of the ‘dark website’ Silk Road, which sold drugs, arms and other contraband online using the Tor protocol to anonymise users and could not be accessed via your usual Google search, has been arrested by the FBI this week. The illicit website relied on Tor, encryption, a complex server network and the Bitcoin digital currency to operate. The Bitcoin currency took a 20% fall in its value after Ulbricht's arrest plummeting to $109 before recovering on the Mt. Gox exchange today.

The closure of the Silk Road online marketplace where assassins, stolen credit cards, hacking tutorials and personal identity information were all available, by the FBI after two years of operation was not unexpected as it has long been targeted by US authorities. Ulbricht was arrested in San Francisco on 2 October and found to be in possession of 26,000 Bitcoins, worth an estimated $3.6m. The 29-year-old’s servers and computer infrastructure has been sized and shut down by the FBI, which also has a court order to investigate Bitcoin wallets on the site to try to track down those engage in criminal behaviour.

According to the FBI Ulbricht, who also uses the name Dread Pirate Roberts, has handled sales worth more than 9.5m Bitcoins over the lifetime of the Silk Road and the founder has charged commission on each transaction, earning 600,000 Bitcoins, equivalent to approximately $80m. The Bitcoin virtual currency, which is under close scrutiny at the moment, was the only form of currency accepted on the site.

Commenting on the arrest and set-up of the ‘dark website’, Robert Hansen, a technical evangelist at WhiteHat Security, explained that the case wasn’t a Tor issue but an operational security one. “Ross Ulbricht combined many online actions with his private actions and gave away many signals that led the federal authorities to figure out who he was,” he said. “Tor itself is very difficult to break. However, given that the authorities knew who he was - due to an earlier customs bust involving counterfeit identification documents - combined with his online personas and the fact that Google and Comcast comply with requests to give IP information of their users, it was relatively straight forward to de-cloak Ulbricht.”

Meanwhile of course many of The Silk Road’s customers will find other online marketplaces, such as Topix or others, and the battle between the authorities and those seeking to avoid them will no doubt continue.

By Neil Ainger