Alleged digital criminal masterminds have assets/liabilities too | FT Alphaville

Alleged digital criminal masterminds have assets/liabilities too

More evidence is emerging in the case against Ross Ulbricht, the alleged criminal mastermind behind the Silk Road illicit goods digital marketplace and keeper of the Dread Pirate Roberts pseudonym.

Court filings refer to computer files seized by the Feds that show, amongst other things, that Ulbricht was a meticulous bean-counter with a tendency to account for assets and liabilities as exotic and incriminating as hacker bribes and server rent.

From the filings, via Ars Technica on Friday:

Financial files stored on Ulbricht’s computer likewise confirm his continuous control of Silk Road from beginning to end. For example, one spreadsheet, titled “sr_accounting,” lists hundreds of expenditures relating to Silk Road, from “server rent” to “pay off hacker,” spread throughout 2010 to 2013. In another spreadsheet, titled “NetWorthCalculator,” Ulbricht listed all of his assets and liabilities, the most notable of which was an entry for “sr inc,” listed as an asset worth $104 million. Moreover, actual proceeds derived from Silk Road were found on the computer, in the form of a Bitcoin wallet containing approximately 144,000 Bitcoins, equivalent to over $20 million based on prevailing exchange rates at the time of Ulbricht’s arrest.

Interestingly enough, 144,000 Bitcoins at today’s rate of approx $759, would equal $109,296,000 — not far off the $104m valuation for “sr inc”.

Ulbricht, it turns out, was also a keen diarist. Amongst his journal entries, according to the court filings, was the following:

I began working on a project that had been in my mind for over a year. I was calling it Underground Brokers, but eventually settled on Silk Road. The idea was to create a website where people could buy anything anonymously, with no trail whatsoever that could lead back to them.

More colourful still, however, is the evidence linking him to a series of attempted murders for hire.

First, as alleged in the indictment filed against Ulbricht in the District of Maryland, in January 2013, Ulbricht commissioned a murder for hire from a Silk Road user claiming to be a large-scale narcotics trafficker, but who in reality was an undercover law enforcement agent (the “UC”). Specifically, on January 26, 2013, Ulbricht , through his “DPR” account on Silk Road’s private message system, told the UC that a Silk Road employee (the “Employee”) had stolen approximately $350,000 in Bitcoins from Ulbricht, by “ [taking] advantage of some of the tools I gave him to do vendor support to rip a bunch of vendors off, who I will have to compensate.” At first, Ulbricht told the UC that he wanted the Employee “beat up” and “ forced to send the bitcoins he stole back. ” Later, however, Ulbricht told the UC he wanted to “ change the order to execute rather than torture .” Ulbricht explained that the Employee had been arrested and that he “ha[d] to assume he will sing.” Ulbricht paid $80,000 for the job, wiring the money to a bank account designated by the UC – $40,000 in advance, and $40,000 after the job was purportedly done. Upon receiving staged photos from the UC of the Employee’s death, Ulbricht replied, “I’m pissed I had to kill him . . . but what’s done is done. . . . I just wish more people had some integrity.”

That above comes on top of an attempted silencing of an extortionist known as “FriendlyChemist”, the order payment for which has now been linked to a specific transaction in the Bitcoin BlockChain:

Next, as alleged in the Complaint, beginning on March 13, 2013, a Silk Road vendor known as “FriendlyChemist” began sending threats to Ulbricht ’s “DPR” account on Silk Road’s private message system, claiming that he had a long list of actual names and addresses of Silk Road users that he intended to publish on the Internet unless Ulbricht gave him $500,000, which “ FriendlyChemist ” said he needed to pay off his narcotics suppliers. Subsequently, Ulbricht communicated with another user claiming to be “FriendlyChemist’s” supplier, who went by the username “ redandwhite ” – a well-known nickname of the Hells Angels. Ulbricht told “ redandwhite ” that “FriendlyChemist” was causing him trouble and that he wanted “to put a bounty on his head.” Ulbricht gave “ redandwhite ” what he believed to be the true name of “ FriendlyChemist, ” and a location for him in White Rock, British Columbia, Canada. Ulbricht and “ redandwhite ” agreed upon a price of 1,670 Bitcoins – approximately $150,000 – for the job, which Ulbricht transferred on March 31, 2013, to a particular Bitcoin address designated by “ redandwhite. ” This transfer appears on the public Bitcoin ledger known as the “Blockchain,” evidencing that the transfer was actually made. Over the next several days, “ redandwhite ” reported to Ulbricht that “ FriendlyChemist ” had been “taken care of” and provided what he claimed to be a photograph of the victim after the job was done. Ulbricht thanked redandwhite” for his “swift action.”

Seriously. The writers of Breaking Bad couldn’t make this sort of stuff up.

On which note, here are the filings describing Ulbricht’s unsuccessful emergency escape plans:

Plans for life on the run. Evidence from Ulbricht’s computer also reflects that he had contemplated and prepared for a life on the run. For example, one file found on the computer, labeled “emergency,” contains a list of apparent to -do items in the event that Ulbricht learned that law enforcement was closing in on him. It reads as follows: encrypt and backup important files on laptop to memory stick. destroy laptop hard drive and hide/dispose destroy phone and hide/dispose Hide memory stick get new laptop go to end of train find place to live on craigslist for cash create new identity (name, backstory)

And for the Walter White kicker, the FBI suspects there could still be very large Bitcoin stashes stored in hidden locations:

Access to digital currency and offshore accounts. Ulbricht also has the financial wherewithal to flee. As described in the Complaint, through his operation of Silk Road, he amassed over 600,000 Bitcoins in commissions from Silk Road sales, an enormous number of Bitcoins, equivalent to approximately $420 million at current exchange rates. Although Ulbricht spent a substantial portion of his Bitcoins in operating Silk Road, and the FBI has seized approximately 144,000 of Ulbricht’s Bitcoins from his computer, there could very well be additional large stashes of Bitcoins that Ulbricht stored elsewhere and that the FBI has yet to locate. Being digital currency, Bitcoins can be stored in any fashion that a computer file can be stored – on a thumb drive in a safe deposit box, for example, or even on the Internet, in “cloud” storage . Ulbricht could thus easily retrieve any Bitcoins he has secreted away were he to be released. Further, Ulbricht’s computer was also found to contain reference materials for setting up offshore bank accounts, indicating that Ulbricht also may have access to bank accounts held abroad

Related links:
Feds say Silk Road suspect’s computer shows he (thought he) plotted 6 murders
– Ars Technica
Guest post: Assassins don’t prefer Bitcoin - FT Alphaville