The trial of the alleged mastermind behind the world’s biggest online drugs marketplace continued Wednesday with testimony from a Homeland Security agent who went undercover to bring down the site back in 2012.
Ross Ulbricht, 30, is charged with conspiracy, money laundering, and narcotics trafficking for his alleged role in building and running Silk Road until he was arrested in October 2013.
Jared Der-Yeghiayan, a Department of Homeland Security special agent, told jurors that he began investigating Silk Road when he noticed that many of the drug shipments coming through Chicago’s O’Hare International Airport — where he worked at the time — matched up with photos, descriptions, and “shipped from” location of the drugs advertised on Silk Road’s website.
Exploring further, Der-Yeghiayan and his team at Homeland Security Investigations set up an undercover Silk Road account under the username “dripsofacid.” The team transferred $US7,000 to the bitcoin exchange Mt. Gox Co. in exchange for 27.27 bitcoins on April 5, 2013, he told jurors. The team used 24 of them — approximately $US5,500 — to purchase 1,000 200-milligram Ecstasy pills from user “SuperTrips” that were to ship from Germany, according to Der-Yeghiayan.
The funds from each Silk Road transaction were automatically placed into an escrow account until buyers confirmed they had received the product. A customer service team was available to resolve any disputes between buyers and sellers.
Der-Yeghiayan’s testimony took a humorous turn when lead prosecutor Serrin Turner began reading parts of a sassy Silk Road vendor’s listing out loud. “Don’t buy my product if you lack common sense,” wrote the vendor, who was selling a bundle of hacking tools and programs.
Der-Yeghiayan estimates that he spent thousands of hours on Silk Road community forums, and that government agents completed about 50 undercover buys, mostly from sellers outside of the US. He found that vendors were fairly reliable — all but one of the substances purchased undercover tested positive in a lab for the drug they were supposed to be.
Buyer-seller transactions could be masked using a “tumbler,” which would split the money between a number of different accounts to make the funds’ source extremely difficult to trace. Der-Yeghiayan said Silk Road on its own would make a commission on every transaction, starting at 10% and scaling down based on the size of the purchase.
Typically, vendors would have to exchange their bitcoins for US dollars using an online exchanger. Der-Yeghian testified, however, that it was possible for vendors to liquidate (read: launder) their own proceeds by selling their bitcoins directly on Silk Road. In this way, the vendors could get straight cash for their bitcoins without ever taking their money off the site.
As Der-Yeghiayan walked jurors through a Silk Road wiki page that explained to vendors how to bypass law enforcement, Ulbricht whispered to his lawyer and pointed at the web page. He appeared upbeat, taking any chance he could to turn around and flash an encouraging smile at his mum, Lyn.
Ulbricht’s defence team said Tuesday in its opening statement that Ulbricht started Silk Road as an “economic experiment,” but handed it off to someone else after it started getting too chaotic. We’ve reached out to his lawyer for comment and will update this post if we hear back.