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Who Owns the World’s Biggest Bitcoin Wallet? The FBI

Bitcoins

Who owns the single largest Bitcoin wallet on the internet? The U.S. government.

In September, the FBI shut down the Silk Road online drug marketplace, and it started seizing bitcoins belonging to the Dread Pirate Roberts — the operator of the illicit online marketplace, who they say is an American man named Ross Ulbricht.

The seizure sparked an ongoing public discussion about the future of Bitcoin, the world’s most popular digital currency, but it had an unforeseen side-effect: It made the FBI the holder of the world’s biggest Bitcoin wallet.

The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address that consolidates much of the seized Silk Road bitcoins. Those 144,000 bitcoins are worth close to $100 million at Tuesday’s exchange rates. Another address, containing Silk Road funds seized earlier by the FBI, contains nearly 30,000 bitcoins ($20 million).

That doesn’t make the FBI the world’s largest bitcoin holder. This honor is thought to belong to bitcoin’s shadowy inventor Satoshi Nakamoto, who is estimated to have mined 1 million bitcoins in the currency’s early days. His stash is spread across many wallets. But it does put the federal agency ahead of the Cameron and Tyler Winklevoss, who in July said that they’d cornered about 1 percent of all bitcoins (there are 12 million bitcoins in circulation).

In the fun house world of bitcoin tracking, it’s hard to say anything for certain. But it is safe to say that there are new players in the Bitcoin world — although not as many people are buying bitcoins as one might guess from all of the media attention.

Satoshi stores his wealth in a large number of bitcoin addresses, most of them holding just 50 bitcoins. It’s a bit of a logistical nightmare, but most savvy Bitcoin investors spread out their bitcoins across multiple wallets. That way if they lose the key to one of them or get hacked, all is not lost.

“It’s easier to keep track of one address, but it’s also most risky that way,” says Andrew Rennhack, the operator of the Bitcoin Rich List, a website that tracks the top addresses in the world of bitcoin.

According to Rennhack, the size of the bitcoin universe has expanded over the past year, but the total number of people on the planet who hold at least one bitcoin is actually pretty small — less than a quarter-million people. Today, there are 246,377 bitcoin addresses with at least one bitcoin in them, he says. And many people keep their bitcoins in more than one address. A year ago, that number was 159,916, he says.

Although some assume that the largest Bitcoin addresses are held by bitcoin dinosaurs — miners who got into the game early on, when it was easy to rack up thousands of bitcoins with a single general-purpose computer — almost all of the top 10 bitcoin addresses do not fit that profile, says Sarah Meiklejohn, a University of California, San Diego, graduate student.

She took a look at how many transactions in these wallets seemed to match the profile of early-day miners and found that only one of them really fit the bill.

The rest seem to belong to what Meiklejohn calls Bitcoin’s “nouveau riche”: People who are accumulating bitcoins from non-mining sources. “What you’re seeing is this influx of a different kind of wealth,” she says.

Because most bitcoin addresses haven’t been publicly identified — like the FBI’s — it’s hard to say exactly makes up the new Bitcoin top 10. Meiklejohn says that they’re likely to include wallets created by up-and-coming Bitcoin exchanges or businesses. One of them is the wallet that’s thought to contain 96,000 bitcoins stolen from the Silk-Road successor, Sheep Marketplace.

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Alleged Silk Road Mastermind Maintains Innocence As Feds Sentence Drug Dealer Who Helped Bring Him Down

Nearly a year after federal authorities brought down the drug trading marketplace known as the Silk Road and arrested its alleged creator Ross Ulbricht, two Silk Road cases are coming to a close while Ulbricht’s own case is just about to start.

The Silk Road’s downfall began in January 2012, when federal authorities arrested a Silk Road drug trader named Jacob Theodore George IV.  George assisted federal authorities for the next year and half as they built a case to bring down the Silk Road and arrest the website’s creator, known as the Dread Pirate Roberts.

In October 2013, authorities seized the Silk Road’s servers and arrested Ulbricht in a library in San Francisco, claiming he was the mastermind behind the drug trafficking website.  

Three months later, federal authorities arrested former BitInstant CEO and Bitcoin foundation member Charles Shrem and underground Bitcoin exchanger Robert Faeilla in connection to a $1 million Silk Road money laundering scheme.

All three cases had big developments this week. On Thursday, Shrem and Faeilla each pled guilty to a charge, which could land them in prison for up to five years. On Friday,  Ulbricht pled not guilty to the latest three charges filed against him, and George was sentenced to six years in prison and three years of supervised release.

USA vs. Shrem and Faeilla

On Friday, Shrem pleed guilty to one count of aiding and abetting the operation of an unlicensed money transmitting business.  Faeilla, who is also known as “BTCKing,” pled guilty to one count of operating an unlicensed money transmitting business.

The two men allegedly worked together on a money laundering scheme between 2011 and 2013. According to the release, Faeilla filled orders for Bitcoin through Shrem’s company in New York, which allowed customers to make the cash-for-Bitcoin exchanges anonymously for a fee.

After getting Bitcoin from Shrem, Faiella sold Bitcoin to Silk Road users at a profit. By the end of their time working together, the two men had allegedly exchanged nearly $1 million in cash for Bitcoin.

Shrem and Faeilla will be sentenced on January 20, 2015, and could face up to five years in prison.

USA vs. Ulbricht

On Friday, Ulbricht’s lawyer Joshua Dratel confirmed that his client had pled not guilty to additional drug and identity theft charges that had been filed against him two weeks ago.

“Pleading not guilty today was consistent [with] my client’s stance from the beginning of the case,” said Dratel in a statement. “This Superseding Indictment changes nothing.”

The superseding indictment had contain three new charges–narcotics trafficking, distribution of narcotics by means of the Internet, and conspiracy to traffic fraudulent identification documents–in addition to the original four charges.

Ulbricht had already  been charged with narcotics trafficking conspiracy, continuing criminal enterprise, computer hacking conspiracy, and money laundering conspiracy. He pled not guilty to these charges in February.

Since his arrest, Ulbricht’s lawyers have filed two motions for charges to be dropped. After the first motion was denied in July, a second motion was filed in August, claiming that Ulbricht’s Fourth Amendment rights had been violated.

Ulbricht is scheduled to begin trial in New York on November 3, 2014.

USA vs. George

In Baltimore on Friday, one of the original Silk Road court cases came to an end. After spending two and a half years in Chesapeake Detention Facility following his arrest, George, who was known on the Silk Road as Digitalink, was sentenced to six years in prison followed by three years of supervised release.

George was charged with “conspiracy to distribute and possess with intent to distribute drugs, including heroin,” according to a press release from the Department of Justice. He pled guilty to these charges in November 2013 and apologized to the judge today in court, according to the Baltimore Sun.

George sold drugs on the Silk Road from November 2011 to January 18, 2012. He bought heroin and other drugs from local drug dealers in the Baltimore area, and had methylone and other synthetic drugs shipped to him from suppliers in China.

“Mr. George believed that he could operate with impunity on the Internet, providing a ‘service’ to drug users and drug dealers alike,” said HIS Baltimore Special Agent in Charge William Winter in a statement. “Mr. George will no longer have access to this expansive illicit marketplace on the internet.”

Check out the rest of Forbes’ coverage of the Silk Road here.

Silk Road Case Began With Hunt for a John Doe

The original three-count indictment in the Silk Road Case was unsealed recently by the United States attorney for Maryland, Rod Rosenstein.The original three-count indictment in the Silk Road Case was unsealed recently by the United States attorney for Maryland, Rod Rosenstein.

The criminal case against Ross W. Ulbricht, the man who federal prosecutors contend is the mastermind behind the notorious Silk Road online marketplace for illegal drugs and hacked credit card numbers, began quietly with an indictment filed in a Maryland courthouse against an unidentified individual five months before the authorities made an arrest.

Last May, federal prosecutors in Maryland indicted a man known only at the time by his Silk Road pseudonym, Dread Pirate Roberts, in a suspected murder-for-hire plot. Prosecutors charged that the Silk Road owner hired an undercover federal agent posing as a seller of drugs on the website to kill an employee.

The “John Doe” indictment was sealed by a United States magistrate judge because prosecutors were worried that the operator of the Silk Road website would destroy evidence or flee if he became aware of the pending criminal charges against him. Prosecutors asked the judge to keep the indictment secret until the man known as Dread Pirate Roberts was arrested and no longer at large.

That original three-count indictment was unsealed recently by the United States attorney for Maryland, Rod Rosenstein, whose office filed a superseding indictment against Mr. Ulbricht that identified him by name on Oct. 1, the day the F.B.I. arrested him at a library in San Francisco. The court filing fills in some of the gaps in the timeline of the federal government’s undercover investigation, which lasted more than a year. F.B.I. agents tracked the computer servers that ran Silk Road’s website to locations in Iceland and a small town in eastern Pennsylvania.

The unsealed indictment reveals that while federal prosecutors did not know Mr. Ulbricht’s identity, they did know the name of the Silk Road employee they say he wanted dead — Curtis Clark Green, who reached a plea bargain with Maryland prosecutors in September and is cooperating with the investigation. In the court filing, Mr. Curtis, who apparently did not know the identity of his boss, was identified by his initials “CCG” and described as a resident of Spanish Fork, Utah.

The unsuccessful murder-for-hire plot is one of the half-dozen criminal charges against Mr. Ulbricht, 29, whom prosecutors in New York have also indicted on charges of money laundering and narcotics trafficking. Mr. Ulbricht, who has pleaded not guilty and is scheduled to go on trial in November in New York, is being held in custody without bail.

Mr. Ulbricht’s case has garnered more attention than the average drug-trafficking case, not only because of the sensational nature of the murder-for-hire plot but also because Silk Road accepted only Bitcoin as payment and operated in the hidden corners of the Internet accessible only through a special software system. Mr. Ulbricht’s lawyer, Joshua Dratel, has insisted his client is not Dread Pirate Roberts.

Some Bitcoin proponents are following Mr. Ulbricht’s case closely out of fear that it will taint the digital currency as primarily a vehicle for criminals to engage in illegal activity on the Internet with a high degree of anonymity.

Five months after Mr. Ulbricht’s arrest, it remains a mystery just how the F.B.I. and other law enforcement officials working on the investigation were able to unmask him as Dread Pirate Roberts, a name taken from “The Princess Bride,” a novel a later a movie.

What is known is that in May, a few days after Maryland prosecutors indicted Dread Pirate Roberts, agents with the F.B.l. reached out to law enforcement officials in Iceland to try to track down one of Silk Road’s servers. Gunnar Runar Sveinbjornsson, an official with the police department in Reykjavik, said in an emailed statement that “the Icelandic police started assisting the F.B.I. with this matter during middle of May last year.” The federal authorities, in court filings, have not identified the country where the server was found but said the country’s authorities gave the F.B.I. an image of its contents in July.

Also in July, agents with the Department of Homeland Security visited Mr. Ulbricht at the San Francisco apartment he was in living in at the time after the government intercepted a package addressed to him that contained several fake ID documents that were purchased on Silk Road. The agents questioned him about the items, but he was not arrested.

The information on the server in Iceland, meanwhile, would lead authorities to seize information contained on a backup serveroperated by a company called JTAN.com, which is owned by a staff member in the electrical engineering department at Lafayette College in Easton, Pa. In September, a few weeks before Mr. Ulbricht’s arrest, federal authorities served a search warrant on JTAN, seeking access to all of Silk Road’s records.

The federal authorities said the servers provided a wealth of information about Mr. Ulbricht and the customers of Silk Road, which generated about $1.2 billion in sales during its two-year run and about $80 million in commissions for its owner and his team.

Still, the unsealed indictment does not disclose how the F.B.I. managed to find the first server in Iceland used by Silk Road, which employed an encrypted Internet network called Tor to remain hidden from general viewing. Perhaps that part of the story will come out in the next few weeks as prosecutors turn over to Mr. Dratel and Mr. Ulbricht the information they retrieved during the investigation.

FBI Confirms First Silk Road 2.0 Arrest in U.S.

Silkroad_jail

The FBI confirmed on Friday it has made a new arrest related to the recently relaunched online drug marketplace Silk Road, known as Silk Road 2.0. The development comes after a night of intense speculation among the site’s community that two of its moderators were apprehended and that law enforcement possibly has deep access to the site.

A spokesperson for the FBI office in Richmond, Va., toldMashable that agents had executed a search warrant Andrew Michael Jones, who is thought to be a Silk Road moderator with the alias “Inigo.” Separately, a spokesperson for the New York FBI office told Mashable that the agency made an arrest related to Silk Road, but would not to provide a name.

Both FBI representatives declined to provide any further information in what is an ongoing investigation.

Concurrently, TechCrunch confirmed with law enforcement in Ireland that another Silk Road top moderators who goes by “Libertas” was also arrested.

These arrests relate to moderators of the new Silk Road, known by some as Silk Road 2.0 o SR 2, which launched five weeks after the FBI seized and shuttered original site on Oct. 1.

Speculation about the arrests erupted early Friday morning, after a poster on Reddit claimed her boyfriend, a moderator for Silk Road, was arrested. You can read the full post here.

Silk Road arrest

The original post on Reddit included images of what appears to be a search warrant. The images have since been deleted, but not before DeepDotWeb downloaded them.

The apparent search warrant was signed by U.S. Magistrate Judge M. Hannah Lauck of the Eastern District of Virginia federal court. The warrant calls for the seizure of “evidence relevant to corroborating the identification of Jones as the Silk Road administrator ‘Inigo.'”

The Redditor also uploaded a scanned business card from FBI agent Christopher Tarbell, who is responsible for the arrest Ross William Ulbricht, the alleged owner and operator of the original Silk Road.

Concern over the arrests bubbled up even further following a post on another black market website called Tormarket. An individual claiming to have access to a private Silk Road vendor forum posted the following:

This is the only announcement from Dread Pirate Roberts so far; he has not replied to Mashable‘s multiple inquiries sent via Twitter and Silk Road’s forums. We will continue to update this story as we receive more information.

Guys I was arrested yesterday and out on bond now. But something is fucked! I know I’m risking more warning you guys and my attorney doesn’t even want me on the internet but you guys need to know this. When I was in the interview room they showed me all sorts of shit that they should not know or have access to including conversations I’ve had with buyers and even DPR. I don’t fucking understand.. and when I was in there I was at a loss for words. Something is definitely wrong and they have the ability to see things on here only mods or admins should like btc transfers and a dispute I had. WHAT THE FUCK?

If the above post is indeed legitimate, more arrests could be imminent. At publishing time, the Silk Road market was still operational.

Silk Road’s owner, who is known by the alias Dread Pirate Roberts or DPR, posted the following comment on his site’s forums Friday morning in an attempt to quell growing concern by the site’s users: “Silk Road has not been compromised even if the allegations are true. Neither had access to sensitive material. I will make an announcement later to address the concerns this has raised.”

In search of Utopia in the Deep Web

utopia.jpg (1440×720)

The following article contains content and images that may be NSFW.

Since the fall of Silk Road, there has been no rest on the Deep Web. Some sites disappeared, others like were mothballed with the promise to reopen again. Considering the latest charges brought against the alleged Silk Road founder, Ross Ulbricht, who is now risking a potential minimum prison sentence of 30 years, times seem grim for the Internet’s black markets.

And yet, there early signs of progress and promise. A new drug market, called Utopia, opened this week. With a sleek design and a green earth as a symbol, it promises to be a “bright star in the shadows of the darknet.”


Screengrab via Utopia

In just a matter of days, the market has collected a staggering number of listings: 1700 in the Drug category; 62 under Service, which includes hacking and gambling; 24 in the Weapons section; and 88 in the Ebook category. Utopia’s forum, which has been online for a while on a separate address, counts over 3000 users and a growing number of posts and topics.

How is such rapid growth possible? The new bazaar appears to have strong connections with an old one, Black Market Reloaded (BMR). Some people from the BMR’s staff moved there, and the market has been developed “with some help and inspiration from Backopy,” wrote Swim, Utopia’s admin, in the same forum.


Backopy, who is well-known and respected within the Deep Web community, is the founder of Black Market Reloaded, which appeared at one point to be the heir apparent to Silk Road. It had a turbulent end to 2013: first by having some of its code leaked, then by being hacked—although its vendors were refunded of eventual losses. After being briefly shut down and then opened again in October, it closed for good in December for security reasons, claiming it was not able to cope with the influx of new customers. Many old BMR vendors appeared to have moved to the new market.

“All BMR vendors names are protected on Utopia market and can only registrar (sic) if they confirm their PGP key,” explains one forum post. “Also the feedback reputation will be imported and available to keep doing business.” Utopia also promises to automatically encrypt users’ personal messages, and to add convenient search filters.

So is Utopia the new BMR? Apparently not. Backopy is still reportedly working on his own project for a new version of BMR. But it’s a promising sign for the future of the Deep Web.

In fact, there are a number of new marketplaces, each vying to capitalize on Silk Road’s disappearance. The site DeepDotWeb, a sort of TripAdvisor for the black markets, has reviewed around 15 of them. Here’s what you need to know.

Silk Road 2.0

The new version of the infamous bazaar, led by a new Dread Pirate Roberts, opened just a month after the original site was seized by the FBI; however, it has faced a lot of problems since its launch. Two of its alleged moderators, who had moved from the first Silk Road, have been arrested. At the same time, Dread Pirate Roberts temporarily disappeared, leaving his second-in-command, named Defcon, at the helm of the ship. Today, the site lists over 12,000 items.

Agora Market and Outlaw Market

Both of these markets are considered at least relatively stable. The Agora Market has a spartan layout, lists roughly 2,400 drug-related items, has got a popular Information category that includes hacking how-to guides, and a Counterfeit section that’s full of watches. The Outlaw Market shows a funny Old West-style design, and it takes a very international approach: Its interface can be configured to use different languages. Apparently, judging from its login page, it’s even looking for admins for different countries and regions.


Screengrab via Outlaw Market

The Blue Sky Marketplace and Pirate Market

Blue Sky Marketplace is small and drug-oriented (mainly selling cannabis) that kindly advises its visitors to disable Javascript in their Tor browser, in order to surf more safely. Pirate Market was formerly known as RoadSilk. It’s a niche market that trying to siphon off customers from larger enterprises. Apart from marketplaces, vendors’ shops also appear to be increasing, likely because some of Silk Road’s old top sellers have decided to start independent operations.

The WhiteRabbit Marketplace

The WhiteRabbit Marketplace is one of the more prominent markets operating with an I2P address, an anonymous overlay network, which is basically a network within a network. It provides strong anonymity and a distributed platform that’s meant to deflect attacks. For the paranoid types, there’s also The MarketPlace, which also has already created a considerable hub on Reddit.

Taken together, the Deep Web appears to be recovering in the wake of the Silk Road closure. There’s still cause for serious concern, obviously. These are illegal markets we’re talking about, where the risk of being scammed runs deep. Just consider the meteoric rise and fall of Atlantis, a marketplace that went so far as to publicize itself on YouTube, only to suddenly fold for “security reasons” suspiciously close to the feds’ seizing of Silk Road, or Sheep Marketplace, which shut down after a suspicious “hack” that stole at least 5,400 bitcoin, worth about $4.6 million at the time.

At least now customers know full well the risk of doing business in the Deep Web.

The SilkRoad saga continues as new admin goes AWOL

SilkRoad’s new leader has went into exile following a global sting that rounded up several of the rehashed drug marketplace’s employees

It seems like the drama is never ending at the infamous online drug marketplace known as SilkRoad. Over the weekend, Silkroad’s new Admin Dread Pirate Roberts (AKA DPR. Not to be confused with the original SilkRoad DPR) signed off from the site with a post informing users that he would release information concerning the arrest of several SilkRoad employees.

the_silkroad_saga_continues_as_new_admin_goes_awol

 

The post was made on Saturday and nothing else has been heard from DPR since. Another site admin who goes by the name DefCon says that DPR has entered exile and his whereabouts are unknown. DefCon says that DPR took the sites key used to unlock its Bitcoin storage with him. This means that none of the bitcoins the site held in escrow can be released until DPR’s return. DefCon says that SilkRoad users should not worry too much as DPR will return and the digital currency will be returned.

The Secret Web: Where Drugs, Porn and Murder Live Online

On the afternoon of Oct. 1, 2013, a tall, slender, shaggy-haired man left his house on 15th Avenue in San Francisco. His two housemates knew him only as a quiet currency trader named Josh Terrey. His real name was Ross Ulbricht. He was 29 and had no police record. Dressed in jeans and a red T-shirt, Ulbricht headed to the Glen Park branch of the public library, where he made his way to the science-fiction section and logged on to his laptop — he was using the free wi-fi. Several FBI agents dressed in plainclothes converged on him, pushed him up against a window, then escorted him from the building.

The FBI believes Ulbricht is a criminal known online as the Dread Pirate Roberts, a reference to the book and movie The Princess Bride. The Dread Pirate Roberts was the owner and administrator of Silk Road, a wildly successful online bazaar where people bought and sold illegal goods — primarily drugs but also fake IDs, fireworks and hacking software. They could do this without getting caught because Silk Road was located in a little-known region of the Internet called the Deep Web.

The Deep Web is a specific branch of the Internet that’s distinguished by that increasingly rare commodity: complete anonymity. As such, it is a vital tool for intelligence agents, law enforcement, political dissidents and anybody who needs or wants to conduct their online affairs in private — which is, increasingly, everybody.

But some prosecutors and government agencies think that Silk Road was just the thin edge of the wedge and that the Deep Web is a potential nightmare, an electronic haven for thieves, child pornographers, human traffickers, forgers, assassins and peddlers of state secrets and loose nukes.

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