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Silk Road used ‘anonymity layers,’ digital currency to sell drugs in plain sight

October 2, 2013 at 12:00 AM EDT
Unlike other online commerce businesses, Silk Road offered sales of illegal drugs, fake IDs and even hitmen. How were buyers and sellers able to remain anonymous? Ray Suarez talks to Glenn Chapman of Agence France-Presse about how this widely known online drug market was able to evade law enforcement for so long.
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 RAY SUAREZ: Those transactions were among more than a million others. Silk Road brokered more than $1 billion in sales and its site listed nearly 13,000 offerings of illegal drugs and services. Those were paid for using a digital currency known as Bitcoins.

For more on Silk Road and today’s bust, we turn to Glenn Chapman, technology correspondent for Agence France-Presse.

And, Glenn, how does the FBI say Silk Road worked?

GLENN CHAPMAN, Agence France-Presse: Well, Silk Road was essentially a speakeasy for the Internet age combined with eBay.

So you had to sort of be able to tap on the door and know the password. You would get to the Web site, it would be a blank page, except for your password and user name. It didn’t even hint at what it was. So you had to know where you were going in order to get there.

Then, once you’re inside, it was — anybody who visited eBay would know that that’s what you were looking at once inside, except what they were offering were, as you noted, illegal drugs, forged I.D.s. Even 10 countries supposedly had offerings of hit men.

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RAY SUAREZ: But it’s one thing to go on a Web site and give your name and address and some information about how to charge you money to a place that wants to sell you shoes. It’s altogether a different thing to go on and tell people who want to sell you heroin or ecstasy where to find you. This stuff would come in the mail, wouldn’t it?

GLENN CHAPMAN: But the beauty of this in the eyes of the Dread Pirate Roberts was that the anonymity layers on it.

It exploited two mechanisms out there that one of which was really designed for online privacy. And in this age of Internet snooping, that’s become a very high priority for legitimate purposes. But it used Tor networks — T-O-R — which actually is an acronym for “The Onion Router,” but — because what it did is, it would take data, in this case your transaction, whatever you’re doing it online, sort of wrap it in these encrypted layers, like an onion, and then it would bounce it off servers all over the world, volunteer servers.

And each little server would only pull back one little layer, just what it needed to throw it to the next server . So by the time it got bounced around the Internet and got where it was going, it was very hard to figure out where it came from.

So the Silk Road depended on that Tor network. And then the currency referred to earlier, Bitcoins, is like an Internet version of cash. You spend cash, you’re hard to trace. So that money spent at that Web site, unlike buying shoes, you were probably harder to find if you bought heroin at Silk Road than you were if you went to a Web site and bought shoes.

RAY SUAREZ: Now that this place has been raided, is it possible that the FBI now has in its possession ways to find tens of thousands of people who were buying illegal drugs over the Web?

GLENN CHAPMAN: It is possible. Investigatively, it’s possible.

It just depends on the level of encryption that was being used. The — if you go to chat forums, popular chat forums at prices like Reddit.com, where they have a Silk Road fallout chat forum, a lot, a lot of chatter. It’s really hot right now.

People — some people are very, very worried. But they’re relying on the fact that the Silk Road in their servers used heavy-duty encryption. Silk Road used a special bit of software. We talked about the Bitcoins earlier. Bitcoins, there are ways to sort of track them.

But it used something called a tumbler to try to bounce — to juggle it around so it was even harder to track the Bitcoins than from the original design. So the people are very worried out there that they will be tracked, but they’re also nervous because when the feds seized assets from Silk Road, they seized a big cache of these Bitcoins, which theoretically could be used to go out in the future and basically have agents posing as buyers or sellers and sort of engage and actually do undercover operations.

RAY SUAREZ: Now, that caught my eye. How do you seize a virtual currency? If it doesn’t exist in any tangible, physical way, how do you seize it in a raid?

GLENN CHAPMAN: Well, Bitcoins — if you think of cash as paper, you could think of a Bitcoin as like a string of code, right?

And then those strings of code — and you would buy it. It’s like currency if you were traveling to another country and you go to exchange and you buy the local currency. There are exchanges for Bitcoins and you get that local Internet currency. And then it’s stored in something they call a Bitcoin — a Bitcoin wallet.

And then to get to that wallet, you do need the — you do need access to the passwords. So they would seize physical servers, physical hard drives from Silk Road. And they — along with these physical hard drives that they would seize with the other assets, they would either have to hack or convince Mr. Ulbricht to cooperate to get access to the Bitcoins.

RAY SUAREZ: It seems kind of unbelievable that you could actually just go on the Web and buy a certain amount of heroin or opium. But there must have been such confidence in this encryption technology that Silk Road felt it could hide in plain sight. People have known about the existence of this place for years, haven’t they?

GLENN CHAPMAN: They have. It’s been — it started — the investigation pegged — started about January of 2011.

It was described by — in the criminal complaint as the largest Internet bazaar for illicit goods ever. The — yes, there — it does seem bizarre. Silk Road even put a buyer and seller guide offering advice on how not to get caught. If you — when you’re shipping your drugs, put it in a sealed plastic container to avoid scent detection.

They would advise sellers and buyers to encrypt data. They actually gave user seller/buyer guides, the same way a legitimate e-commerce site might, to help you. Oh, and they added a stealth mode about a year ago for users who felt they were at high risk of law enforcement investigation.

RAY SUAREZ: Glenn, quickly before we go, tell us a little bit about the alleged mastermind of this whole thing, Mr. Ulbricht. What do we know about him? Quick description.

GLENN CHAPMAN: Quick description, 29-year-old, studied undergraduate study in Texas, and then did some graduate work in engineering and materials over in Pennsylvania.

He appears — from posts that we found at LinkedIn and Google+, he appears to have said — he describes what he was doing as this experiment, that people can experience what it’s like to live without being under the oppressive, violent regime of a government control.

So you can expect that, if this goes forward, if there’s not a deal, if there is a prosecution, that part of his defense is going to be that he was just making this forum for freedom, in a way, in much the way 4chan made a forum for freedom of speech under — by offering absolute anonymity online.

RAY SUAREZ: Glenn Chapman, thanks for joining us.

GLENN CHAPMAN: Thank you, Ray.