Today In Bitcoin: Silk Road Busted and Bitcoin Forum Hacked

An important piece of the Bitcoin libertarian dream crumbled this Tuesday as a handful of FBI agents stormed the science fiction section of the Glen Park library in San Francisco and arrested 29 year-old California resident, Ross William Ulbricht. He was charged with operating the popular online drug market, Silk Road. For several years now, the founder of the site has been known to the public simply as "Dread Pirate Roberts," a name borrowed from a mysterious yet charismatic swashbuckler in the movie The Princess Bride. The service he provided on Silk Road allowed drug buyers and sellers to anonymously contact each other, make deals, and send payment through the Bitcoin network. The Feds that scooped Ulbricht up claim that he brought in an estimated US $80 million in commissions from the sales conducted on Silk Road.

The website, which can only be accessed through the anonymity-enhancing Tor network, is now disabled, and displays a notice claiming the site to have been seized by a collection of U.S. authorities, including the FBI and the Drug Enforcement Administration, at the behest of the United States District Court for the Southern District of New York.

The criminal complaint filed against Ulbricht has been unsealed; it includes charges of conspiracy in money laundering, computer hacking, and narcotics trafficking. But certainly the most shocking lines of the document are those that describe Ulbricht's alleged attempt to solicit the services of a hit man to knock off an individual who had threatened to expose the identities of many Silk Road users.

Although it's not entirely clear how authorities were able to expose Ulbricht's identity as the Dread Pirate Roberts, traces of his activity in the development of Bitcoin markets can be found on multiple sites around the Internet. At one point, shortly after Silk Road opened, a user, going by the name "altoid," posted on the Bitcoin Forum to solicit help from developers on an evolving project and asked that interested parties contact him at the personal e-mail address, rossulbricht@gmail.com.

On his LinkedIn page, Ulbricht outlined a libertarian philosophy that parallels many of the political motivations espoused in public forums by the Dread Pirate Roberts and also by the people who used his service.

In a description of himself, he wrote:

I want to use economic theory as a means to abolish the use of coercion and aggression amongst mankind. Just as slavery has been abolished most everywhere, I believe violence, coercion and all forms of force by one person over another can come to an end. The most widespread and systemic use of force is amongst institutions and governments, so this is my current point of effort. The best way to change a government is to change the minds of the governed, however. To that end, I am creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force.

Bitcoin enthusiasts, many of whom consider the use of drugs to be a matter of personal choice and openly abhor drug war tactics, corralled at the Bitcoin Forum to mourn shortly after the news broke. Others, however, chimed in to celebrate the takedown, arguing that successful regulation of these laws will ultimately polish Bitcoin's image and encourage mainstream adoption of the currency.

The debate was cut short this morning, however, when the Bitcoin Forum suddenly shut down its site at bitcointalk.org and followed up with an e-mail to forum users simply explaining that the server had been hacked. As the team works through the postmortem, they are advising forum users to consider their passwords to be compromised and change any that were used on other accounts. 

Bitcoin prices, which had been holding steady around $125 on the online exchanges, dipped below $100 in the hours immediately following the news of the Silk Road bust. Today, they are rebounding somewhat, falling just below the $120 mark.

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