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Marketplace of vice, 'Silk Road' meets its end

By Jim Finkle

BOSTON (Reuters) - Before it was shut down by U.S. agents this week, people looking to buy street drugs, hire hackers or hitmen, and acquire stolen e-commerce accounts anonymously online could go to Silk Road, the Amazon.com of vice.

For more than two years, according to U.S. authorities, the website allowed users to buy and sell illegal goods and services on the assumption that they were safe from the law. The buyers were cloaked by technology designed to keep identities secret and transactions were processed with bitcoin digital currency.

Silk Road's alleged creator, 29-year-old Ross William Ulbricht, was arrested in San Francisco by FBI agents on Tuesday after investigators apparently linked his personal email address to the website, which has been shut down.

Ulbricht's lawyer Brandon LeBlanc, a public defender, declined to comment.

The crackdown on Silk Road is the latest in a series of moves by law enforcement against digital currencies, which critics say are a magnet for drug transactions, money-laundering and other illegal activities.

"Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the Internet today," FBI agent Christopher Tarbell said in the criminal complaint.

Based on court documents filed since the arrest, Silk Road -named for the ancient trade routes between China and the West - offered a wide array of wares.

Customers could buy a gram of cocaine for 0.8956 bitcoin, or about $127 at an exchange rate of $142 per bitcoin. That exchange rate fell to as low as $110 per bitcoin on Tuesday, after the Silk Road bust was announced.

A half pound of "hydroponic bud" was running about 17.2 bitcoins and 25 LSD blotters were on offer for 1.48 bitcoins, according to court filings that included screen shots of the product listings. Vendors showed photos of crushed white powder, marijuana, pills and other illicit-looking substances.

The website included nearly 13,000 listings for controlled substances as of September 23, according to the court documents.

"Quality is superb ... Best stuff I've seen in a while," one user reported, according to the documents, saying he received a shipment of heroin overnight from a dealer known as "gotsitall 5.0."

Gotsitall 5.0 charged an extra $12 to insure his product, which he described as "high quality #4 heroin all rock," according to the documents.

Another vendor offered the services of "hitmen" operating in more than 10 countries, according to the FBI. Tarbell said in the complaint that buyers could also purchase firearms and the services of hackers offering to break into ATMs and social networking accounts on Facebook or Twitter.

They also sold computer viruses that could be used to attack personal computers, as well as access to compromised accounts on online services such as Amazon.com Inc and Netflix Inc, he said.

CAUGHT IN A LIBRARY

The end for Silk Road came in the small Glen Park branch of the San Francisco public library system on Tuesday afternoon.

At least six plainclothes FBI agents seized Ulbricht as he lingered at a corner table on the second floor near the science fiction section, pressing him up against a window and announcing he was under arrest, a library spokeswoman said.

A Silk Road wiki had offered advice on how to avoid getting caught by authorities. A seller's guide advised sellers to vacuum seal packages containing narcotics to avoid detection by dogs or electronic sniffers, according to the complaint.

The court documents allege that altogether bitcoins worth some $1.2 billion changed hands through the Silk Road site, which charged commissions of between 8 and 15 percent before it was shut down after a 2 1/2-year run.

Silk Road processed all transactions with bitcoin, which leaves no traditional money trail for investigators to follow.

The site also routed traffic through a no-cost, anti-surveillance service known as the Tor network.

Tor sends traffic through multiple virtual "tunnels" and relays in a bid to keep Web users' identities secret. It also provides "hidden services" to help websites keep the locations of their servers confidential by routing traffic to them from other locations.

Tor, which was originally developed with a seed grant from the U.S. Naval Research Laboratory, is an open source project backed by people who say they are concerned about internet surveillance. It is accessible to anybody, including criminals.

The complaint describes some of the steps by which investigators came to the conclusion that Ulbricht was the owner of the site, known online as "Dread Pirate Roberts."

It said the mistakes included using a Google email address, rossulbricht@gmail.com, for communications linked to Silk Road, such as promotional material about the website dating back to January 2011.

(Reporting by Emily Flitter; Additional reporting by Joseph Menn; Editing by Richard Valdmanis and Jim Loney)

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