Unmasking Dread Pirate Roberts — The Bitcoin Edition

If only Piper Chapman’s girlfriend, the protagonist in the Netflix series, “Orange is The New Black,” knew the alleged Dread Pirate Roberts and his Libertarian bitcoin Web project, Silk Road, maybe she wouldn’t have had to ask Piper to carry the suitcase full of drug money that landed Piper in the slammer.

Now, in a drama unfolding in a federal courtroom in New York, Silk Road’s alleged mastermind, Ross Ulbricht, aka the accused Dread Pirate Roberts is on trial with details salacious enough to be Netflix’s next miniseries. Or the sequel to “The Princess Bride.” Dread Pirate Roberts is a character in this classic book and film whose identity is never known and easily mistaken.

“Ross was the perfect fall guy,” the defense claims.

And so the drama behind the Silk Road trial has begun.

In this case, the Silk Road isn’t a story of the ancient silk and spice trading routes to Asia. It’s about drugs and bitcoins and the leader who masterminded it all. And the real identity of that mastermind.

The journey down The Silk Road since October of 2013 hasn’t been smooth sailing for Ross Ulbricht, a 30-year-old Texan with a degree in physics, who is accused of being the Dread Pirate Roberts — AKA the alleged captain of the site used for drug-trafficking, money-laundering and criminal activities. That site was sunk when the FBI busted it after a two-year investigation that followed the bitcoin trail into the newest generation of cybercrime on the dark web.

But is he the mastermind behind the scheme that will set the tone for many cybersecurity trials to come? Is the man who says on his LinkedIn profile that he “[wants] to use economic theory as a means to abolish the use of coercion and aggression amongst mankind” the same man who created the site that the federal government says ran the massive online illegal drug trade that brought in billions of dollars for selling heroin, cocaine and crystal meth? Those billions of dollars, however, were masked by the allegedly unsuspecting digital currency known as bitcoin that allows users to mask their true identities.

Or is the mastermind Mark Karpeles? He’s the bitcoin tycoon that Ulbricht’s defense lawyers say is the true Dread Pirate Roberts — a claim which Karpeles adamantly denies. And since the Feds haven’t presented any evidence publicly otherwise, Ulbricht is the man on trial.

Some computer science experts are skeptical about Ulbricht’s claims, based on what prosecutors have presented as evidence from the bitcoin collection alone. According to Forbes, the amount of bitcoins seized from Ulbricht was valued somewhere between $18 million and $20 million at the time of the seizure, which Nicholas Weaver, a researcher at the International Computer Science Institute, said raises more than scant suspicion.

“The defense attorney better hope Ulbricht really was a brilliant Bitcoin trader, because that defense is easy to shred otherwise,” Weaver said. “Bitcoin is insanely traceable. The Silk Road bitcoins are well known, not just the ones seized but the entire cloud of Bitcoins. Add in the known purchases from law enforcement, and it becomes downright trivial to create the ‘history cluster’ that is Silk Road.”

The Journey To The Silk Road

Before traveling further down the road, let’s go back to the time when the accused Dread Pirate Roberts was arrested.

It was October 2013 and his arrest was not in some underground lab or a tech-savvy office hidden away from the portals or society. Nope, this supposed cyber-pirate was arrested in a San Francisco, California, public library — a beacon for free speech and Internet freedom.

Oh, the irony.

The agents had been quietly watching him for two years and the time had come to strike. The likely unsuspecting Ulbricht clicked on a message on a forum linked to the website. He logged on to The Silk Road, according to federal prosecutors, giving them what they needed to swoop in for the arrest.

A federal agent, posing as a Silk Road member, had him just where the government wanted. Click. Click. Click. That’s all they needed. Ulbricht took the bait and the Feds swept in.

They wanted him online as “Dread Pirate Roberts in the marketplace,” said undercover Department of Homeland Security Agent Jared Der-Yeghiayan. And that’s what they said they got. His defense lawyers, however, say they arrested the founder of the site, but not the captain of the ship.

”We have the name of the real mastermind and it’s not Ulbricht,” Joshua Dratel, Ulbricht’s lawyer, said in court Jan. 15. He’s arguing that Ulbricht was framed by Karpeles.

But Karpeles has denied any wrongdoing.

“This is probably going to be disappointing for you, but I am not Dread Pirate Roberts,” he said. “The investigation reached that conclusion already—this is why I am not the one sitting during the Silk Road trial, and I can only feel defense attorney Joshua Dratel trying everything he can to point the attention away from his client,” the bitcoin mogul said.

So why is Karpeles’ name being tossed in the ring anyway – and why is that so interesting?

Simple.

Karpeles is the former CEO of Mr. Gox, the busted Bitcoin exchange based in Tokyo. Karpeles is also now the current CEO of Tibanne Co, a company that specializes in Web hosting, application development, network administration and business development. The nature of how bitcoin is used and traded has also become a key part of this federal investigation. As of now there is no indication Karpeles is involved as a suspect, as he is allegedly cooperating with the government’s investigation.

But the defense has’t given up. One theory in the case is that there is not just one person leading the way as the Dread Pirate Roberts, but rather the “person” in question is a “series of individuals who pass along the name and reputation to a chosen successor.”

Here’s what the defense claims: Ulbricht founded the Silk Road as a free-market site to sell almost anything. It was an economic experiment that grew too large and he passed off the site to others. They then claim he was lured back by the operators of the site, baited into the library and put into the hands of the federal government as a scapegoat.

But that’s not the case the Feds have presented.

“We are here to pull the curtain back on the dark and secret world. Behind that curtain was one man: Ross Ulbricht and his laptop,” assistant U.S. attorney Timothy Howard told the jury.

And the plot thickens.

The defense’s theory that Ulbricht was framed was a key theme throughout the first days of trial as the presiding judge in the case, Katherine Forrest said the defense is still arguing that the leader behind the operations of The Silk Road is still up for debate.

“The defense has been [trying to show] that Karpeles was at least arguably ‘a’ Dread Pirate Roberts,” Forrest said. “They’re trying to raise reasonable doubts.”

The defense has also relied on what is called “The Princess Bride” theory, based on the classical book and movie where the audience doesn’t knows the true identity of the Dread Pirate Roberts. Many speculating on the trial have drawn parallels to the story because the main villain was named Dread Pirate Roberts, a criminal who never leaves captives alive. The film involves a case of leadership transfer and mistaken identities — the main argument of the defense in the Silk Road trial.

Ulbricht’s defense attorney is claiming there was a “Princess Bride” sort of switch behind capturing the real leader behind the Silk Road. They claim that the real Dread Pirate Roberts is still at large. That was reason enough for the federal judge to say one peculiar thing to the jury after giving them instructions about not discussing the trial publicly.

“Don’t go watching ‘The Princess Bride’ this weekend,” she said.

If in fact the defense’s claims are correct and there was a transfer of leadership and a case of mistaken identities, then the story is a lot different for Ulbricht. And perhaps Karpeles. But again, that’s for a jury to decide.

What The Case Means For Internet Freedom And Bitcoins

Outside of what the jury determines is the fate of the accused Dread Pirate Roberts, this case is bigger than Ulbricht, bigger than Karpeles and bigger than bitcoins, says the group that’s campaigning for his innocence. Even with Ulbricht’s life on the line since he could face life in prison if convicted, the group has highlighted what this trial could mean for all cybersecurity cases, e-Commerce trade and the the freedom of the Internet. It’s also a case that could influence how bitcoins are traded and regulated.

“[Silk Road] would be a device for leveraging the value of bitcoin, and if he could create a site independent of bitcoin, you could control the value of bitcoin,” Dratel said, reading from an email written by federal investigator DerYeghiayan.

Ulbricht’s advocacy group agrees.

“This case represents the first challenge to the government’s attempt to expand the money laundering statute to include digital currency,” the advocacy group wrote.

They also have focused on the constitutional elements of the case.

“If Ulbricht is convicted, it opens the door for the censure and erosion of a free Internet. Under present law, website hosts are not held responsible in civil cases for illegal actions on their sites. This case could set precedent and open the door to criminal liability for Web hosts,” the group claims. There appears to be a good amount of public support behind Ulbricht as of Jan. 16, $339,018 had been raised for his legal defense (Ironically, but also appropriate, bitcoins are one accepted currency on the fundraising site.)

Ulbricht has been charged with running the global marketplace where heroin, hacking services and fake passports were sold that amounted to more than $200 million sold through the anonymous Web browser and bitcoin. Turns out it wasn’t so anonymous and bitcoin wasn’t so untraceable — at least if the Fed’s story holds up in court.

“The Silk Road was more than a drug bazaar, it was seen by many as a Libertarian experiment, a non-regulated market for mostly illegal but ‘victimless’ products and services such as forgeries, firearms, and software hacking tools,” wrote David Leveille for Public Radio International.

And that’s the question some media outlets are asking: Is Ulbricht a criminal or is he a “geeky tech entrepreneur” and philanthropist? That will be up to the jury to decide. His official charges, all of which he’s plead not guilty to, include: narcotics trafficking; computer hacking; money laundering; engaging in a criminal enterprise; and conspiracy to traffic in fraudulent IDs.

According to Andy Greenberg, who’s covering the Silk Road trial for Wired Magazine: “[Silk Road] was a one of its kind black market that really allowed you to buy any drug imaginable using the digital currency bitcoin and this anonymity system called Tor to hide your identity. So it was a completely anonymous, completely free market on the Internet.”

Greenberg also said that the defense claimed that “when the Dread Pirate Roberts sensed that law enforcement was closing in, they tricked Ross Ulbricht into being the fall guy, they lured him back in and framed him.”

So just who is the Dread Pirate Roberts? People eyeing this case, particularly the free-market Internet activists who are backing Ulbricht think it’s more a case about the “Internet experiment in free commerce, not as a massive scheme to commit fraud or drug dealing scheme.”

That’s what really matters in this case, according to Greenberg. It’s less about the drugs, but more about where and how the drugs were being traded. And even more — what that could mean for government regulation over the Internet and the free trade of commerce.

“[The Silk Road trial] is going to be a case study in how the government can attack these sites, where the vulnerabilities exist,” he wrote. “I think the administrators of these dark websites that still exist and that are making millions of dollars will be closely watching to see what weaknesses they might have and if the government tips its hand in any way about how it can find the chinks in their armor.”

There’s a lot of layers in this case, and plenty of drama that will unfold in the courtroom in the coming weeks. But what’s most important now — both from the defense and prosecutor’s side — is proving the one question everyone is asking: Is Ulbricht the real Dread Pirate Roberts?

While the jury ponders his fate, Ulbricht, like Piper, will no doubt have the chance to make new friends, and who knows, even renew old Silk Road acquaintances.