Nov. 7 (Bloomberg) -- The man accused by the FBI of running a billion-dollar online market for illegal drugs, who allegedly also paid hit men to murder people threatening his business, was no trigger-happy junkie.
He was an Eagle Scout who earned an advanced degree in physics from Penn State University before abandoning academia to pursue a career in finance.
Ross Ulbricht, 29, who was arrested Oct. 1 in San Francisco and imprisoned in Oakland, California, yesterday appeared in federal court in Manhattan. U.S. Magistrate Judge Ronald Ellis ordered Ulbricht, who is charged with narcotics trafficking, money laundering and computer hacking, to remain in custody. Federal prosecutors in Maryland have charged him with attempted murder.
Ulbricht denies the charges and will seek bail at a hearing set for Nov. 21, his lawyer, Joshua Dratel, said yesterday. Ulbricht founded Silk Road, a “sprawling, black-market bazaar,” in early 2011 that he ran under the pseudonym Dread Pirate Roberts, prosecutors allege.
“He’s not the person they’re saying he is,” Dratel said outside the courtroom after Ulbricht’s brief appearance. He is “a regular person, a loyal friend,” Dratel said. Friends and family “express their firm conviction that he’s not the person” prosecutors claim, Dratel said.
The Justice Department’s 33-page court filing outlines the operation of the online marketplace for illegal drugs and details the evidence pointing to Ulbricht as Dread Pirate Roberts, or DPR, after a character in the 1987 film “The Princess Bride.”
The portrait of Ulbricht that emerges from the recollections of his friends, professors and classmates, as well as the social media footprint he left behind, shows the Austin, Texas, native to be something of a Renaissance man.
Ulbricht was a popular student who indulged his craving for alcohol and controlled substances without becoming dependent, a gifted artist who posted his phantasmagoric sketches on his Facebook page, and an outdoorsman who enjoyed hiking and snowboarding and who was daring enough to leap off a 50-foot cliff into a lake, according to a video he posted online. He was an Eagle Scout, said Charles Mead, director of public relations at the Boy Scouts of America. After graduating from high school in Austin, he attended the University of Texas at Dallas.
“He was a smart guy,” said Sean Gaulager, 29, a classmate from Westlake High School’s class of 2002 who operates a nonprofit art gallery in East Austin. Ulbricht “had a knack for computers,” Gaulager recalled.
In a 35-minute podcast recorded last December with a friend, Rene Pinnell, that appeared on YouTube but has since been taken down, Ulbricht said he led an active party life during high school, experimenting with alcohol and drugs. Gaulager said he didn’t think Ulbricht’s behavior was unusual.
“I think that it’s fairly common in this day and age for kids to experiment in high school and after high school,” he said. “I wouldn’t say it was overt or over the top or anything like that.”
Even in a high school that produced two current National Football League quarterbacks, Drew Brees of the New Orleans Saints and Nick Foles of the Philadelphia Eagles, Ulbricht seemed destined for big things.
“He was average in the sense that he was like a normal guy,” Gaulager said. “But he was above average in terms of intelligence, you know, in terms of drive. You could tell he was going to do something big.”
At the University of Texas at Dallas, Ulbricht majored in physics. He also began a flirtation with Eastern philosophy, according to the podcast. He had an intense, two-and-a-half year relationship with a girlfriend that caused some of his friends to think he would marry, Pinnell said in the podcast.
But marriage wasn’t for Ulbricht, who said in the podcast that he broke off the relationship. He was admitted to a selective graduate program in physics at Penn State run by Professor Darrell Schlom.
During his three years there, Ulbricht developed a new persona. His interest in Eastern philosophy and the spiritual concept of “oneness” was supplanted by a commitment to libertarian ideas and an incipient interest in politics.
Ulbricht was a supporter of Texas congressman Ron Paul’s 2008 bid for the Republican Party’s presidential nomination, telling Penn State’s paper, the Daily Collegian, that “there’s a lot to learn from him and his message of what it means to be a U.S. citizen and what it means to be a free individual.”
Ulbricht wore a Ron Paul for President T-shirt to class regularly, recalled one of his professors who asked not to be identified.
The physics student also immersed himself in the principles of Ludwig von Mises, an Austrian economic thinker with a following in libertarian circles. Ulbricht joined a student group, the Austrian Economic Society at Penn State, according to a former Penn State student who was friendly with Ulbricht at the time and asked not to be identified.
Ulbricht was serious about Austrian economic theory. He went on road trips organized through the society to Auburn, Alabama, the headquarters of the Ludwig von Mises Institute, according to the fellow student.
Ulbricht put his theories into action. During an era of easy credit that helped inflate the housing bubble, he invested in gold and other currencies, reaping significant gains, according to the fellow student. Ulbricht also bought a three-bedroom, two-bath house just off campus, for $174,675, in 2007, putting down a deposit of 10 percent, according to county records.
To help pay the bills, Ulbricht rented out rooms in the house. Two former tenants, Greg Wieserman and Josh Wyka, who live in State College, said they recalled nothing unusual about Ulbricht as a landlord.
“He was very reachable, and was very cool,” said Wieserman, who added that he was surprised when he learned about the charges against Ulbricht.
“Dread Pirate Roberts” was willing to use deadly force when his own economic interests were threatened, according to prosecutors in New York and Maryland. On two occasions, according to court filings, DPR paid online “confederates” to murder individuals who threatened his business.
On one of these occasions, the “confederate” was an undercover agent who received $80,000 to execute a former Silk Road employee and sent staged photographs to convince DPR that the murder had been committed, prosecutors said.
The other occasion involved a payment by DPR to an individual who called himself “redandwhite” and promised to execute a blackmailer, “FriendlyChemist,” for $150,000, prosecutors said. There is no evidence that any such murder took place, even though DPR paid the money, the FBI said.
As for his research work, Ulbricht excelled, according to two of his professors in the school of Materials, Science and Engineering. He wrote or collaborated on several published research papers in the area of “spintronics,” which, according to Penn State’s website, involves the orientation of polarized electrons, an area of study affecting the development of semiconductor chips.
Ulbricht completed his work for his Master’s degree in 2009, according to Penn State. Instead of advancing further in the field by studying for his PhD, he wanted to pursue a career in finance, according to his two professors.
Asked by his primary adviser, Darrell Schlom, to fill in his occupation upon the completion of his studies, Ulbricht wrote that he worked at “Retracement Capital,” according to a roster of graduates on Schlom’s website.
“He was a nice and bright colleague and I did regret his choice to leave science,” Andreas Schmehl, who collaborated with Ulbricht as a post-doctoral student at Penn State, said in an e-mail. “I’m aware about the recent events and they were as shocking to me as to anyone who worked in the group during that time.”
Schmehl, who is in the physics department at the University of Augsburg in Germany, said in a subsequent e-mail that “I knew he was going to pursue a career in the financial business. He was openly talking about this. I don’t know his deeper motivations for this move and we never discussed them. But I know quite a bunch of people who started doing science and then turned their analytical talents towards other fields. So it wasn’t that unusual or surprising. We lost contact after he left the group.”
Ulbricht aired his libertarian views on a posting attributed to him on Amazon.com, where his master’s thesis is offered for sale.
“This manuscript is the culmination of my career as a scientist,” Ulbricht wrote. “It marks the fulfillment of my goal to expand the boundaries of human understanding of nature. The rest of my life is dedicated to bringing freedom from oppression to the people of the world.”
In January 2011 he started Silk Road, an online marketplace where buyers and sellers of illegal drugs could come together and transact using Bitcoin, a digital currency that provided its users with anonymity, according to the Federal Bureau of Investigation.
Silk Road’s operations remained hidden from the prying eyes of the law on the onion router, or TOR network, which disguises the origins of digital communications. Over the next two and a half years, the FBI said, the site did $1.2 billion worth of business, netting Ulbricht more than $79.8 million in commissions, according to prosecutors.
Following an extensive two-year cyber-manhunt, the FBI tracked down Ulbricht in San Francisco, where he had moved in 2012 ostensibly to join his friend Pinnell in a startup.
From the podcast the men made last December, it appears that Pinnell believed Ulbricht’s occupation at the time of the move was his investment in foreign currencies.
According to a profile he submitted to Instadate, an online dating website, after moving to San Francisco, Ulbricht claimed to be a Christian single libertarian with an annual income greater than $1 million.
Ulbricht has supporters for the idea of an online marketplace for controlled substances.
“I think he’s a genius,” said Joshua Braun, 36, of Santa Barbara, California, who said he drove over 300 miles to attend Ulbricht’s court appearance in San Francisco last month.
Silk Road is an “ingenious creation” that’s making the world a safer place for recreational drug users, Braun said. “I happen to know people very high up in their fields” who used Silk Road “to maintain their responsible drug use,” Braun said.
Silk Road provided a safe and efficient way for people to purchase drugs, said Braun, a former medical marijuana dispensary operator who said he was charged with 73 counts of money laundering when local prosecutors started cracking down on medical pot. The dispensary was shut down and he served three months house arrest; now he runs a hydroponics business.
“People are getting shot” trying to buy drugs on the street, Braun said. “I think overall you are not going to stop drugs,” he said.
The criminal case is U.S. v. Ulbricht, 13-mg-023287; a related civil forfeiture case is U.S. v. Ulbricht, 13-cv-06919, U.S. District Court, Southern District of New York (Manhattan). The murder-for-hire case is U.S. v. Ulbricht, 13-00222, U.S. District Court, District of Maryland (Baltimore).
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