‘Dread Pirate’ Trial Shows Alleged Trafficker Diary, Cheap Pot

The trial of the man charged with running the Silk Road online drug bazaar has featured what prosecutors call the diary of a major trafficker, damaging testimony from a friend and a giveaway promotion for the “biggest stoner holiday” of the year.

Prosecutors are set to continue presenting their case Wednesday in federal court in Manhattan after a 1 1/2 day interruption caused by a snowstorm in the Northeast. The government may rest its case next week, while the defendant hasn’t said whether he will take the stand.

Jurors listened closely during the trial’s first two weeks to evidence that the government hopes will tie the man at the defense table, Ross William Ulbricht, to “Dread Pirate Roberts.” That’s the online identity of the person -- or people -- who for almost three years ran the most notorious illicit website on a hidden, anonymous part of cyberspace called the dark net.

“That really is one of the biggest challenges in prosecuting cybercrime,” said Marcus Asner, a former head of the Manhattan U.S. Attorney’s unit that prosecutes computer crime. “With some detective work you often can pin it to a computer, but the challenge then is to pin it to an individual.”

Bitcoins, Drugs

The government claims that from January 2011 to October 2013, Ulbricht ran Silk Road, where customers used bitcoins to buy LSD, heroin, marijuana, Ecstasy, phony identification, computer hacking help and other illegal goods and services from thousands of sellers around the world. If convicted of charges including Internet drug trafficking and conspiracy, he faces the possibility of life in prison.

Asner, now partner in the New York office of the firm Arnold & Porter LLP, said prosecutors face a challenge similar to those in more traditional cases involving drug trafficking, child pornography and identity theft. He said defendants in those cases go to great lengths to keep authorities from figuring out who they are.

Prosecutors showed jurors evidence collected from Ulbricht’s computer, including the diary, a list of servers used to run the site and online computer chats with Silk Road employees, in an effort to prove Ulbricht was in charge of its day-to-day operation.

Ulbricht took the name “Dread Pirate Roberts” from the 1987 film “The Princess Bride,” prosecutors claim. In the film, the name is taken by a series of pirates, who pass it along to another as each retires.

Ulbricht, who denies breaking the law, claims that’s what happened with Silk Road’s Dread Pirate.

‘Fall Guy’

Ulbricht isn’t required to testify in his defense, and his lawyer, Joshua Dratel, hasn’t disclosed what evidence he may present to show his client’s innocence. Elements of the defense’s theory have emerged in court filings and in Dratel’s opening statement to jurors and his cross-examination of the government’s witnesses.

He argues he was set up as a “fall guy” to take the punishment when the U.S. targeted Silk Road.

Prosecutors said they will also present evidence that Ulbricht tried to arrange as many as six killings, including the murder of a former Silk Road employee. The government claims Ulbricht paid $80,000 to an undercover agent, who misled Ulbricht into believing the hit had been carried out.

In another alleged plot, prosecutors claim Ulbricht paid $150,000 to a drug dealer known as “redandwhite” to kill another Silk Road user, “Friendly Chemist.” Friendly Chemist was blackmailing Ulbricht by threatening to disclose the identities of Silk Road vendors and customers, according to the government.

Baltimore Case

U.S. authorities believe none of the murders were carried out. Ulbrict isn’t charged in the New York case with the attempted murders-for-hire. He’s charged with one of the alleged plots in federal court in Baltimore.

Silk Road used the Tor network, which routs communications through multiple computers, to help users hide their identities while transacting more than 1 million drug transactions, according to the government. Silk Road required the use of bitcoin virtual currency, limiting the ability of authorities to identify people.

Dratel surprised observers and Ulbricht’s own family when he conceded at the start of the trial on Jan. 13 that his client had created Silk Road in early 2011 as an “economic experiment.” He passed the site to others after a few months when running it proved too stressful, according to Dratel. “Dread Pirate Roberts” was merely an online identity used by different people in connection with the site, he said.

Mt. Gox Head

Dratel seized on testimony by a federal agent that just weeks before Ulbricht was arrested in October 2013, the agent believed there was probable cause to think Silk Road was run by Mark Karpeles, the former head of the bankrupt Mt. Gox Co. bitcoin exchange. Dratel told U.S. District Court Judge Katherine Forrest, who’s overseeing the trial, that Karpeles was Silk Road’s true mastermind and that he set up Ulbricht to take the blame.

Karpeles, who lives in Japan, denies involvement with Silk Road. He hasn’t been charged.

The government claims Ulbricht’s computer contained a personal journal containing “devastating confessions” about his connection to the website. In entries shown to the jury, Ulbricht appears to write about coming up with the idea for the site, adding upgrades and struggling to keep up with Silk Road’s rapid expansion.

Grabbing Laptop

The government also tried to show that Ulbricht was the Dread Pirate on Oct. 1, 2013, the day he was arrested. Thomas Kiernan, a computer scientist with the Federal Bureau of Investigation, told jurors that plainclothes agents tracked Ulbricht to a public library in his San Francisco neighborhood, then staged a fake domestic dispute to distract Ulbricht while agents grabbed his Samsung 700Z laptop from him, to avoid giving him time to close it and encrypt his files.

Agents testified that they recovered online chats between Ulbricht and site employees with names such as “Libertas,” “Samesamebutdifferent” and “Inigo.” In a March 2012 chat, prosecutors said, Ulbricht discussed a marijuana sale for April 20, or “420,” a date observed by marijuana users in the U.S.

“Here’s a rough draft for ya,” the U.S. claims Ulbricht said. “Roll up a doobie and put your party hat on because the biggest stoner holiday is just around the corner, and we’ve got alot of ganja to deliver!”

Drug Prizes

In the chat, he suggests giving away prizes every 420 seconds and even sending one customer on a “dream vacation with all the trimmings!!!” According to the government, Ulbricht joked about selling drugs to kids, “and we’re selling drugs here, first one’s free little jonny! damn that sounds aweful.”

Jared Der-Yeghiayan, a Department of Homeland Security special agent, testified that he used the name “Cirrus” when he infiltrated the site as an undercover administrator for several months as part of the government’s investigation.

Der-Yeghiayan told jurors that investigators maintained at least a dozen buyer and seller accounts on the illicit site, occasionally expressing frustration over the uncertain identities of the people they were dealing with.

Prosecutors countered the defense theory through the testimony of Richard Bates, a software engineer who, as a friend of Ulbricht, helped him with free programming assistance for Silk Road.

“Did the defendant share a secret with you?” Assistant U.S. Attorney Timothy Howard asked Bates, who testified in exchange for immunity from prosecution.

Site Sold

“He shared with me that he created and ran the Silk Road website,” said Bates, who frowned throughout his testimony. Bates said he purchased marijuana, MDMA, hallucinogenic mushrooms, Vicodin and an antibiotic from Silk Road using the name “Melee.” He testified that his friend told him in November 2011, almost two years before Ulbricht’s arrest, that he had sold the site.

If true, Ulbricht’s sale of Silk Road may not matter for the purpose of the criminal charges, said Asner, the former prosecutor. He has admitted starting the site in 2011. And federal agents said his 2013 arrest showed him acting as the Dread Pirate.

“He was literally caught with his fingers at the keyboard,” Assistant U.S. Attorney Timothy Howard said in his opening statement.

The case is U.S. v. Ulbricht, 14-cr-00068, U.S. District Court, Southern District of New York (Manhattan).