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Feds Bust the Amazon of Drugs, Seize Its Untraceable Loot

It was the Amazon.com of the illegal drug trade. An online black market in which cocaine, marijuana, heroin, and LSD were bought and sold by anonymous customers and dealers, using untraceable digital currency. U.S. authorities called it "the most sophisticated and extensive criminal marketplace on the Internet..." And today, they announced they've taken it down.

In a criminal complaint unsealed Tuesday, the Justice Department announced that the online market Silk Road has been wiped off the Internet and its profits seized. Since its inception in 2011, Silk Road has been the bane of federal drug enforcement agents, who knew full well what the illicit marketplace was selling but were largely powerless to do anything about it. As of last month, there were more than 13,000 listings for illegal drugs of all varieties on Silk Road, the government said in its complaint.

Silk Road, which operates through an extensive network of routers that lets users remain anonymous, enabled several thousand dealers to distribute hundreds of kilograms of illicit substances, as well as other illegal goods and services, to more than a 100,000 buyers, federal prosecutors allege.

The site, which also sold hacker services and even advertised murder for hire, obscured transactions by requiring they be conducted in Bitcoin, an electronic currency "designed to be as anonymous as cash," prosecutors charge.

The marketplace was a well-known, if not widely visited, corner of the so-called Deep Web, a part of the World Wide Web that is not indexed by search engines. Visitors to the Deep Web have to know what they're looking for and cannot find their way to its sites through traditional means, such as Google searches.

Silk Road "has sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream e-commerce websites," prosecutors allege.

Silk Road was designed to let its customers remain anonymous in two ways. The first was by using the Tor router network, which makes it practically impossible to locate computers that are hosting or accessing websites on the network.

The second form of anonymity came from Bitcoins. The electronic currency has been a favored means for procuring illegal goods and services online, because Bitcoins can be extremely difficult, if not impossible, to trace to their owners. There is no central bank that generates Bitcoins or regulates their use. People can buy and sell Bitcoins through exchanges set up by independent parties.

Skeptics of Bitcoin say its value fluctuates too wildly to be a useful currency and that its greatest value is to criminals and black market buyers. But proponents say Bitcoins have the potential to revolutionize commerce by making it easier for customers to make purchases and vendors to get paid. A small but growing number of individual vendors, nonprofit organizations, and companies accept Bitcoin.

The government has seized 26,000 Bitcoins from Silk Road, which it estimates are worth approximately $3.6 million. This would constitute the largest-ever seizure of Bitcoins, prosecutors say.

Silk Road has allegedly generated sales totaling more than 9.5 million Bitcoins and has collected commissions totaling more than 600,000 Bitcoins. The value of the currency has varied during Silk Road's operations, but the government believes those transactions equate to approximately $1.2 billion in sales and $80 million in commissions for Silk Road.

The FBI arrested Ross William Ulbricht, aka "Dread Pirate Roberts," in San Francisco yesterday and accused him of overseeing Silk Road's operations since their inception. Ulbricht "has controlled the massive profits generated from the operations of the business," prosecutors allege, adding that he "has always been aware of the illegal nature of his enterprise."

Ulbricht is charged with narcotics trafficking, computer hacking and money laundering. He was expected to appear in court Tuesday morning.

Ulbricht is accused of engaging in a "massive money laundering operation, through which hundreds of millions of dollars derived from unlawful transactions have been laundered," according to the government's complaint.

In arresting Ulbricht, the feds have nabbed the poster boy of online black markets. But if history is any guide, some ambitious entrepreneur will try to take Ulbricht's place, and buyers will beat another silk road to his door.






 


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Chinese Netizens on U.S. Government Shutdown: We Want One of Our Own

This is a guest post from Liz Carter, a senior contributor to FP's Tea Leaf Nation. 

As the U.S. federal government hurtles into shutdown mode, many in the United States have responded with anger or shame; here at FP, for instance, Gordon Adams compares the congressional bickering that gave rise to the shutdown to Shakespeare's Comedy of Errors.

Americans would be forgiven for assuming that observers in China, whose government is not averse to showcasing U.S. government failures to burnish the ruling Communist Party's image, are watching all this and indulging in schadenfreude. Instead, both China's state-run and private-but-state-supervised mainstream media outlets have thus far reacted with restraint. Meanwhile, users of the country's bustling, often candid, often profane social web have found a silver lining in the political paralysis that would surprise many Americans.

Mainstream coverage of the shutdown has been widespread, but its tone has been explanatory, not celebratory. State-run China Central Television covered the developments in a several-minute-long segment entitled, "Republicans' and Democrats' Contest Without Result: U.S. Federal Government Non-essential Departments Forced to Close." Sina, one of China's major news portals, prepared a dedicated page covering the shutdown (see above), complete with infographics and listicles explaining its causes and consequences. The page's most febrile headline accompanied a relatively workmanlike article: "Exclusive Analysis: Two-party Government Stalemate Holds America Hostage." Even an article on the reliably pro-Party Global Times posited that while failure to resolve the standoff before Oct. 15 could have negative consequences for global financial markets, the possibility that this would happen was less than 10 percent.

In Chinese social media, meanwhile, the government shutdown became an opportunity to criticize the Chinese government. Chatter ran deep: the Chinese equivalent of "#USGovernmentShutdown" rose to the second-most discussed topic on all of Sina Weibo, a popular social media platform, as of this writing. Weibo users have commented on the topic more than 135,000 times.

Perhaps predictably, some web users cracked jokes about how trash would pile up in Washington, D.C. and public bathroom closures would present problems for citizens with indigestion. But many took the opportunity to discuss how the U.S. government shutdown reflected on China itself.

Some veiled their critiques. Xu Jilin, a professor of history at East China Normal University in Shanghai, wrote, "The government has shut down, but the country is not in disorder -- now that's what you call a good country where people can live without worry."

The gridlock itself, decried by most commentators in the U.S., struck many Chinese as a sign of lawfulness. As one user remarked, "A government that can shut down, no matter how big the impact on everyone's lives, is a good thing. It shows that power can be checked, and the government can't spend money however it wants."

Most users, while critical of the U.S. tendency to borrow from China, did not see the shutdown as a sign that democracy was inherently flawed. One user, @HeYanbin, described the issue as one of tradeoffs:

It is clear that there is an economic cost for the fairness and equality of a rule-of-law system and constitutionalism. Only then is it a true democracy; the shutdown is just the result of a two-party standoff. Only in this kind of society do you have rule and order, not tyranny. China isn't like that. The government runs extremely smoothly -- no need at all to worry that it might shut down. In this regard, I envy the U.S.

Others took more direct aim at their own government. As one user noted, "Comrades, no need to worry that the same thing will happen in our country!  In any event, delegates in our National People's Congress [China's rubber-stamp legislature] cannot cast dissenting votes, haha." Another wrote, "I wish China's government would shut down and let corrupt officials have a taste of it."

The growing connections between China and the United States mean that no issue is strictly domestic for either country. Many Weibo users speculated about the effects the U.S. government shutdown would have on them personally. Some wondered whether Washington's museum and zoo closures would affect Chinese traveling to the United States during China's National Day holiday (Oct. 1 marks the anniversary -- this year, the 64th -- of the founding of the People's Republic of China, and is one of the most popular times for Chinese to travel abroad). Others questioned how the shutdown would affect their visa applications, or the value of the U.S. dollar. On Netease, a popular news site with active comment forums, the top comment related to the shutdown put it in perspective: "No one is laughing at the United States; they just find it very interesting." That's not precisely true, but Americans may be heartened to know that it's close enough.

Sina