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THE ULBRICHT CAPER

FROM TIME to time, stories on the electronic currency Bitcoin appear in the media. On May 2, 2016, for example, BBC News reported that “Australian Craig Wright Claims to be Bitcoin Creator.” Three days later, the same online source updated matters with “Bitcoin ‘Creator’ Backs Out of Satoshi Coin Move ‘Proof.’ ”

To interpret these arcane headlines is non-trivial. Fortunately, though, I can offer help. Back in January 2014, SimanaitisSays offered something of a Bitcoin for Non-Dummies in “Brother, Can You Spare a Bitcoin?” And, rather more extensively, the April 21, 2016, issue of London Review of Books has “When Bitcoin Grows Up,” by John Lancaster.

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Lancaster’s article is a fascinating as well as lengthy one, including aspects of mathematics, economics and sleuthing. Here I share only one of his stories. I call it The Ulbricht Caper in honor of Ross Ulbricht, a 26-year-old Texan and founder of Silk Road, an online marketplace for drugs, firearms, fake IDs and other nasty things profiting from anonymity of buyer and seller.

Don’t try this at home, kids. Ulbricht is now serving two life sentences without possibility of parole.

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The capture of Ulbricht makes for a great tale, but to appreciate this, it helps to understand the nature of his Silk Road website using Bitcoin as its medium of payment.

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Briefly, as an exchange of electronic currency, a Bitcoin transaction depends on two encrypted bits of information. One is a public key giving users a means of verifying legitimacy of the transaction. The other is a private key known only by the current possessor of the bitcoin’s value.

Privacy is at the heart of the Ulbricht Caper.

His Silk Road drug trading used Tor, a highly secure internet browser that hides location of users. Ironically, though popular with terrorists, Tor was devised by the U.S. Naval Research Laboratory in the mid-1990s as a means of communicating with spies and informants.

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Tor, originally The Onion Router for its layered approach to communication. The image below is by the Electronic Frontier Foundation.

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So here’s Tor giving Ulbricht’s buyers and sellers complete anonymity. And here’s Bitcoin, an anonymous, non-traceable means of transferring the payments. Things went well: By 2013, Ulbricht hinted in an encrypted interview that the worth of his Silk Road site was perhaps in the tens of billions of dollars.

The FBI knew all about Ulbricht: In early Silk Road days, he had once used his real email address in bragging on an online forum. Ulbricht quickly deleted the posting, but not before it got archived by the server, which led to later FBI identification.

Lancaster sums up the Ulbricht Caper in the LRB: “He was nevertheless hard to pin down, because, once the Feds knew who he was and what he was doing, that combination of Tor and Bitcoin was still powerful. To convict him, they would have not just to catch him at it, but to grab the computer out of his hands while he was in the middle of criminal activity.”

Simply closing the laptop’s lid automatically encrypted its hard drive. Ulbricht could also invoke this encryption with a couple of key strokes.

His nabbing was high drama. As described by Lancaster, “On 1 October, 2013, Ulbricht was sitting in a public library in San Francisco, logged into Silk Road via the library’s wifi. He was in an online chat with an FBI agent whose job it was to make sure Ulbricht was still online when his colleagues swooped.

“Ulbricht was at a desk across from a slight young Asian woman when a couple of typical San Francisco street people began arguing loudly just behind him. He turned to look, and the young woman grabbed his laptop; she was an FBI agent. So were the street people.

“Nice one, the Feds….” And a good LRB tale, Lancaster. ds

© Dennis Simanaitis, SimanaitisSays.com, 2016

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