Silk Road Drug Market Was An Economic Experiment Gone Wrong
MELISSA BLOCK, HOST:
This next story refers to an ancient Asian trade route and a masked character from "The Princess Bride." For a few years, the easiest place to score illegal drugs on the internet was a site called the Silk Road. It was a secret site where you could get pot, heroin and meth. And the Silk Road was run by a figure known only as the Dread Pirate Roberts. Next month the government will try to prove in court that the Dread Pirate was, in reality, a former physics graduate student named Ross Ulbricht. Steve Henn from our Planet Money team has the story of how an economic experiment gone wrong lead to the downfall of the pirate.
STEVE HENN, BYLINE: From the start, the Silk Road was more than just a Craigslist for illegal drugs. There was a philosophy to the site - a belief that people should be able to buy and sell pretty much anything without government interference, but not without a leader. On February 5, 2012, this nameless system administrator, the guy who had actually created the Silk Road, gave himself an identity. We only know what he wrote on the Silk Road but, for this story, we decided to give his writings a voice - a computerized voice.
DREAD PIRATE ROBERTS: (Through computer-generated voice) I need a name. Drum roll, please. My new name is Dread Pirate Roberts.
HENN: A year and a half later, the FBI thought they knew the real identity of the Dread Pirate Roberts, and they found him at the Glen Park Public Library. Now, this place feels like an unlikely headquarters for an international drug conspiracy, but last year, right here, a team of federal agents snuck up behind Ross Ulbricht, pinned his arms to his side and seized his laptop. They allege at that moment Ulbricht was online acting as the Dread Pirate. Ulbricht denies it.
But here's what we do know. In 2011, he gave up a career in science, moved to San Francisco. He was a tech geek, sure. But his friends say he was also this sweet guy. At one point, he sat down and recorded his thoughts for the public radio project StoryCorps, saying where he wanted to be in 20 years.
ROSS ULBRICHT: I want to have had a substantial, positive impact on the future of humanity by that time.
HENN: Ulbricht told friends he traded currency - actually, bitcoin - for a living. He wrote on his LinkedIn profile that he was a fan of libertarian philosophy. And on the Silk Road, the Dread Pirate Roberts also preached economics. Andy Greenberg, a reporter at Wired, stumbled into the Silk Road back in 2011.
ANDY GREENBERG: Well, at first I just was reading his messages like everyone else. He was kind of the emcee of this whole party. People talked about him as this Che Guevara-like figure and a job creator and a modern hero of our times. And the Silk Road community just loved him.
HENN: The Dread Pirate explained everything, reassured everyone. He was the site's philosopher king.
GREENBERG: Then, there was even a Dread Pirate Roberts book club.
HENN: So the Dread Pirate Roberts had a book club on the site?
GREENBERG: Right. And, very specifically, it was a book club all about free market economics - you know, Austrian theory, radical libertarian ideas.
HENN: So would they - would they read, like, Hayek one week and then have a discussion forum on Friday?
GREENBERG: I'm not sure that it was as highbrow, also, as you're making it out to be.
HENN: They also had a movie night. The Dread Pirate Roberts wrote that he was trying to create a community - a truly free market. But building an online anonymous libertarian marketplace is a challenge. I mean, think about it. There are no courts, no cops. Everyone is anonymous. It looked like a scam. How do you make a market like that work?
GREENBERG: Well, you know, I asked him, what is your role as the Dread Pirate Roberts? Are you the CEO or the administrator? He responded that he saw himself as the center of trust of the site, which I thought was a pretty interesting way of putting it because that is what the Silk Road required.
HENN: The Dread Pirate solved this trust problem with a really traditional solution - escrow accounts. When you bought something on the site, you'd send your money - your bitcoin to the Pirate. He would hold it, and when the drugs showed up, then the dealer would get his money. And this worked. The site exploded. It did more than a billion dollars in business. The Pirate hired a team of administrators. He created rules. He said you can sell drugs, sure, but no child pornography, no stolen credit cards.
GREENBERG: He was very clear about only selling victimless contraband.
HENN: But eventually, the Pirate ran into problems. An employee was arrested and the Dread Pirate thought the entire site was at risk. And so, according to federal prosecutors, he hired a hitman.
DREAD PIRATE ROBERTS: (Through computer-generated voice) I have never killed a man or had one killed before, but it is the right move in this case.
HENN: The hitman was actually an undercover DEA agent. Federal agents eventually followed a digital trail back to that library in San Francisco - back, they say, to a laptop and Ross Ulbricht. Now Ulbricht is facing two federal indictments - one for running the Silk Road and one for attempting a murder-for-hire. Steve Henn, NPR News. Transcript provided by NPR, Copyright NPR.