Denial

Karpeles responded to Dratel’s allegation within a few hours, first on Twitter and then in a longer message to reporters.

"This is probably going to be disappointing for you, but I am not and have never been Dread Pirate Roberts," he wrote. "I have nothing to do with Silk Road and do not condone what has been happening there."

In a private message to a colleague of mine, Karpeles added, "It's so ridiculous. I mean, I never did drugs even once in my whole life and I don't really care about all that libertarian thing."

He'd never heard of Ulbricht until his arrest was in the news, he said. As for the silkroadmarket.org site, Karpeles' hosting company may have been chosen simply because it was willing to accept Bitcoin as payment. Anyone could have created the site.

Dratel would continue to insist on what he called Karpeles' "intimate involvement" with Silk Road, but in fact there was nothing substantive tying him to the Silk Road, other than the fact that he had briefly been suspected by law enforcement. (Agents had at one point obtained warrants to search two of Karpeles' e-mail accounts but found nothing to change their conclusion that Ulbricht was the culprit.)

What initially looked like a bold defense would morph into frustrated courtroom theatrics over the next two weeks.

The rabbit was never pulled out of the hat, though; Dratel's increasingly frantic arguments over evidentiary matters were masking a defense that wasn't simply insufficient, it was effectively nonexistent. Dratel would rage when his two expert witnesses, disclosed at the last possible minute, were excluded from trial. But the protests concealed a basic fact—Dratel had no positive factual witnesses to call, no one who could back up Ulbricht's claim to have walked away from the site.

And the government was not exaggerating when it described Ulbricht's laptop as a "mountain of evidence." Over the next two weeks, prosecutors would show hundreds of lines of chats between Ulbricht—or whoever was "me" in his computer's chat logs—and top Silk Road lieutenants. Ulbricht even kept diaries and daily logs on computers, in which he mixed intimate facts from his personal life with notes about Silk Road business. Dratel couldn't explain it, and he didn’t call any witness who could explain it.

Yet Ulbricht's family and a core of true believers continued to cling to the idea that Ulbricht was innocent.

"I could buy anything"

On the first day of the trial, 26-year old Max Dickstein had come dressed in a black ninja costume while holding a poster reading "The Chosen One," featuring a picture of Ross Ulbricht and the Bitcoin logo. Midway through the trial, I bumped into Dickstein again as he smoked a cigarette on the court’s eighth floor balcony with two friends.

Beneath a mop of black hair, Dickstein smiles often, in a way that suggests he has secrets to share.

"Rolex!" said Dickstein, thrusting his wrist toward me. "Let's just say I got it on a certain Tor-only marketplace."

"Got it," I said, looking at the gold watch. "Is it real?"

"No!" he said. The trio erupted with laughter.

I had dinner with Dickstein in Chinatown, where he lives. He's an "out-there" libertarian, he explained. His father is a currency trader, and Dickstein, who describes himself as an "unrepentant one-percenter," dropped out of college to trade currency as well. He got his father interested in Bitcoin, which he saw "as an alternative to gold," he told me.

Dickstein wouldn't say on the record whether he'd made buys on Silk Road or other "darknet" markets, but his knowledge of them was extensive. Silk Road had far more traffic than its competitors and had features other markets didn't have, including the ability to "hedge" Bitcoin, which essentially froze the value of the trade at the moment the buyer and seller agreed on it. That protected either side from losing money due to Bitcoin volatility.

Other markets included Black Market Reloaded, which had everything, including guns, which Silk Road didn't traffic in, but it became clear talking to Dickstein that one of the reasons for Silk Road's success was because people trusted it. Much of the credit for that went to DPR himself, who was communicative and helpful. With millions of dollars' worth of bitcoin in the site’s "escrow" system at any given time, nothing could stop a market owner from running with all the escrowed cash. But DPR wasn't like that—he had truly wanted to build the site, and his users believed in him.

I asked him what Dickstein thought about the Ulbricht case; his answer had a kind of duality to it that I would hear from other supporters. If Ross was innocent, then he was a victim and a hero, Dickstein believed. If Ross was guilty—then he was an even bigger hero.

"He created a marketplace where I could buy anything," said Dickstein.

He was even more enthusiastic about the idea of Karpeles getting in trouble. Dickstein was certain that the collapse of Mt. Gox had been straight-up theft by Karpeles, to the tune of $400 million worth of bitcoins—including $16,000 of Dickstein's own.

I asked him how he knew the two other men who'd been smoking on the balcony with him. They met at a 9/11 Truth rally, he explained.

"Building Seven, at least, was brought down by explosives," he said. He had been living near the site at the time with his parents, when just barely a teenager.

I said nothing, but Dickstein could read my skepticism. "Like I said, I'm out there," he told me, smiling broadly.

"We were shocked like everyone else"

Ulbricht's parents have been steadfast in support of their son since his arrest. Lyn Ulbricht, Ross’ mother, is the outspoken one, and she has talked many times to activists who support Ross.

Her refrain has always been that Ulbricht's case would have dramatic ramifications for Internet freedom. If convicted, her son would be the first "alleged website host" punished criminally for the actions of his users, she said.

"It's going to be a historical case," she said in an interview with one libertarian activist, Julia Tourianski, who also showed up to the trial. "How much will the government regulate and intrude into the Internet, with precedent set here?"

The Ulbrichts apparently found out that Ross had created Silk Road at the same time everyone else did—when Dratel disclosed it in opening statements.

"There were amazing developments in Ross’ trial this past week!" the family wrote in an e-mail to supporters as trial resumed for the second week. "Ross’ attorney, Joshua Dratel, stunned the courtroom by saying that yes, Ross did create the Silk Road. We were shocked like everybody else."

"Things really changed once Joshua Dratel got up there," Lyn Ulbricht said in a fairly upbeat talk with the editor of Liberty Beat, a libertarian blog that was covering the trial. "The whole room, it just got real. He's expensive, and we need help paying him, because he's brilliant, and he's great, and I believe he can win this—not only for Ross, but for all of us, who believe in Internet freedom."

When I approached her in court, Lyn Ulbricht was upset that a colleague of mine had published her e-mail to supporters, one she initially described as "private." In any case, the "shocked" quote was taken out of context, she said.

"It makes it sound like we're saying Ross lied to us."

The need to raise funds was an imperative for the Ulbrichts, who are not wealthy. They sustain themselves by renting out four vacation cottages on a property purchased in Costa Rica in 1990; during discussions over their son’s bail, which was ultimately denied, they Ulbrichts said that the cottages provide two-thirds of the family income.

Supporters had also raised a great deal of money, including a donation of $160,000 by Roger Ver, a Bitcoin entrepreneur living in Russia. "If guilty, he's a hero," said Ver on Twitter in announcing his participation. "If innocent, he needs help."

"A year of prosperity and power"

On the fifth day of trial, FBI Agent Tom Kiernan unwrapped, with some difficulty, a Samsung 700z laptop that was swathed in thick plastic. It was the very computer he and two other federal agents had taken from Ross Ulbricht back in October 2013.

After establishing how Kiernan kept the computer awake, Howard walked the jury through the data pulled from Ulbricht's computer. The stash unveiled during Kiernan's testimony was stunning. In addition to the chat logs with staff, only snippets of which were shown to the jury, the FBI had found code for specific Silk Road pages, including the login page and the "mastermind" page Ulbricht had open in the library. They also found a copy of the site's logo, a nomad riding on a green camel.

Ulbricht was an intensive record-keeper. A spreadsheet labeled "net worth calculator" chronicled what Ulbricht believed he was worth. It ran from August 2006, when he started graduate school at Penn State University ($821) to the moment he launched the Silk Road in 2011 ($29,948),to April 2012 when he had arrived in San Francisco ($384,050). In June 2012 Ulbricht added Silk Road to the spreadsheet as a "hard asset," assigning it the wildly optimistic value of $104 million.

Most revealing, though, were the four entries by Ulbricht in what appeared to be his personal journal. The first, labeled “2010,” described Ulbricht’s unhappiness over the direction his life had taken in Texas.

Ulbricht was unhappy about the problems with "Good Wagon Books," an online used-book recycling business he was involved in. "It was clear that we hadn’t grown the business to the point that it made sense for me to stay on," wrote Ulbricht. "There I was, with nothing. My investment company came to nothing, my game company came to nothing, Good Wagon came to nothing, and then this."

He got a job editing "scientific papers written by foreigners," which he found on Craigslist. But he hated “working for someone else and trading my time for money with no investment in myself." It was then he got serious about Silk Road:

I began working on a project that had been in my mind for over a year. I was calling it Underground Brokers but eventually settled on Silk Road. The idea was to create a website where people could buy anything anonymously, with no trail whatsoever that could lead back to them. I had been studying the technology for a while, but needed a business model and strategy.

Ulbricht decided to produce hallucinogenic mushrooms himself so that he could "list them on the site for cheap to get people interested." The journal describes his trip to Bastrop, near Austin, where he rented a cabin "off the grid" and produced several kilos of mushrooms.

Creating the website for Silk Road was difficult for Ulbricht, who was not an experienced programmer at the time. He was also trying to keep up his relationship with his girlfriend Julia, which wasn't easy. The journal describes his feelings at the time:

I had mostly shut myself off from people because I felt ashamed of where my life was. I had left my promising career as a scientist to be an investment adviser and entrepreneur and came up empty handed. More and more my emotions and thoughts were ruling my life and my word was losing power. At some point I finally broke down and realized my love for people again, and started reaching out. Throughout the year I slowly re-cultivated my relationship with my word and started honoring it again.

The tone of the paragraph, and its talk about "relationship to my word," appears linked to the Landmark Forum, a popular self-help seminar that Ulbricht was a proponent of. Earlier this year, Eileen Ormsby, who wrote a book about Silk Road before Ulbricht's arrest, noted that the Silk Road Charter appeared to be largely plagiarized from Landmark's own corporate charter.

Ulbricht’s journal entry ended:

In 2011, I am creating a year of prosperity and power beyond what I have ever experienced before. Silk Road is going to become a phenomenon and at least one person will tell me about it, unknowing that I was its creator. Good Wagon Books will find its place and get to the point that it basically runs itself. Julia and I will be happy and living together. I have many friends I can count on who are powerful and connected.

The next journal entry was a file called "2011." Ulbricht described himself as working on both Good Wagon Books and Silk Road "at the same time," and learning how to program.

Got the basics of my site written…. Launched it on freedomhosting. Announced it on the bitcointalk forums. Only a few days after launch, I got my first signups, and then my first message. I was so excited I didn't know what to do with myself. Little by little, people signed up, and vendors signed up, and then it happened. My first order. I'll never forget it. The next couple of months, I sold about 10 lbs of shrooms through my site. Some orders were as small as a gram, and others were in the qp range. Before long, I completely sold out. Looking back on it, I maybe should have raised my prices more and stretched it out, but at least now I was all digital, no physical risk anymore. Before long, traffic started to build. People were taking notice, smart, interested people. Hackers. For the first several months, I handled all of the transactions by hand.... Between answering messages, processing transactions, and updating the codebase to fix the constant security holes, I had very little time left in the day, and I had a girlfriend at this time!

The site got "its first press,” a widely-read Gawker article. that led to a spike in signups. But the publicity also led two US senators two attack the site publicly.

“I started to get into a bad state of mind,” Ulbricht wrote. “I was mentally taxed, and now I felt extremely vulnerable and scared. The US govt, my main enemy was aware of me and some of its members were calling for my destruction.”

Ulbricht had made $100,000 from Silk Road and was earning "up to a good $20-25k monthly" at this point. He hired several staffers, especially to help with moderating the forums, a time-consuming job. He met no one in person, only collecting their drivers' licenses and storing them, encrypted, on his laptop.

But it remained Ulbricht alone, in his role as Dread Pirate Roberts, who made all final decisions about what could be bought and sold on the site. A chat with a Silk Road staffer "inigo" shows the two debating the sale of cyanide.

inigo: so uhhh we have a vendor selling cyanide

myself: link please

inigo: getting it now

inigo: not sure where we stand on this

...

inigo: fentanyl has been used to assassinate people too

myself: cyanide has a bad reputation

myself: there are plenty of legitimate uses

inigo: so we're going to allow it?

myself: its bad for image/PR

myself: i think we're going to allow it

myself: its a substance and we want to err on the side of not restricting things

inigo: this is the black market after all :)

myself: it is, and we are bringing order and civility to it

In a journal entry dated January 1, 2012, Ulbricht reflected on just how revolutionary his work with Silk Road had become, writing, "I imagine that some day I may have a story written about my life, and it would be good to have a detailed account of it."