Was Silk Road Founder Framed?

The Deep Web

Directed by Alex Winter (2015)

Film Review

The Deep Web is about the January 2015 trial of the alleged founder of the Silk Road website Ross Ulbricht. In addition to exploring Ulbricht’s background and the history of the Silk Road, the documentary also lays out some pretty revealing evidence US District Judge Katherine Forrest disallowed at trial. Ulbricht was sentenced to life imprisonment for drug sales, money laundering, hacking and engagement in a continuing criminal enterprise (kingpin charge). The filmmaker clearly believes Ulbricht was denied a fair trial.

The film begins by explaining what the Dark Web is, ie the unindexed records on the Internet. The Dark Web, which is thousands of times larger than the visible Internet, includes millions of bank records, as well as private and government administrative records. It also includes illicit sites like Silk Road.

Silk Road was created in 2011 by combining two cryptographic technologies: TOR (an open source technology originally developed by the US military), a browser that allows a user to access the Internet anonymously, and bitcoins, a cryptographically generated currency which, unlike bank-generated currency, is virtually untraceable.

Silk Road Founded as Political Statement

Silk Road didn’t actually buy or sell drugs. It simply provided a secure eBay-type marketplace where buyers and sellers could link up anonymously. Over time Silk Road developed an extremely tight knit user community that participated in the site’s political forums. One of the lead administrators, who took the screen name Dread Pirate Roberts (DPR)*, always maintained that Silk Road was less about selling drugs than making a political statement. DPR presented himself as a free market libertarian and talked a lot about resisting state efforts to control every aspect of our lives. All the Silk Road administrators were unified in their desire to end the war on drugs** and the extreme violence associated with it.

This fundamental nonviolent stance was reflected in their refusal to accept sellers offering products or services that caused people harm, such as prostitution or child pornography.

The Cryptoanarchist Movement

The Deep Web also provides interesting background on the radical cryptoanarchist movement that would eventually lead to the emergence of Wikileaks, Anonymous and Silk Road. A primary goal of this movement has been to create a world where the government can’t spy on everything we do. Members feel they have an implicit duty to develop encryption tools that non-tech savvy Internet users can employ to protect their privacy and anonymity.

Before the FBI shut it down in 2013, Silk Road had over one million registered users. According to cops, judges and FBI and DEA agents filmmakers interviewed, the site accomplished its goal in reducing violence associated with the drug trade.

Judge Disallows Evidence of FBI Crimes

The defense Ulbricht attempted to present was that he founded Silk Road but wasn’t Dread Pirate Roberts, as the prosecution claimed – that the individual using this screen name had taken over the website and framed him.

In March 2015, two federal agents were indicted (after a nine month investigation) for infiltrating Silk Road and stealing and extorting millions in bitcoins from Silk Road clients. These agents had high-level access to administrative functions of Silk Road, thanks to an administrator they arrested who turned informant. These federal agents had the power to change access to administrator platforms and passwords and to change PIN numbers and commandeer accounts, including that of DPR. They also had the means to manipulate logs, chats, private messages, keys, posts, account information and bank accounts. And they had the motive to alter data in order to cover up their own actions and point guilt elsewhere.

Judge Forrest barred Ulbricht’s attorney from presenting any of this evidence at trial.

She also disallowed evidence the FBI had illegally hacked into Silk Road’s servers in Iceland without a warrant – a violation of Fourth Amendment protections against illegal search and seizure. If her ruling is allowed to stand on appeal, it sets a dangerous precedent for allowing evidence resulting from illegal government hacking to be used at trial.

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*Dread Pirate Roberts was a fictional character in the novel and movie The Princess Bride. In both, when the original Dread Pirate Roberts dies, his successor takes up the alias.
**The libertarian think tank Cato Institute has taken the position that the US should legalize all addictive drugs as Portugal has done. See The Cato Institute and the Drug War

For an update on Ulbricht’s appeal and to donate to his legal defense fund (like I did) go to
http://freeross.org/

Beating Wall Street at their Own Game

The People’s Hedge Fund

Robin Hood Minor Asset Management Cooperative (http://www.robinhoodcoop.org/), the first cooperatively owned hedge fund, is another novel method of funding political activism. Unlike Enric Duran’s act of “financial civil disobedience” (see Spain’s Modern Day Robin Hood), it’s totally legal.

Founded in Finland in 2012, the main purpose of the Robin Hood Co-op is to use experimental investment technologies to expand the commons and public domain, while offering ordinary people access to income outside of paid work. Among its founding members are several former economics professors from Aalto University (who were fired for starting the Robin Hood Co-op). The co-op presently has over 350 members from 15 different countries and is valued at roughly half a million euros.

Like a hedge fund, the fund’s growth is based on the principle of producing new financial assets by hedging existing ones. Fund managers employ a data mining algorithm called “Parasite,” which follows all the transactions of the US stock markets, identifies the spreads and the star investors and follows their “swarming.” In other words, Parasite is designed to imitate the emerging consensus actions of the world’s best investors.

In the nearly three years since its formation, it has consistently kept pace with the S&P index. In its first year the value of its portfolio rose 30.75%. In the second year, it rose another 9.4%. Since June 2014 it seems to be performing slightly under the S&P index. Profits are primarily used to fund anti-corporate projects that expand the commons or public domain.

How to Join

To join the cooperative, people need to buy one share (30 euros) and pay a onetime membership fee (30 euros). They can buy as many additional shares as they want at any point.

Every member has one vote independent of the numbers of shares they own. They use it to vote in on-line member meetings, where important co-op issues are decided. They can also suggest Robin Hood Projects, become part of the selection board and participate in the work of the cooperative. For examples of proposed projects for to 2015 go to Projects.

When new members buy shares, they are given six options for how they want their net profits (profit minus co-op’s costs) between themselves Robin Hood Projects. If they choose to keep more than 50% of the profit, there is a onetime fee.

Once a month, the new money invested in shares is exchanged for dollars and sent to the co-op’s broker, Interactive Brokers, in New York. This creates a new series, which is invested based on information from the Parasite algorithm. Thus, the performance of the investment fund depends both on the euro/dollar exchange rate fluctuations and the success of the co-op’s investment portfolio on the stock exchange.

Robin Hood Co-op is a “slow” investment organization. Thus people must notify the co-op management if they wish to sell their shares. The actual value of each share is calculated after the end of the fiscal year (end of June) when costs of the co-operative are deducted from them. Finnish law allows them to transfer monies from sold shares six months after the end of the fiscal year. People can also sell their shares to other members.

Avoiding Outrageous Bank Fees

The co-op website is set up to use Transferwise, a low cost non-bank method of overseas money transfer. In countries (like Australia and New Zealand) that aren’t set up yet for Transferwise, Robin Hood Co-op encourages members to avoid exorbitant bank charges by paying their membership fee and buying shares in bitcoins (BTC).

I paid my 60 euros by exchanging $NZ 97for 0.27248653 BTC at Coined (a New Zealand bitcoin exchange) and using Coinbase to transfer the bitcoins to Robin Hood Co-op.

The Obsolete “Means of Production” Narrative

Below is Max Keiser’s interview with Daniel Hassan about Robin Hood Co-op (starts at 11:42). In it they discuss how the leftist “means of production” narrative is obsolete in a global economy where most wealth is produced via financial transactions. They also discuss how the Parasite algorithm works and how they choose activist projects to support with their profits.

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*Bitcoins are a type of digital currency which operate independently of any central bank and in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds.

**Kiwibank is a full service commercial banked owned and operated by the New Zealand government.

Also posted at Veterans Today

Tor 101: Protecting Yourself Against Internet Surveillance

Inside the Dark Web

BBC (2014)

Film Review

Inside the Dark Web is about Tor, a technology that prevents government and corporations from spying on us when we use the Internet.

The World Web has been described as the world’s best tracking device, thanks to the wealth of information it provides about our daily activities. Many families have computerized home appliances that are connected via the Internet (referred to as the Internet of Things). This enables coffee makers, furnaces, coffee makers, etc to turn themselves on and off automatically when we wake up or enter or leave the house. These set-ups allow private companies to collect and store vast amounts of information about our personal lives.

Government and Corporations Are Building Dossiers on Us

No one realized how much Internet data NSA and their British counterpart GCHQ were collecting until Edward Snowden began leaking documents about it in 2013. Private technology companies compile even more detailed documentation (which they regularly turn over to NSA and GCHQ about our Internet activities). Every time we browse, they build detailed dossiers about our reading and browsing habits and sell them to multiple advertisers. For example, if a young woman Googles for pregnancy related information, within hours, she will be bombarded with pregnancy and childbirth ads.

The Onion Router

Tor, which stands for The Onion Router, was develop by the US Naval Research Laboratory in the 1990s for the purpose of protecting online intelligence communications. It combines three layers of encryption with three relay computers belonging to Tor volunteers. Each relay computer removes a layer of encryption and passes the original signal to the intended recipient without revealing the original user.

In 2004, the Navy released the code for Tor under a free licence, and the Electronic Frontier Foundation (EFF) began funding its continued development. The State Department actively encouraged its usage by anti-Assad activists in Syria and various Arab spring organizers. The US government is less happy about American dissidents using Tor to expose his criminal activities. Whistleblowers used Tor to leak documents to Wikileaks and Snowden used it to leak confidential files.

Silk Road

The term “dark web” refers to criminal enterprises that use Tor to escape detection by government authorities. The most notorious is Silk Road, a website that connected anonymous illicit drug dealers and buyers. Purchases were paid for in bitcoins, a virtual currency created by computer algorithm as opposed to a bank. Like cash, bitcoins are totally untraceable because the users are anonymous.

On Silk Road, people responded to a drug offer by depositing the specified amount of bitcoins in an escrow account. Once they notified the Silk Road administrators they had received the drugs, the bitcoins held in escrow were released to the seller.

In 2013 the FBI temporarily shut down Silk Road by arresting its anonymous founder Ross Ulbricht (aka Dread Pirate Roberts), a Texas investment advisor. Ulbricht has just recently been convicted of conspiring to sell narcotics, hacking and counterfeiting documents. You can read all about the trial on Wired

Criminal enterprises also use Tor and bitcoins for other illegal activities, such as websites that sell guns, stolen credit card details and the sexual services of children.

To download free Tor software go to: https://www.torproject.org/