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Photo of Matt M. McClenahen
Photo of Matt M. McClenahen

Penn State Grad Founded Cyber Drug Market Known as “Silk Road”

On Behalf of | Oct 3, 2013 | Penn State

It turns out that the founder and operator of the “Silk Road” website, which had frustrated law enforcement for the past several years, has a masters degree from Penn State. Ross Ulbricht, who earned a masters in material science and engineering from Penn State in 2010, was arrested yesterday in San Francisco on a variety of federal charges related to his operation of Silk Road, as well as charges related to a murder for hire plot, in which Ulbricht allegedly sought the murder of someone who was trying to extort money form him, and an employee to had defrauded Silk Road users out of a substantial amount of money.

If you listen to NPR or read a lot of internet news stories, you had probably already heard of “Silk Road,” a website operated on the “Deep Web,” which served as an online market place for pretty much anything illegal. No surprisingly, the most common goods bought and sold on Silk Road were illegal drugs like marijuana, heroin, cocaine and prescription meds, but I would not be surprised if people were selling illegal porn and weapons as well.

The “Deep Web” is a hidden area of cyber space, assessable only to those with a high level of computer skills. Sites on the Deep Web do not show up on regular browsers. If you attempted to google “Silk Road,” all you would find were news stories about the site, but you could not find the site itself. Silk Road’s sophisticated security features allowed users to remain anonymous, while conducting transactions in an electronic currency known as “bitcoins.” Although bitcoins are used for mostly legitimate and legal internet transactions, they also served as the perfect currency for the online black market, as they are not a form of currency issued by any government, they are not deposited in banks, and as far as I know, I do not think the IRS has ever pursued anyone for failure to pay taxes on bit-coin income.

According to federal authorities, Ulbricht had become a bitcoin millionaire through his operation of Silk Road, but all of his bitcoins were seized at the time of his arrest. As news of Silk Road’s downfall quickly spread, the exchange rate value between bitcoins and real currencies plummeted. Apparently not being able to use bitcoins on Silk Road anymore greatly reduces their utility, which underscores how big the site must have been.

As a Penn State grad, I have to say that Ulbricht’s status as a fellow alumnus does not bother me in the least. In a way, it is actually kind of cool. Usually, genius criminals like Ulbricht come from places like MIT, Cal Tech, Harvard, Cambridge, Oxford and the like, but Ulbricht is one of us. One naturally does not feel contempt for the genius criminal who commits an essentially victimless crime, the way one feels contempt for a more traditional criminal. Also, the two people he allegedly wanted killed were criminals, who knew they risked the possibility of retaliation when they victimized others. Who knows? I may have sat next to him at Zeno’s or Webster’s without even knowing it.

Matt McClenahen is a criminal defense attorney in State College, Pennsylvania, home of Penn State University. He did not accept payment in bitcoins even before their exchange rate collapsed.

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