Prosecutor Says San Francisco Man Admitted Running 'Silk Road 2.0'

Update 4:05 p.m. Blake Benthall was mostly silent at a federal court hearing in San Francisco this morning, speaking only to waive his right to a hearing that would confirm his identity.

“My name is Blake Benthall, and I am 26 years old,” he said.

Federal prosecutor Katheryn Haun said the government would pursue detention. "He was found with over $100,000 cash in his home. He has a passport, and he engaged in fraudulent identification," Haun said. "We believe he poses a severe flight risk.”

She said that Benthall had admitted to being the administrator of Silk Road 2.0 after receiving his Miranda rights.

Assistant Federal Public Defender Daniel Blank represented Benthall, but his counsel is likely to change by tomorrow when he is scheduled to attend a pretrial detention, or bail, hearing. Until then, Benthall is being held in Oakland, Blank said.

Benthall, who stands just over 5-feet-tall, stared at three women in the courtroom audience for most of the hearing. At its conclusion, one of the women who did not want to be identified or give a statement said, “Why? Why, why?” and began to cry.

Benthall has brown, thinning hair and a beard. He was wearing a gray hoodie with ``Internet Better'' written on the back.

Some individuals who lived near Benthall’s Florida Street home didn’t seem to know him well, though several said he seemed like a "nice person." They did know him by his car, a gray Tesla Model S mentioned in the FBI’s complaint. He allegedly put the $70,000 down payment on the car with Bitcoins from Silk Road 2.0 commissions.

Pam Benjamin is the station director of a small radio station around the corner from Benthall’s house. She said neighbors had noticed people taking pictures from unfamiliar vans and SUVs on Florida Street for the past week.

Then Wednesday afternoon, she said, dozens of FBI agents swooped onto the street.

“All these cars just came screeching out of nowhere and there was a lot of yelling,” she said. “And then they descended right around the corner.”

Original post

Authorities say a 26-year-old who lives in San Francisco's Mission District has been arrested for starting a spinoff version of the Silk Road website, enabling approximately 150,000 people to buy and sell illegal drugs and generating monthly sales of about $8 million.

Blake Benthall, who lives on Florida Street, was arrested Wednesday, the FBI said. In New York, U.S. Attorney Preet Bharara said Benthall is being charged with conspiring to commit narcotics trafficking by starting the "Silk Road 2.0" website about five weeks after the government shut down the original version last year. He has also been charged with conspiring to commit computer hacking, conspiring to traffic in fraudulent identification documents and engaging in a money-laundering conspiracy. The various charges carry sentences from 10 years in prison to life.

Benthall's online presence includes Twitter, Facebook and LinkedIn. He worked as a software engineer from August 2011 to November 2012 at RPX, a San Francisco patent risk management firm, the company has confirmed to KQED. Benthall also lists SpaceX on his resume; that company confirmed an employee of that name worked there from December 2013 to February of this year.

The complaint, unsealed in Manhattan federal court today, says Benthall was known online as "Defcon" and that he ran the website on Tor, described by the Tor website as "a network of virtual tunnels that allows people and groups to improve their privacy and security on the Internet."

A "small staff of online administrators and forum moderators" assisted Benthall, who oversaw the computer infrastructure and programming of the site, the complaint says. Among the drugs allegedly bought and sold on the new Silk Road were heroin, cocaine and LSD.

An FBI press release says an undercover Homeland Security agent "successfully infiltrated the support staff involved in the administration for the Silk Road 2.0 website, and was given access to private, restricted areas of the site reserved for Benthall and his administrative staff."

According to an affidavit by the agent included in the complaint, users logging on to the site received a welcome message:

It is with great joy that I announce the next chapter of our journey. Silk Road has risen from the ashes, and is now ready and willing for you all to return home.

The agent said that, like the first version of Silk Road, the site offered users an Amazon-like shopping experience.

The website contains a user-friendly interface with links to various categories of items for sale on the site, which include, most prominently, "Drugs," within which are sub-categories of various types of narcotics. Clicking on any of the links to items for sale on the site brings up a webpage containing the details for the listing, including a description of the item, the price, the username of the vendor selling the item and prior customers' "feedback" on the vendor's "product." To buy an item listed, the user can simply click the link labeled "add to cart." The user is then prompted to supply a shipping address and to confirm the placement of the order. Once the order is placed, it is processed through Silk Road 2.0's bitcoin-based payment system....

Also available on the site: a private message system, customer support page and online forums at which users could post comments.

The First Silk Road

Last October, a half-dozen FBI agents stormed the Glen Park branch of the San Francisco Public Library to arrest 29-year-old Ross William Ulbricht, allegedly the first administrator of Silk Road. Ulbricht, known online as Dread Pirate Roberts, was charged with drug trafficking, computer hacking and money laundering. Wired's Andy Greenberg is following that case and reported last month that a federal judge rejected defense arguments that the FBI investigation was illegal.

In a 38-page ruling Friday, Judge Katherine Forrest dismissed the defense’s motion to suppress evidence that hinged on the argument that law enforcement had violated Ulbricht’s Fourth Amendment right to privacy from unreasonable searches. Just last week, Ulbricht’s lawyers went so far as to contend that the FBI had illegally hacked a Silk Road server in Iceland without a warrant to determine its location.

But the Judge’s rejection of that argument comes down to what may be seen as a fateful technicality: she argues that even if the FBI did hack the Silk Road server, Ulbricht hadn’t sufficiently demonstrated that the server belonged to him, and thus can’t claim that his privacy rights were violated by its search. “Defendant has…brought what he must certainly understand is a fatally deficient motion to suppress [evidence],” the judge writes. “He has failed to take the one step he needed to take to allow the Court to consider his substantive claims regarding the investigation: he has failed to submit anything establishing that he has a personal privacy interest in the Icelandic server or any of the other items imaged and/or searched and/or seized.” Full article

You can read the criminal complaint against Blake Benthall here.

Blake Benthall Criminal Complaint by Andy Greenberg

The Associated Press contributed to this report.