First Conviction of Online Drug Marketplace User Signaling a Crackdown?

Wednesday, February 6, 2013 by Reine Duffy

The online marketplace Silk Road has been compared to Amazon.com, as it allows potential buyers who create an account on the site to purchase a variety of products sold by individual sellers, see buyer reviews, and have items shipped directly to their doorstep. But unlike Amazon, Silk Road primarily serves as a black market for drugs and other illegal products, allowing users to purchase LSD or cocaine at the click of a button. Silk Road is difficult to find, and use of the marketplace requires several steps to protect users’ anonymity, seemingly shielding Silk Road’s users from the eyes of law enforcement. In fact, nobody has ever been convicted of a crime connected to Silk Road. Until now.

It’s debatable whether a crackdown of this underground drug marketplace is even possible, considering its sheer size.

This month, Australian Paul Leslie Howard, who was arrested in July 2012, pleaded guilty to two charges of “importing a marketable quantity of a border-controlling drug” and to trafficking controlled drugs. Howard joined Silk Road as a vendor in April 2012 and sold a variety of drugs on the site before law enforcement began tracking him and gained access to his online profile. Australian Customs and Border Protection Services then intercepted mail containing cocaine on the way to his address, and found more than $2,000 in cash, digital scales, and other evidence in a raid of his home, along with incriminating texts on his mobile phones such as “promote the LSD I got more in. Last week I sold 200 cubes.”

The conviction may come as a surprise to Silk Road users, who thought the secretive nature of Silk Road protected their anonymity. After all, users must access the site through TOR, which has been described as “a network of virtual tunnels that allows users to connect to the internet anonymously, without revealing their IP addresses or locations.” The Silk Road URLs are complicated and impossible to remember, often a mix of random letters and numbers, and a username, passphrase, and PIN are needed, none of which are retrievable later if forgotten.  Once a user decides to purchase from Silk Road, they must do so using only Bitcoins, completely digital currency that can only be obtained through bank wiring or a deposit system such as Moneygram.

Still, law enforcement has threatened to crack down. Following Howard’s arrest, an Australian Federal Police press release warned users of Silk Road that their activities were not as “anonymous” as they thought and they would be prosecuted once caught. The Drug Enforcement Administration in the United States has also said that it has been investigating Silk Road. And in April 2012, eight men were arrested and accused of distributing illegal drugs through “The Farmer’s Market,” another online store for controlled substances that also used TOR. Nonetheless, it’s debatable whether a crackdown of this underground drug marketplace is even possible, considering its sheer size. Silk Road has been described as “the largest black market ever to exist.” And a study performed by Nicolas Christin, associate director of the Information Networking Institute, estimated that the site may have as many as 150,000 customers, with sellers bringing in approximately $1.9 million in revenue each month. The size and popularity of the market, combined with the lack of prosecutions despite threats by law enforcement and public officials, suggests that a significant crackdown is unlikely to occur or have any effect. Whether this one conviction turns into many remains to be seen.