Alleged mastermind of online drug bazar due in court following worldwide arrests

Amid a global roundup of suspected drug dealers who used a notorious online black market, the alleged mastermind is due in court to argue for his release on bail pending charges that he anonymously ran the $1 billion narcotics website called Silk Road.

U.S. investigators arrested Ross Ulbricht on Oct. 1 in a small branch library in San Francisco as he chatted online with a "cooperating witness," according to authorities and court papers.

Ulbricht, 29, is scheduled to appear in federal court in San Francisco Wednesday morning to argue for bail and to discuss a transfer to New York City where three felony charges are pending. He is also charged in Baltimore federal court with soliciting the murder of a former worker who was arrested on drug charges. The indictment alleges Ulbricht feared the former worker would turn on him.

The FBI said Ulbricht unwittingly hired an undercover agent for the murder, which the FBI staged but never took place. Prosecutors in New York also have charged Ulbricht with trying unsuccessfully to solicit the murder of a Canadian man who allegedly hacked into Silk Road, obtained dealers names and began blackmailing Ulbricht.

Ulbricht -- a native Texan who was living in San Francisco and holds degrees from the University of Texas and Penn State -- didn't address the charges in his first brief court appearance last week and is not expected to enter a plea Wednesday.

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Federal public defender Brandon LeBlanc, who has been appointed to represent Ulbricht in San Francisco, declined to comment on the case Tuesday. But he said outside court last week that, "we deny all charges."

Silk Road gained widespread notoriety two years ago as a black market bazaar where visitors could buy and sell hard drugs, guns, computer hacking instructions and a wide-range of other illegal goods and services using bitcoins, a form of online cash which operates independent of any centralized control. An FBI affidavit said the site has generated an estimated $1.2 billion since it started in 2011, collecting $80 million for itself by charging 8 to 15 percent commission on each sale.

A so-called "hidden site," Silk Road used an online tool known as Tor to mask the location of its servers. While many other sites sell drugs more or less openly, Silk Road's technical sophistication, its user-friendly escrow system and its promise of near-total anonymity quickly made it among the best known.

The FBI shut down the site when they arrested Ulbricht. FBI agents appear to have penetrated the behind-the-scenes operations of Silk Road and obtained a list of the sites users and sellers, court papers show.

In the following days, authorities in Britain, Sweden, and the United States arrested eight people who are charged with using the site to sell drugs. In Washington state, a man and a woman were arrested on charges of selling cocaine, heroin and methamphetamine through the now-shuttered website.

In the U.K., the country's newly established National Crime Agency warned that more arrests were on the way.

"These latest arrests are just the start; there are many more to come," said Keith Bristow, head of the agency.

In court papers, the FBI said it had managed to copy the contents of the site's server -- something one expert said would likely provide international authorities with detailed information about the site's dealers.

Silk Road's eBay-style customer review system means that months' worth of sales history are now in law enforcement hands, according to a computer expert who studies bitcoins.

"Any large sellers on Silk Road should be very nervous," said Nicholas Weaver, a researcher with the International Computer Science Institute in Berkeley and the University of California, San Diego.

The traceable nature of bitcoin transfers means the FBI "can now easily follow the money," Weaver said in an email.