Silk Road, a now-defunct site on the Dark Web, led Australian police to seize Australia’s largest cryptocurrency
Police say they were "very inconspicuous in every way" and led a normal life in the community, having never been on police radar before.
But behind closed doors, the two Victorians quietly amassed a fortune that police now believe may be linked to Silk Road, a notorious dark web marketplace that was shut down by the FBI nearly a decade ago.
Silk Road, the first marketplace hosted on the dark web and used primarily to buy and sell illegal drugs, was shut down in 2013 as part of a massive U.S. police operation. Ross Ulbricht, a physics graduate from the University of Texas, was arrested and is currently serving a life sentence in prison.
Investigation data has been shared with police around the world, who continue to make arrests in connection with the now-defunct dark web site.
Last week, information provided to Victoria Police by the U.S. Federal Bureau of Investigation (FBI) prompted the largest-ever cryptocurrency seizure by Australian law enforcement.
A record $8.49 million worth of cryptocurrency, understood to be bitcoin, was seized during raids at properties in urban and remote Victoria last Thursday, and was just part of $13.1 million worth of assets seized by police.
A 31-year-old woman from Kinglake, north of Melbourne, and a 30-year-old man from Preston were interviewed by police and released pending further investigation. The woman was charged with possession of marijuana and was released on bail to appear in court in March.
Police say the two were "partners" and are investigating their use of the Silk Road website and what activities led the couple to amass a large fortune over the next eight years.
Thursday's raids in Kinglake, Preston, Prahran, South Yarra and South Gippsland dollars resulted in seizures of drugs believed to be marijuana, Seroxin (magic mushrooms), ecstasy, prescription pills, and white powders and crystals.
Also seized were two properties in Kinglake and Dollar valued at approximately $2 million, as well as vehicles such as a Toyota Prado and Volkswagen T-Cross valued at approximately $100,000, and approximately $2.6 million in cash in the bank.
Commander Mick Frewen of the Victoria Police Crime Command told The Age that the couple arrested were inconspicuous and "completely unremarkable."
"These people didn't even come to the attention of the police and they amassed a huge amount of wealth from their living rooms via their keyboards." He said.
"They're just completely anonymous people in the community …… I would describe them as inconspicuous in every way. They don't usually openly flaunt their wealth, [or] have ties to any organized crime groups or networks."
Frewen said the investigation into their activities could take time, given the different jurisdictions and platforms involved. Both men could face serious money laundering or proceeds of crime and could face up to 10 years in prison.
"With respect to their contemporary criminal conduct, we did find some drugs at several addresses yesterday and we're still looking at what that means in terms of their exposure to drug trafficking online." He said.
"They were surprised [to see the police], but just as the value of Bitcoin has spiked dramatically, even they probably didn't expect it to grow so much when it went online in 2012."
"The Changing Face of Money Laundering and Organized Crime"
Commander Frewin said the dark web and cryptocurrencies provide "fertile ground" for organized crime and serious criminal activity to occur.
Many platforms are secure and anonymous and can be used to quickly move money around the world, with new dark web sites popping up every day for the purchase of drugs, guns and money laundering.
"It is well known that cash was once king, but now cryptocurrencies, in a completely different way, are an opportunity for online money laundering …… multinational syndicate drug networks, or two people operating in a suburban Melbourne living room - in many ways, although the situation is completely different, there are similarities. "
"Not only do users not need to leave their recliners, neither do criminals. It doesn't really matter whether they're operating in Melbourne, Chicago or Southeast Asia. Their reach and ability to syndicate or distribute drugs across Australia and internationally is really effective. Again, we've adapted our investigative model to accommodate and exploit the vulnerabilities we've seen."
He said it's hard to simply explain how bitcoin was seized by police.
"Cryptocurrencies can be seen on the blockchain, which is a public ledger." He said. "That's the starting point, but it's a long way from the end point, and clearly plugged into each of those end points is the vast amount of other data analysis and intelligence that law enforcement relies on."
A UNODC manual on detecting and investigating the proceeds of crime involving virtual currencies says one way to seize cryptocurrencies is to find and take control of the virtual wallets being used to store bitcoins and transfer them to the accounts of law enforcement agencies.
The electronic wallets can be found on desktop or mobile applications, accessed through Internet sites or mobile hard drives.
Bitcoin was first seized by Victorian police in 2013 following the arrest of Warrandyte drug trafficker Richard Pollard. Police later found three electronic wallets containing 24,518 bitcoins.
His bitcoins were worth $700,000 at the time of his arrest in late 2012, but were worth $7.3 million by mid-2015. Authorities said at the time that they expected them to be sold through a public auction, with the proceeds going to the state's consolidated revenue.
Commander Frewen said this week's investigation highlights the changing face of money laundering and organized crime.
"People are looking to hide or launder money through other means (other than cash). Real estate, cryptocurrencies and crypto-currencies have been very, very quick to move money to offshore entities and vice versa because of their anonymity and some level of security."
Victoria Police will soon announce the creation of a cybercrime unit, which will have teams dedicated to areas such as cryptocurrencies.
"Traditionally, if we're going to use that analogy, Victoria Police, like retail, is no longer a brick-and-mortar trader. We also operate in the digital space. We have an extensive digital footprint."
Silk Road allows users to use bitcoin to buy medicines anonymously and have them mailed to their doorstep. It was taken offline in October 2013 after more than two years of operation.
Authorities say Silk Road founder Ross Ulbricht, alias Fear Pirate Roberts, racked up $13 million ($17 million) in commissions by making buying heroin, cocaine and meth as easy as shopping online on eBay or Amazon.
Since then, people have been arrested all over the world. RogerThomasClark, a Canadian man, was arrested in Thailand in 2015 for allegedly serving as a senior advisor to the founder of Silk Road in 2015.
Peter Nash, an Australian man who chaired the Silk Road Forum, was sentenced in 2015 after 17 months in prison.
From：On DarkNet – Dark Web News and Analysis
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