Silk Road. Bitcoin. Liberty Reserve. Ross Ulbricht. Arthur Budovsky. These are the respective names of an alleged online drug marketplace, two virtual currencies and two individuals accused by the United… Read more » Continue reading →
Silk Road. Bitcoin. Liberty Reserve. Ross Ulbricht. Arthur Budovsky. These are the respective names of an alleged online drug marketplace, two virtual currencies and two individuals accused by the United States Justice Department of leading major cybercrime operations. The arrests of these two men were heralded by U.S. prosecutors as significant crackdowns on Internet crime, and it just so happens that both suspects have substantial ties to Costa Rica.
The Alleged Silk Road Online Drug Emporium
Ulbricht is, according to U.S. federal prosecutors in New York, the main person behind Silk Road an online drug bazaar that allegedly operated as a hidden service on the Tor privacy network before being seized by U.S. law enforcement. Silk Road was operated by someone using the online monicker of Dread Pirate Roberts, whom U.S. prosecutors believe is Ulbricht, a man who spent part of his childhood in Costa Rica. The Economist recently shed some light into the Ulbricht / Dread Pirate Roberts purported connection:
THE Dread Pirate Roberts, a character in William Goldmans novel The Princess Bride, which was made into a cult film, is not one man but several who take the name in turn. It was also the nickname of the creator of Silk Road, an online drug-dealing website that was shut down in October by the FBI. On February 9th a date was set for the trial of Ross Ulbricht, a 29-year-old physics graduate from Austin, Texas and, allegedly, the Dread Pirate Roberts.
German national daily newspaper Die Welt recently described Ulbricht’s younger years in Costa Rica as idyllic: Surfing, smoking marijuana on the beach, playing with monkeys, and learning yoga. He would later become a boy scout and devoted reader of comic books. As an adult, Ulbricht completed graduate studies in engineering through academic scholarship programs, enjoyed hallucinogenic drugs as well as Eastern philosophy, Libertarian politics, and drum circles.
A comprehensive media dossier compiled by Forbes magazine includes a video showing Ulbricht and his parents in the Osa Peninsula in 2009:
Ulbrichts parents, Kirk and Lyn, built and currently maintain vacation houses in Costa Rica for travelers. According to a personal web site, they mentioned that they spend about half their time in Austin and half their time in Costa Rica. Its unclear when Ulbricht visited Costa Rica but the video was posted to his YouTube page in Jan. 2009 and gives a tour of Casa Bambu, one of his parents vacation homes [ ]
Technology site Ars Technica hints at more recent visits by Ulbricht:
Ulbricht has significant ties abroad. His parents own property and hold bank accounts in Costa Rica, and they live there for half the year. He also has undertaken recent foreign travel [ ] traveling to Costa Rica from May to June 2012.
While in operation, the Silk Road hidden Tor site listed numerous controlled substances for sale. Transactions were allegedly settled using the Bitcoin virtual currency.
Months before Ulbricht’s arrest, law enforcement agents in Costa Rica raided the offices of Liberty Reserve in Santa Ana at the behest of U.S. prosecutors while Spanish agents in Madrid arrested Arthur Budovsky, a naturalized citizen of Costa Rica who is currently fighting extradition to the U.S.
Liberty Reserve in Costa Rica: A PayPal for Crooks?
Last year, the Costa Rica Star published comments by legislator on the matter of Liberty Reserve:
Jeanette Ruiz from the Citizen Action Party (PAC in Spanish) has insinuated that Liberty Reserve, a controversial money transmitter based in Costa Rica, donated money to fund the electoral campaigns of the Libertarian Movement and the powerhouse National Liberation Party (PLN in Spanish).
Liberty Reserve and its principals are currently facing an indictment that the [U,S,] categorizes as the largest money laundering operation in the world. [ ] Liberty Reserve was formed by two foreign businessmen who became naturalized citizens of Costa Rica.
Although Liberty Reserve became active circa 2006, the company had been around since before then. By 2009, the company was moving millions of dollars each year in a system that involved the exchange of digital currency in an online platform. The U.S. Attorney for the Southern District of New York claims that Liberty Reserve laundered more than $6 billion by operating as a sort of PayPal for crooks. Hackers, multilevel marketing swindlers, drug traffickers and other law breakers allegedly flocked to Liberty Reserve due to their implied anonymity and lax Know Your Customer practices.
Liberty Reserve and Bitcoin are virtual currencies, but the latter is decentralized while the former was controlled by a single business entity organized under the laws of Costa Rica.
It is interesting to note that the ties Ulbricht and Budovsky have to Costa Rica belie the general lack of interest by Ticos in virtual currencies, including Dogecoin. The arrests and indictments against Budovsky and Ulbricht will certainly not help to advance virtual currency use in Costa Rica, especially not when New York District Attorney Cyrus Vance Jr. writes long pieces published by the Associated Press that demonize virtual currencies as being inductive to crime:
Authorities say the recent investigations of Liberty Reserve and the hidden website Silk Road, a vast black-market bazaar for narcotics and other contraband, demonstrate how the anonymity inherent in the use of virtual currency is attracting a legion of flesh-and-blood criminals.