Feds announce charges against 'Silk Road' copycat

A San Francisco man cloned the black market Silk Road website just five weeks after it was busted last year for enabling anonymous drug deals and built his version into an $8-million-a-month business, Manhattan federal prosecutors said Thursday.

Charges against the new Silk Road 2.0 site and operator Blake Benthall, 26, who went by the pseudonym "Defcon," came amid concern from experts that the spiraling growth of online drug bazaars is driving a surge of heroin abuse on Long Island and elsewhere.

Prosecutors said the site, using an encrypted portion of the Internet and the virtual currency Bitcoin to thwart law enforcement, processed hundreds of kilograms in drug sales for 100,000 buyers and laundered tens of millions of dollars since last November.

Benthall, wearing a hooded sweatshirt with "Internet Better" on the back, was held without bail in San Francisco after prosecutors said he had confessed and had $100,000 in his apartment. He will come to Manhattan for trial, and faces up to 50 years in prison.

Ross Ulbricht, the founder of the original Silk Road that prosecutors said did $1 billion in illicit business from 2011 to 2013, will go on trial in January. Manhattan U.S. Attorney Preet Bharara said the new case highlighted the persistence of law enforcement.

"Those looking to follow in the footsteps of alleged cybercriminals should understand that we will return as many times as necessary to shut down noxious online criminal bazaars," Bharara said. "We don't get tired."

But Sen. Charles Schumer (D-N.Y.), for whom Bharara once worked as chief counsel and who has been raising alarms about the spiraling growth of online drug dealing, said he has urged federal enforcers to be more "vigilant."

"We can't play whack-a-mole here, close down one Silk Road and let another one pop up, but it's good news now that they've heeded our call," Schumer said. "I think they're going to be vigilant. There's not going to be another Silk Road that will be allowed in existence for any period of time."

The criminal complaint charging Benthall said the government built its case through an undercover agent who infiltrated the "support staff" for Silk Road 2.0 at its founding in October 2013, monitored its growth and exchanged emails with Defcon.

After prosecutors took down the original Silk Road and posted an FBI notice saying "This Hidden Site Has Been Seized," the complaint said, the new site emerged with a version of that notice saying, "This Hidden Site Has Risen."

By last month, prosecutors said, it carried 13,000 listings for drugs, from Ecstasy to cannabis and opioids as well as items such as fake passports and hacking tools. Benthall allegedly charged users a 5 percent commission, and was taking in $400,000 a month.

Like its forerunner, Silk Road 2.0 worked through computers on the Tor network, a "dark" section of the Internet that blocks tracing. Investigators located the server hosting the site in a foreign country in May, and tracked Defcon's identity from there.

The complaint said surveillance of Benthall matched his movements with Defcon's interaction with the website staff. It also said that just after Defcon took over the site, Benthall paid $70,000 for a Tesla Model S, a high-end electric car, using bitcoins.