A San Francisco man confessed to operating a spinoff version of the shuttered Silk Road website, which enabled more than 100,000 people to buy and sell illegal drugs over the Internet, a prosecutor said Thursday.
Blake Benthall, 26 years old and wearing a hooded sweatshirt with "Internet Better'' on the back, appeared in federal court in San Francisco after his Wednesday arrest. He faced several charges, including conspiracy to commit narcotics trafficking, which carries a potential life sentence and a mandatory minimum of 10 years in prison.
Assistant U.S. Attorney Kathryn Haun told U.S. Magistrate Judge Jacqueline Scott Corley that Benthall was a flight risk, was a danger to the community and should be held without bail after he waived his rights and "did admit to everything,'' including running the copycat website.
Calling Benthall a "severe flight risk'' who had acquired fake identify documents, Haun said investigators found $100,000 in cash in his apartment after he earned $400,000 in monthly commissions on $8 million monthly revenue since December.
Corley ordered Benthall returned to a federal lockup until a bail hearing Friday.
Benthall's attorney, Daniel Blank, declined to comment except to say the issue of bail must be resolved.
Preet Bharara, the U.S. attorney in Manhattan, said in a statement that Benthall created "Silk Road 2.0,'' a "nearly identical criminal enterprise'' website, about five weeks after the government shut down the original version in October 2013. Authorities said the original site generated more than $1 billion in illicit business since 2011.
"Let's be clear – this Silk Road, in whatever form, is the road to prison,'' he said. "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. We don't get tired.''
FBI Assistant Director-in-Charge George Venizelos said, "Benthall should have known that those who hide behind the keyboard will ultimately be found.''
Authorities said the new version of Silk Road attracted about 150,000 active users since Benthall started it in December, acting as its owner and operator. They said it was used by thousands of people peddling illegal drugs and other illicit goods and services to buyers worldwide.
Reporters gathered Thursday afternoon outside the olive green and yellow Victorian in the city's Mission district where Benthall lived. A neighbor, Betsy Selander, 25, said she saw FBI agents raid the house around noon Wednesday and emerge with a man in a red T-shirt and handcuffs. She did not know whether the man was Benthall.
Benthall faces a prosecution similar to the one against Ross William Ulbricht, who has pleaded not guilty to charges that he founded and ran the original Silk Road website. Ulbricht remains incarcerated, awaiting a January trial in New York.
Authorities said the copycat website was virtually identical to Silk Road, appearing exclusively on the Tor network, which cloaks the locations of Internet servers and users, and requiring all transactions to be paid with the virtual currency bitcoin. Initially, they said, Benthall even went by Ulbricht's moniker, "Dread Pirate Roberts,'' before switching to "Defcon.''
They said offerings on Silk Road 2.0 consisted overwhelmingly of illegal drugs, including hundreds of listings for psychedelics, Ecstasy, marijuana and opioids, plus phony identification documents and computer hacking tools and services.
They said a break in the investigation occurred when an undercover investigator from Homeland Security Investigations infiltrated the website's support staff, gaining access to private, restricted areas of the site where the investigator could interact directly with Benthall.
U.S. Sen. Charles Schumer said Thursday that federal authorities must remain vigilant.
"We can't play whack-a-mole here – close down one Silk Road and let another one pop up,'' the New York Democrat said. "Hopefully we can put an end to this.''