January 13, 2015 / 7:21 PM / 5 years ago

UPDATE 2-Accused Silk Road owner 'fall guy' for operators - trial lawyer

(New throughout following opening statements)

By Nate Raymond

NEW YORK, Jan 13 (Reuters) - A lawyer for the man accused of running the online black marketplace Silk Road acknowledged on Tuesday that his client had created the site, but said he was the “fall guy” for its true operators.

The assertion by Joshua Dratel, a lawyer for Ross Ulbricht, came at the start of a trial in Manhattan federal court. It marked the first time Ulbricht’s lawyers had conceded their client played a role in Silk Road, where drugs and other illicit goods could be bought anonymously with bitcoins.

Dratel told jurors that Ulbricht created Silk Road as a “free wheeling, free market website” but said the “economic experiment” ultimately proved too stressful for him.

“So he handed it off to others,” Dratel told jurors during opening statements.

But Dratel said Ulbricht was not the real “Dread Pirate Roberts,” the online alias for Silk Road’s operator, and said the people behind Silk Road had brought him back only after realizing law enforcement was closing in on them.

“Ross was the perfect fall guy as Silk Road, after all, was his idea,” Dratel said.

Timothy Howard, a federal prosecutor, however, told the jury that authorities had a “mountain” of evidence on Ulbricht’s laptop proving he was the Dread Pirate Roberts.

“He was the kingpin of this digital criminal enterprise,” Howard said.

The trial is the highest-profile test yet of U.S. authorities’ efforts to crackdown on the use of the digital currency bitcoin for drug trafficking and other crimes.

Silk Road operated from at least 2011 to October 2013, a period in which Howard said drug dealers earned $200 million through 1 million sales and Ulbricht amassed an $18 million bitcoin fortune through commissions.

Prosecutors say Ulbricht ran Silk Road under the alias borrowed from a character in the 1987 movie “The Princess Bride.” The website relied on the so-called Tor network, which lets users communicate anonymously.

Ulbricht is charged with seven counts including operating a continuing criminal enterprise and conspiracy to commit narcotics trafficking and faces life in prison.

His has garnered supporters, who say the case is an attack on Internet freedom. Some gathered outside the court holding signs that read “Free Ross” and “30 years to life for an honest website?”

According to prosecutors, Ulbricht was logged into the Silk Road website as Dread Pirate Roberts when he was arrested in a San Francisco library. His laptop also displayed an online chat with an Silk Road employee who was actually a federal agent, Howard said.

“The defendant was caught red handed,” he said.

Howard said 95 percent of the items for sale on Silk Road were drugs, though it also carried listings for fake passports and hacking services.

Ulbricht was vigilant in protecting Silk Road, going so far as to solicit the murders of people who threatened it, Howard said.

While the murders were never carried out, Howard said Ulbricht “was willing to stop at nothing to protect his criminal enterprise.”

The case is U.S. v. Ulbricht, U.S. District Court, Southern District of New York, No. 13-06919. (Reporting by Nate Raymond in New York; Editing by Tom Brown and Noeleen Walder)

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