A phony South Carolina driver's license with a West Ashley address was among a crucial batch of clues that led federal authorities to Ross Ulbricht, the alleged mastermind behind the international online drug bazaar Silk Road.
Arrested in July in San Francisco, Ulbrict, 29, was arraigned Friday in New York and pleaded not guilty to charges of drug trafficking, computer hacking, money laundering and conspiracy.
Ulbricht also faces federal charges in Maryland for an alleged murder-for-hire plot.
His arrest and the shutdown of Silk Road came three months after the federal Drug Enforcement Administration made its first-ever seizure of Bitcoins, an alternative digital currency used on the website. In a forfeiture notice, the DEA said the seized Bitcoins were owned by a downtown Charleston resident with a Silk Road user name.
Silk Road was an encrypted website where people could anonymously buy narcotics and other illegal goods and pay for them with hard-to-trace Bitcoins. The U.S. Attorney's Office claims more than $1 billion in drug sales moved through Silk Road between its creation in 2011 and its shutdown in July.
The site was allegedly controlled from California by Ulbricht, known to Silk Road users as Dread Pirate Roberts. Ulbricht is a Texas native whose background, according to published reports, included becoming an Eagle Scout and earning a master's degree in materials science and engineering from Penn State.
The Charleston-related seizure of Bitcoins associated with a Silk Road alias created a flurry of speculation in mid-2013 that federal authorities were closing in on the illicit site, which operated on the identity-cloaking Tor Network. The Bitcoin seizure became known after the DEA included it in a forfeiture list posted online.
"We do have to name whoever we think is the owner or potential claimant, so that's how that happened," said DEA Special Agent Sarah Pullen in Los Angeles. "The rest of the investigation is ongoing, so I can't talk about it."
The forfeiture listing said the Bitcoins were seized in connection with a violation of the federal Controlled Substances Act, and belonged to Charleston resident Eric Daniel Hughes, 31, who the DEA said was known on Silk Road as "Casey Jones."
No federal charges were filed against Hughes, but around the time the DEA seized the Bitcoins, Charleston police made two undercover drug purchases from Hughes, according to arrest affidavits. Hughes' St. Philip Street apartment was raided in June, and he was charged with distributing marijuana and prescription pills.
The local charges against Hughes moved quickly through the court system, and Hughes was referred to the Drug Court intervention program in early December, giving him a chance to eventually have the charges erased.
Hughes has denied he is "Casey Jones" and denied the Bitcoins were his. His lawyer said he planned to cooperate with authorities.
"His standpoint from the beginning was that it wasn't a seizure he was going to be concerned with, because he wasn't Casey Jones," said Charleston attorney David Aylor, representing Hughes. "The government still has them, and if no one contests it, they will become the property of the government."
Alyor said Hughes "can't make any statements at this time, since the potential of criminal charges are still realistic regarding his alleged involvement with the Silk Road site."
The 11 Bitcoins seized by the DEA were worth $814 in April, but were worth about $8,000 on Friday. The price of the digital currency fluctuates wildly, rising in 2013 from less than $13.50 to more than $1,100 per Bitcoin, before dropping to around $700.
In the investigation that shut down Silk Road and resulted in charges against its alleged creator and operator, Ulbricht, the government has seized 173,991 Bitcoins, 144.336 of which the U.S. Attorney's Office says were found on computer hardware belonging to Ulbricht, with the rest being on the Silk Road computer server.
"Ulbricht has filed a claim in the civil forfeiture action, asserting that he is the owner of the Bitcoins found on his computer hardware, and contesting the forfeiture of those Bitcoins," said the U.S. Attorney's office in New York.
The combined seizures amounted to $158 million in Bitcoins at the time of a Jan. 16 announcement, although they were worth considerably less at the time they were seized.
Bitcoins can be bought, sold, and used for purchases at a growing number of mainstream businesses. However, the fluctuating value due to supply, demand and speculation means that Bitcoins could be worth a substantially different amount of money from one day to the next.
"These Bitcoins (seized from the Silk Road server) were forfeited not because they are Bitcoins, but because they were, as the court found, the proceeds of crimes," said Manhattan U.S. Attorney Preet Bharara in January.
The hard-to-trace digital currency allowed hundreds of thousands of people to buy and sell drugs, fake identification, and other illicit goods on Silk Road, according to authorities, but at some point most those goods had to be physically delivered to the buyers.
It was a package containing nine phony ID cards, including the South Carolina driver's license with a West Ashley address, that helped lead federal authorities to Ulbricht's apartment in San Francisco, according to published reports.
His final mistake, according to the court papers, was ordering fake identification documents from a Silk Road vendor from Canada, The Associated Press reported in October. The package, destined for Ulbricht's apartment in San Francisco, was intercepted during a routine U.S. Customs search.
Those identification cards were later cited in a federal motion to deny bail to Ulbricht.
"The identifications, which are high quality forgeries, depict Ulbricht with different names and in different disguises - some with beard, some without - and include licenses from six different states and three different countries," the government's motion said.
The U.S. Attorney's Office in New York, and other local and federal law enforcement officials, declined to comment on any connections between the Lowcountry and Silk Road.
The phony South Carolina driver's license listed a real street, Coosaw Drive, but the street number on the license doesn't exist. Like the other ID cards intercepted by U.S. Customs, the license had Ulbricht's photograph and birth date, but each one of the ID cards had a different name.
Reach David Slade at 937-5552.