FBI seizes black market website Silk Road

The Federal Bureau of Investigations has seized the online black market website Silk Road and arrested its alleged owner Ross Ulbericht, 29, who also goes by the name "Dread Pirate Roberts."

Silk Road is a website that can only be accessed through the anonymous Tor Web browser. Users can purchase drugs, guns, forged documents and other illegal paraphernalia using the online currency Bitcoin.

According to a court papers, Ulbericht is being charged with narcotics trafficking conspiracy, computer hacking conspiracy and money laundering conspiracy. Reuters reports that Ulbericht was arrested on Tuesday in San Francisco.

Authorities suspect Ulbericht of hiring a Silk Road user to murder a user by the name of "FriendlyChemist," who threatened to reveal the identities of anonymous Silk Road users. However, authorities say they have no evidence, other than alleged messages planning the murder, to support the claims.

The court filing revealed that the site generated sales totaling over 9.5 million Bitcoins, with a commission of over 600,000 Bitcoins. Although the value of Bitcoin fluctuates continuously, authorities estimate that Silk Road processed $1.2 billion in transactions and took in approximately $80 million in commission fees. 

According to the New York Times, authorities said they seized 26,000 Bitcoins worth about $3.6 million. It's likely that any Bitcoin that was recently processed through Silk Road is now lost.

Following the news of Silk Road shutting down, community members on Silk Road forum on the link sharing site Reddit were worried about the feds having access to the site's servers -- wondering if they will also be arrested.

"The fact that they have a full transaction history is kind of worrying. I've only ever purchased relatively small amounts for personal use; it would kinda suck if they traced my bitcoins back to me," Reddit user wikidd said. "I'm never buying drugs on the Internet again."

A user who posted a discussion thread about the shutdown suggests that sellers start to clean house and "delete anything incriminating" about buyers. It is likely that sellers have shipping addresses and other information about their customers. 

There is also the issue of Bitcoin's value dropping, following the news of Ulbericht's arrest. According to the Mt.Gox exchange, the online currency was valued at about $140 per Bitcoin on Wednesday morning. Its value has since dropped to about $120.

Although Bitcoin can be used to buy legal items in the real world, it played a large role in the success of Silk Road because the currency can be bought and sold anonymously.