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Feds arrest the alleged founder of Bitcoin’s largest drug market

( <a href="">btckeychain</a> / Flickr)

Federal prosecutors have indicted a man named Ross William Ulbricht in San Francisco. They say he is the founder of Silk Road, a controversial website that allows users to buy and sell narcotics and other illicit goods. Founded in 2011, Silk Road website used Bitcoin, a digital currency that helped mask the identity of Silk Road's merchants and customers.

The government shuttered the site and seized approximately 26,000 Bitcoins worth approximately $3.6 million. The government says it was the largest ever Bitcoin seizure in history.

"During its two and a half years in operation, Silk Road has been used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over a hundred thousand buyers," the government alleges in its indictment. The government says that 600,000 Bitcoins changed hands on the site, which at current exchange rates translates to $1.2 billion.

In addition to narcotics, Silk Road also had listings for fake drivers' licenses, counterfeit currency, hacking services and much more, the government alleges.

According to the government's complaint, the defendant is 29 years old. He earned a bachelor's degree in physics from the University of Texas in 2006, and later attended the Pennsylvania School of Materials Science and Engineering.

The government says it identified Ulbricht after a routine border search of a package that contained nine counterfeit IDs. The package was shipped from Canada to an address in San Francisco. When the government visited the San Francisco address, they found Ulbricht there.

The government then identified the primary Silk Road server and obtained an image of its hard drive in July, providing the federal government with a wealth of information about the Silk Road's operations.

We'll have much more on the Silk Road shutdown in the coming hours.