According to the government, Ulbricht was duped: the man who arranged the first "murder" was really an undercover police officer. The government says Ulbricht wired $80,000 real dollars to pay for the murder, but he only got a fake murder in return.
According to the indictment, the undercover police officer first got Ulbricht's attention by posing as a large-scale drug dealer. The feds say the undercover officer complained to Ulbricht that Silk Road buyers "want very small amounts" of drugs, and that "it really isn't worth it for me to do below ten kilos."
Ulbricht allegedly offered to find the man a larger buyer, and put him in touch with one of the Silk Road's employees. The undercover officer allegedly sold the employee 1 kilogram of "a mixture or substance containing a detectable amount of cocaine," receiving $27,000 worth of Bitcoins in exchange.
The indictment says Ulbricht then contacted the undercover cop (who was still posing as a drug dealer) to report that his employee had been arrested and had stolen funds from other Silk Road users. He allegedly told the officer that "I'd like him beat up, then forced to send the Bitcoins he stole back."
Later, he allegedly wrote "can you change the order to execute rather than torture?" He reportedly wrote that the employee "was on the inside for a while, and now he's been arrested, I'm afraid he'll give up info." He allegedly added that he had "never killed a man or had one killed before, but it is the right move in this case."
The two allegedly agreed on a price: $40,000 to be paid up front and another $40,000 to be paid after the job was done. Ulbricht allegedly wired the first payment to a bank account in Washington, D.C.
Ulbricht then allegedly asked for a "proof of death" — "a video, if they can't do that, then pictures." He also allegedly stated that "they should probably just give him the note, let him use his computer to send the coins back, and then kill him." But he reportedly wrote that "I'm more concerned about silencing him than getting that money back."
The agent allegedly told Ulbricht that the assassins were ready to do their work, but they wanted to avoid doing it while the target's wife and daughter were home. "Just let me know when it's done," Ulbricht allegedly replied. "We are still a go."
At this point, the government says it staged a fake torture session. When they sent photographs of the "employee" being "tortured," Ulbricht allegedly replied that he was "a little disturbed, but I'm OK." Ulbricht was allegedly informed that the employee had "died of asphyxiation/heart rupture" as the result of the torture. After receiving photographic "proof" of his death, Ulbricht allegedly wired the second $40,000 payment to the undercover officer.
This was presumably the murder Ulbricht had in mind a few months later when he allegedly told another would-be assassin that "not long ago, I had a clean hit done for $80K." Ulbricht allegedly paid about $150,000 for that second murder, though officials haven't been able to find any evidence that a murder actually took place in that case either.