US authorities said Wednesday they had arrested the owner of the Silk Road website, where illegal drugs were bought and sold using the virtual currency Bitcoin.
Ross William Ulbricht, also known as "Dread Pirate Roberts," was arrested on Tuesday in San Francisco after the website was shut down, the Justice Department said in a statement.
Prosecutors said they seized approximately $US3.6 million worth of Bitcoins in the largest ever seizure of the virtual currency.
"The Silk Road website has served as a sprawling black market bazaar where illegal drugs and other illicit goods and services have been regularly bought and sold by the site's users," FBI special agent Christopher Tarbell said in a criminal complaint filed in a federal court.
From about January 2011, Ulbricht ran a marketplace that hawked heroin, cocaine, LSD, and methamphetamine as well as hacker tools such as software for stealing passwords or logging keystrokes on people's machines, according to the court documents.
Prosecutors also charged that in March of this year, Ulbricht tried to hire someone to kill a Silk Road user who threatened to expose the identities of others using the website.
"The defendant deliberately set out to establish an online criminal marketplace outside the reach of law enforcement and government regulation," Tarbell said in the legal filing.
Ulbricht, 29, anonymised Silk Road transactions by using a Tor computer network designed to make it almost impossible to locate computers used to host or access websites.
He also added a Bitcoin "tumbler" to the Silk Road payment system that foiled efforts to trace digital currency back to buyers, according to the criminal complaint.
"Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the internet today," the criminal complaint contended.
"The site has sought to make conducting illegal transactions as easy and frictionless as shopping online at mainstream e-commerce websites."
Prosecutors maintained that Silk Road has been used by thousands of drug dealers to distribute hundreds of kilograms of illegal wares to more than 100,000 buyers and to launder hundreds of millions of dollars in ill-gotten profits.
Silk Road took in commissions ranging from eight to 15 per cent of sales, raking in at least $80 million on more than $1.2 billion worth of transactions, the criminal complaint estimated.
Ulbricht controlled the website, serving as "captain" and using a handful of online "administrators" as his staff, investigators said.
Federal agents in New York posed as buyers to shop at the website, successfully ordering an array of illegal goods, according to the complaint.
As of last month, Silk Road featured about 13,000 listings for controlled substances, with offers coming under headings such as "High Quality 4 Heroin All Rock" and "UNCUT Crystal Cocaine," the legal filing said.
Services for sale at Silk Road included hacking into accounts at Twitter, Facebook or other social networks and tutorials for cracking bank teller machines, the complaint contended.
The legal filing also told of Silk Road offers to sell stolen credit card data, forged IDs, and for "hitmen" in 10 countries.
The website had seller and buyer guides that were described as including advice about how not to get caught by using tactics such as shipping drugs in sealed plastic containers to avoid scent detection or having narcotics delivered to a friend's house instead of the buyer's home.
Silk Road last year added a "stealth mode" for vendors who considered themselves "at risk of becoming a target for law enforcement," according to the complaint.
As of July of this year, Silk Road had just shy of a million registered users, with 30 per cent of them indicating they were in the US and the rest spread about the globe, prosecutors said.