Silk Road scammer charged with narcotics trafficking and money laundering

The Justice Department announced new charges Thursday against one of the most notorious scammers on the now-defunct criminal marketplace Silk Road, who they say allegedly used the platform to sell a variety of drugs.

In a statement, the DOJ said 47-year-old Canadian national James Ellingson – known by his Silk Road account names “redandwhite,” “MarijuanaIsMyMuse” and “Lucydrop” – sold more than four kilograms of methamphetamine, more than 100 grams of heroin, more than two kilograms of cocaine, more than six grams of LSD, approximately seven kilograms of the drug commonly known as “ecstasy” or “MDMA,” and more than 19 kilograms of marijuana, among other narcotics, in exchange for bitcoin.

Ellingson is best known for his role in scamming Silk Road’s founder Ross Ulbricht out of thousands of dollars in exchange for what was later determined to be faked assassinations. Prosecutors believe Ellingson used one account name to tell Ulbricht that people were threatening to release the personal information of Silk Road vendors in March 2013.

He then approached Ulbricht from another account with an offer to kill the man. Ellingson was paid $150,000 for the alleged killings and sent Ulbricht proof – all of which was fake.

Ulbricht paid Ellingson another $500,000 to kill four other people in Canada. Several law enforcement agencies have said no murders were ever committed.

“As alleged, Ellingson used the Dark Web to ship dangerous drugs around the world, including to New York City. He discussed with Silk Road’s founder a plot to kill five people and received hundreds of thousands of dollars in Bitcoin in exchange,” U.S. Attorney Damian Williams said.

“Others who would try to hide in the shadows of the Internet should know that federal law enforcement will continue to uncover crime, wherever and however committed.”

Ulbricht was sentenced to life in prison without the possibility of parole in 2015 for his role in running Silk Road.

Ellingson was previously arrested in Canada for his role in the Silk Road saga and has a long criminal history that includes three convictions for drug possession and trafficking. He has seven other convictions related to weapon use, harassment, assault, probation violations and more.

The Vancouver-native is now facing one count of narcotics trafficking conspiracy and one count of narcotics importation conspiracy, which each carry a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. He is also facing one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison.

“Ellingson’s alleged criminal actions are far more egregious than just money laundering or the large quantities of narcotics trafficked through the ‘Silk Road’ online marketplace,” IRS-CI Special Agent in Charge Thomas M. Fattorusso said.

“He also claimed to have acted as the middleman between the Silk Road founder and murderers-for-hire. Now, Ellingson will face the consequences of his actions.”

Jared Der-Yeghiayan, who was the lead case agent for the U.S. Department of Homeland Security’s investigation into Silk Road, told Recorded Future News that the latest charges are essentially tying up the remaining threads and loose ends.

For some investigators who worked on the case, particularly agents at the IRS, Ellingson was their “white whale” and the Justice Department is likely looking to seize the massive amount of bitcoin and money that he was sent from various scams on Silk Road.

“There are a few outstanding people that were either associated with the service side of the website – from the vendors that are still outstanding to some of the people that got paid money for doing different things like scamming,” said Der-Yeghiayan, who currently leads the advanced cybercrime & engagements team at Recorded Future. The Record is an editorially independent unit of the company.

“There's not too many left on the bigger side of things, but there's most certainly a few administrators and people that played administrative roles in smaller capacities from earlier stages that I think will potentially see some charges at some point.”

Der-Yeghiayan noted that law enforcement agencies gained access to more than 16,000 names and addresses from the servers connected to Silk Road, so officers are likely working through those and distributing them to other agencies.

“I wouldn't expect it to be the end. The only thing is the statute of limitations,” he said.