And the winner is…

Posted: October 10, 2013 in Drugs, Silk Road
Tags: , , , , , , ,

There are certainly winners from last week’s shutdown of Silk Road, the online black market where every illicit drug imaginable could be bought at the click of a button. But it’s not a win for the War on Drugs, nor for people affected by drug addiction, or for the Australian taxpayer.  The people who will welcome the FBI’s seizure of the site most enthusiastically will be bikie gangs and other organised crime involved in illegal drug importation.

Back when I first started reporting in the mainstream about Silk Road, I wrote a post, ‘Why politicians and law enforcement should embrace Silk Road‘. I argued it was a safer alternative than the current model and reduced the violence associated with the illegal drug trade.

Winning! You can buy your drugs from him now

Winning! You can buy your drugs from him now

Now that Silk Road has been closed down and hard-earned tax dollars all over the world are being spent busting computer nerds, amongst the hyperbole and hysteria that comes from much of the mainstream media, there are some commentators piping up with the same arguments. Because they make sense.

I have spent countless hours reading and posting to the site’s forums and interviewing dozens of buyers, sellers and black market employees. I already knew what the FBI documents confirmed – Australians were the third-most prolific users of Silk Road, after the USA and UK.

I also knew another titbit revealed in the indictment – the quality and purity of drugs obtained from Silk Road was far superior to that which was generally available on the street. For Australians, this quality also came at a drastically reduced price as end-users ordered directly from vendors in Europe and North America. The drugs would be delivered by mail to their home, bypassing the organised crime gangs, distributors and street-level dealers usually involved in such transactions.

The news last week of the seizure of the site and the arrest of Ross Ulbricht, allegedly Silk Road’s founder better known as Dread Pirate Roberts, was huge. Drug users immediately began discussing contingency plans – alternative online markets or returning to real-life deals. Not one person posting to the forums, nor anyone I spoke to suggested reducing or eliminating their drug use would be their response to the shutdown of Silk Road.

Prohibition doesn’t work. If drugs were legal and regulated, the criminal element would be eliminated, taxes could be raised and education, counselling and support services targeted.  The Portugal model, where the use of illicit drugs is not illegal, has been around long enough to provide some insight into the consequences of lifting prohibition. And they are encouraging.

It’s obvious that people want mood-altering drugs and are willing to take risks to procure them. But many people prefer not to have dealings with the criminal element who are necessarily involved because of the illegal nature of drugs. Purchasing online eliminated any risk of violence to either buyer or seller.

What’s more, with the eBay-like feedback and review system, the escrow service and vendor discussions in the forums, purchasers had a much better idea of what they were buying and how to take it.  This is especially important in an age of NBOMEs, the new synthetics that mimic the effects of popular drugs like LSD or MDMA. Being so cheap, the NBOMEs are often sold as the real thing by unscrupulous dealers in nightclubs. Unfortunately, although the effects may be similar, correct dosages and health consequences are not. This has led to a number of Australian deaths that most likely would not have occurred on the genuine substances.

It is true that some people will increase their drug intake because of services like Silk Road. One couple in particular I spoke to described the “kid in a candy shop” effect, as they ordered an array of exotic new drugs. But at least they were making informed decisions, based on reviews and literature readily available on the site.

On the other hand, one Australian user I spoke to claimed to have had a 14-year heroin habit and several years’ incarceration in Victorian prisons when he discovered Silk Road. He told me that the availability of other drugs, along with waiting for a delivery, taught him he could go without heroin, until eventually he stopped altogether. “13 rehabs and 8 years of prison couldn’t do it… SR  did,” he said. The drugs he has continued to use don’t have the same devastating effects on his life.

The FBI documents showed that we drastically underestimated the revenue being made by Silk Road, which they placed at $US1.2bn – and a commission to the site’s owner of $80m – since February 2011. Previous estimates of $22m annual turnover, whilst healthy, produced commissions of less than $2m a year.  All organised crime needs to do is to hire some geeks who will be the fall guys and who will not only be able to move the gangs’ drugs, but also provide a cut of other people’s.

EDIT: I have received convincing information from Nicolas Christin, the researcher who previously provided the analysis of Silk Road’s income, that this FBI figure of $1.2 billion is a significant overestimate. I trust Nicolas’ judgment on this and I hope to get up a post at some point explaining the discrepancy. Meanwhile, even if the FBI estimate is wildly inaccurate, it does not change the point of the above paragraph: i.e. that the numbers being thrown around may make online dealing an attractive prospect for organised crime.

It’s also obvious reading through the indictment that the FBI put massive resources into seizing the site and arresting its alleged founder.  But to what end? A team of vendors of the site are “90% there” on Silk Road 2.0; others have moved to existing alternative websites. I wonder how many Australian resources are being similarly wasted on futile efforts?

Do I think online drug markets are the answer to Australia’s drug problem? No; I think drug reform and the end of the deadly and costly ‘War on Drugs’ is the answer. Legislate, regulate, educate. It’s a no-brainer.

Comments
  1. Ted says:

    Great article.

  2. In plain view says:

    Yeah well, the NSA can crack TOR, and anyone who thinks they can’t is in denial.
    All the rest will get busted, it’s only a matter of time.
    For all DPR’s esoteric ramblings, and his claims he was doing it for a higher ideal, the fact remains he was just a common drug dealer, the only difference is that he advertised it to the world via the media and waved it in law enforcements face.
    What happened to drug dealers staying below the radar?
    He wasn’t very streetwise.
    He was a naive fool.

  3. gwern says:

    > The FBI documents showed that we drastically underestimated the revenue being made by Silk Road, which they placed at $US1.2bn – and a commission to the site’s owner of $80m – since February 2011. Previous estimates of $22m annual turnover, whilst healthy, produced commissions of less than $2m a year. All organised crime needs to do is to hire some geeks who will be the fall guys and who will not only be able to move the gangs’ drugs, but also provide a cut of other people’s.

    Yes, I was impressed while doing http://www.reddit.com/r/SilkRoad/comments/1obvm2/estimating_dprs_income_after_expenses_exchange/ to compare the July 2012 revenue estimate from Christin to the July 2013 estimate from the FBI – it implied a growth rate of somewhere under 500% annually. Admittedly, at least some of that is telling us how much the hidden vendors were selling (a lot), but even 300% or 400% is really impressive.

  4. Jimmy Hill says:

    “the fact remains he was just a common drug dealer”

    Actually, he was more of a website administrator. I don’t think he was selling drugs on there – merely facilitating it

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