From 'Darknet drug lord' to Cryptocurrency entrepreneur, the decade-long redemption journey of Silk Road 2.0 creator Blake Benthall

Authored by: Ryan Mac and Kashmir Hill, The New York Times

Compiled by Yangz, Techub News

In May of this year, at a Cryptocurrency conference in Austin, Blake Emerson Benthall, like dozens of other entrepreneurs, actively mingled with potential investors, trying to raise funds from them. It is certain that none of them could demonstrate their experience as a leader of a drug crime network worth millions of dollars as Benthall did.

In the 'Deal Flow' area of the conference, Benthall, who is only 1.62 meters tall, shaved his beard neatly and wore a gray T-shirt with his startup company logo. He turned his laptop on the table and began to introduce his situation to a potential investor wearing glasses.

"I am a lifelong entrepreneur," Benthall said as he slid through the PPT, detailing how he operated Silk Road 2.0 (the second iteration of the Darknet Silk Road, where 1.7 million anonymous registered users purchased drugs such as methamphetamine and heroin with BTC). Then, he recounted his arrest by the FBI and the subsequent years. After the presentation, Benthall closed his computer and immediately reached a "partnership" agreement with the investors for $150,000.

Now, 36-year-old Benthal, who has completed his sentence and probation, is promoting his two-year-old company Fathom(x). The company aims to provide software for tracking cryptocurrency transactions to ensure legal Compliance for businesses and government agencies.

Benthall knows that it's strange for a person with a criminal record to teach others about Compliance. But in this industry full of scammers, Benthall believes that his experience can help expose fraudulent activities and prevent another eyewash like FTX.

Although Fathom(x) has not yet gained follow in the market, Benthall's attendance at the Consensus conference indicates that his long legal journey is nearing its end. Along the way, Benthall has experienced many difficulties, such as his childhood life under the background of Christian family education, and the operation of a website with monthly illegal drug sales amounting to 8 million US dollars. In order to atone, he spent nearly 10 years secretly helping the government crack down on the abuse of Cryptocurrency.

This is a journey tracing the evolution of BTC from speculative Digital Money associated with Darknet crime to an investment asset recognized by Wall Street. Even some skeptical government investigators who were involved in the Silk Road case have become enthusiastic Cryptocurrency evangelists. Among them, a former FBI agent named Vincent D'Agostino even invested in Benthall's startup company.

From a boy educated at home to an online drug lord

Four or five-year-old Blake Benthall is playing on the computer

Benthall grew up in Houston, the only child in the family, and received education at home. His parents are devout Christians, with his mother Sharon Benthall being a community college teacher and his father Larry being a software manager. In his mother's eyes, Benthall is "reserved, cautious, and very clever," while his father would often hold a young Blake on his lap while working, with the computer used for work ultimately becoming the link for his son to the outside world.

At the age of 7, Blake started making websites for the Beanie Babies series. At the age of 14, he co-founded a web game hosting company with another teenager he met on AOL Instant Messenger. He ordered a computer server using his mother's PayPal account and promised to repay the server's cost with customer subscription fees.

"Looking back, some things are indeed extraordinary," Sharon Benthall said.

The Benthalls recalled that they had tried to control Benthall's internet time, but he was already deeply immersed in the online world and found the friendship and joy that he should have experienced in church and Boy Scouts.

After briefly attending a small Christian school, Florida College, near Tampa, Benthall moved to San Francisco in 2009 to pursue his tech dream. Initially, he worked for a startup, developing an application that allowed parents to control their children's gaming time. However, the company closed down after just four months.

Benthall then travels back and forth between the Bay Area and Florida, working a variety of casual jobs and indulging in the "XTZ holes" of the online world in his spare time. Among them, he was most fascinated by BTC, a cryptocurrency worth about $130 at the time, which allowed people to make anonymous online transactions. Benthall read a 2013 interview with a mysterious figure who called himself Dread Pirate Roberts. He runs a website called Silk Road, a darknet marketplace that sells illegal drugs, and relies on BTC and Tor (a software that anonymizes online identities) to provide privacy-preserving services for buyers and sellers, and the authorities seem helpless.

As a "Internet addict", Benthall wanted to browse the Internet without leaving any traces, so he downloaded Tor. And one afternoon in October 2013, Benthall's life changed when he saw an explosive news on a TV in a gym in San Francisco: law enforcement agencies shut down the Silk Road and arrested Dread Pirate Roberts, aka Ross Ulbricht. And Ulbricht, 29, lived in San Francisco and was arrested at a library near Benthall's home.

Benthall neither uses drugs nor has ever visited the Silk Road, but when he learned that the authorities had seized 26,000 BTC, he immediately stopped exercising, hurried home, and immersed himself in the 'Darknet drama'.

Benthall found that after the FBI shut down the Silk Road website, its forum remained active. Some users were afraid of being identified or arrested, but what surprised Benthall more was that other users were already discussing the establishment of a new drug market. Benthall believed that these chat contents could be deleted at any time, so he used a computer program to save the posts on the forum.

Benthall's new venture thus began. A Silk Road moderator, upon seeing forum data being copied, sought to know the executor behind it. When Benthall revealed his identity in an anonymous chat service, the moderator posed many technical questions to him and ultimately offered Benthall 50,000 USD worth of BTC to establish a new website.

Benthall knows that it's not appropriate to help build an illegal drug market while authorities are investigating, but he convinced himself when he was tight on money and had just finished interviewing at SpaceX without getting the job, that working on Silk Road was just some temporary coding work. 'At 25, I didn't understand the so-called conspiracy,' Benthall said. 'I thought I was just an unknown behind-the-scenes developer with basically no risk.'

Of course, at that time Benthall did not consider the potential crimes or harms associated with the Darknet or the free use of drugs. He believed in the libertarian argument put forward by Dread Pirate Roberts, that Silk Road could mitigate the risks associated with drugs by allowing users to rate products and sellers.

Benthall took three weeks to write the later Silk Road 2.0, and the website went live a month after Ulbricht's arrest.

At this point, Benthall planned to leave, but the moderator who hired him suggested that he could receive 50% of the profits if he continued to manage the website's servers.

"I definitely knew this was illegal," Benthall said, but the website attracted 100,000 registered users on the first day of launch. "It feels great, people are finally starting to use something I created."

In December of the same year, Benthall received an offer from SpaceX for a position as a flight software engineer. Despite the relatively low salary and the need to commute between the Bay Area and the company's headquarters in Southern California every week, he still accepted the offer because it was his 'dream job'.

And so, Benthall embarked on his 'double life'.

Dual Lifestyle

The Silk Road 2.0 is developing rapidly, but due to the withdrawal of a partner (later arrested and confirmed as a 19-year-old residing in the UK), Benthall had to make a choice between closing the market and operating it alone.

“I took over all the leadership,” Benthall said, “overnight, I became the head of the world's largest drug sales website.”

Running Silk Road 2.0 consumed all of Benthall's energy, making it difficult for him to focus even during his daytime work at SpaceX. Once, he crawled directly into SpaceX's Dragon spacecraft prototype and took a nap.

Every night is a moment for Benthall to accumulate wealth. Silk Road 2.0 extracts approximately 8% commission from each transaction, resulting in a monthly income of up to 500,000 USD. Benthall uses a portion of it to hire dozens of anonymous users to assist in providing customer service.

In January 2014, Benthall used BTC to purchase a $127,000 TSL Model S and lived a luxurious life. He would fly by private jet to Lake Tahoe, attend the Coachella music festival, and share the beautiful scenery along the way on Instagram.

Benthall never brought his computer used for 'Darknet life' into SpaceX because he was afraid that security personnel would discover his actions. However, on a day in February, when a hacker invaded Silk Road 2.0 and stole about 2.7 million USD worth of BTC, he heard a colleague's comment in the SpaceX cafeteria: 'Can you believe that there are idiots who would restart such a stupid website?'

Shortly afterwards, SpaceX fired Benthall for poor performance, and he plunged headlong into his criminal career. The website announced that it would not make any profit until customers receive compensation.

So people continued to use the Darknet market, and Benthall became even more reliant on his anonymous customer service team. He said that despite the hacking attacks, busy work, and legal risks, he still felt responsible for keeping the website running.

However, the legal sanctions came faster than Benthall imagined.

Legal Sanctions

Jared Der-Yeghiayan is one of the several anonymous users hired by Benthall, responsible for customer service. He is actually an undercover agent of the Department of Homeland Security.

Among the anonymous users employed by Benthall, there was an undercover agent Jared Der-Yeghiayan from the Department of Homeland Security, who was responsible for assisting Benthall in providing customer service. Der-Yeghiayan had previously helped investigate the original Silk Road by pretending to be a dedicated community moderator and gaining Ulbricht's trust. This time, Der-Yeghiayan spent months infiltrating Silk Road 2.0, but the outcome was not fruitful. He only learned Benthall's alias 'Defcon' and his technical expertise.

The real breakthrough in the FBI's bust of Silk Road 2.0 relied on researchers from Carnegie Mellon University. The research team developed a method to expose the location of servers hosting the Darknet that Tor has been trying to conceal. Using this method, federal authorities immediately linked 'Benthall' to Silk Road 2.0. When investigators found through a Google search that Benthall's most recent job was at SpaceX, it was widely believed that someone had stolen his identity. Gary Alford, the IRS special agent in charge of the case, recalled jokingly, 'A real rocket scientist' is running this website.

In order to collect more long evidence, the FBI conducted a five-month-long surveillance on Benthall. Then, one afternoon in November 2014, after Benthall drove away from home in a Tesla, the agents drove to intercept him and successfully arrested him.

Der-Yeghiayan and Vincent D’Agostino (a special agent from the FBI in New York who was also involved in the initial Silk Road case) took him home and handcuffed him.

During months of surveillance, D'Agostino read through the posts on the Benthall forum, followed his Twitter feed, and even watched his college cover band performances on YouTube. D'Agostino believed he had a thorough understanding of Benthall, combined with his previous similar work experience, and concluded that Benthall was not a habitual offender.

In his view, Benthall is not cut from the same cloth as Ulbricht. Ulbricht is a radical libertarian who is skeptical of government authority and has been accused of hiring someone to kill five individuals who might expose his actions (although none of them died), ultimately resulting in a life sentence for drug trafficking. (Trump recently stated that if he is elected as the next President of the United States, he will pardon Ulbricht).

D'Agostino said Benthall's goal is to make the website better for long. 'Builders sometimes overlook the potential impact of what they are doing.' 'The pure joy of building a website is the pleasure they get.' He believes that these skills may be useful for the government.

In Benthall's apartment, D’Agostino and Der-Yeghiayan showed Benthall the chat records he thought had been deleted, telling Benthall that they knew he was Defcon, and had searched his parents' home in Houston, urging him to cooperate with the investigation.

At that moment, Benthall knew he was finished. And when he recalled the thoughts in his mind at the time, Benthall said, 'What I need to do is make them believe that I am not a radical.' Benthall said that after a moment of prayer, he handed over the digital Secret Key and BTC Wallet of the website and explained the operation of Silk Road 2.0 to investigators after midnight. He did not reveal the names of other individuals because all participants were anonymous, but he did create a tool to extract the data they wanted from the website.

Regarding Benthall's reaction, Der-Yeghiayan said, "He immediately felt remorse, and I believe he truly repented."

Collaboration with the Federal Bureau of Investigation

After federal prosecutor Katie Haun opposed bail, Benthall spent the first few nights after his arrest in the Oakland prison. At a hearing, the judge told him that he would face at least 10 years in prison. Later, Benthall was transferred to the Queens Detention Center in New York and was prosecuted there.

A few weeks after Benthall arrived at the detention center, D'Agostino took him to an interrogation room near the FBI's Chinatown office. After handcuffing him to the desk, agents placed a laptop in front of him and asked him for technical assistance. And so, Benthall's cooperation with the FBI began. "That was the most stressful hackathon of my life," Benthall said, realizing it was a rare opportunity.

The authorities' raid on Silk Road 2.0 was just the first step in shutting down dozens of Darknet markets. D’Agostino said the F.B.I. at the time was "drowning in data" and urgently needed people with technical capabilities to help process the data.

With the support of the federal prosecutor, investigators began discussing cooperation with Benthall's lawyer Jean-Jacques Cabou on the protocol. If Benthall is willing to assist the government, the judge may give him a lighter sentence in the future.

Soon, Benthall was left alone in the locked FBI interrogation room, his handcuffs were removed, but someone still kept an eye on him when he went to the restroom.

One day, D'Agostino handed Benthall a polo shirt for him to put on, and drove to a shopping mall in Queens. D'Agostino gave Benthall a $5 bill and let him hang out in the food court. The FBI agent looks at Benthall like a "child" and asks him for change after he buys him a cup of Wendy's coffee.

D’Agostino said, “Our goal is to slowly and gradually build a relationship with him so that we can trust him more and obtain more long information.”

In 2014, Vincent D'Agostino, while serving as an FBI agent, arrested Benthall. He subsequently left the agency and recently invested in Benthall's startup company.

In July 2015, Benthall admitted to four charges, including drug trafficking and Money Laundering, and signed a cooperation protocol, formally committing to work for the government. Eight months into his prison sentence, Benthall was allowed to move to an apartment in Queens and became a full-time, ankle monitor-wearing cybercrime consultant, receiving compensation in the form of freedom and allowances (a $1 pizza, toothpaste, and subway fare).

During this period, Benthall helped investigate large-scale enterprise hacker attacks, tracked BTC transactions in an attempt to identify criminals, and even conducted training for investigators at the Federal Bureau of Investigation office in Quantico, Virginia. He said, 'The US government holds a large amount of cryptocurrency, and ensuring their security is indeed a concerning issue.'

Benthall believes he is particularly lucky because he acquired the skills the government needed at the right time. On the other hand, Brian Farrell, who provided services under the name 'DoctorClu,' was sentenced to six years in prison. Benthall believes it is fundamentally unfair that 'less associated people' receive harsher punishments.

Benthall refused to discuss the specific details of his work in the government. However, he mentioned a case. Benthall said that someone had previously threatened to bomb a school in New York City and demanded a BTC bounty. Benthall helped confirm the person's identity by tracking the encryptionWalletAddress. (The F.B.I. declined to comment, and a spokesperson wrote, 'There are no publicly available documents detailing Benthall's actions.')

However, Benthall's seemingly free life also led to him suffering from paranoid delusions. He said, "Once you're under the surveillance of a national state, the way you see the world really changes." He felt that he was constantly being watched and was also afraid of being recognized by Silk Road 2.0 customers. Fortunately, Benthall received treatment (covered by the government) and returned to a normal life. He sings and plays the guitar at open-air wheat activities, and also starts going to church to worship, making friends. However, he has always hidden his past, and everyone refers to him by his middle name, 'Emerson'.

Benthall often went to the CityLight Church where the executive director, Michael White, said, "As a pastor, people usually open up to me. But there's this one person, Emerson, of whom I know nothing except his name."

A new beginning?

Over the next five years, Benthall will work with some agents who once destroyed Silk Road and Silk Road 2.0. As time passed and BTC became mainstream and broke through $10,000, some government employees left the government and entered the private sector, specifically the Cryptocurrency industry.

One of the most notable figures is federal prosecutor Katie Haun, who once opposed the bail of Benthall. She joined venture capital firm Andreessen Horowitz in 2018, investing in cryptocurrency enterprises and raised her own $1.5 billion fund four years later.

D’Agostino was initially skeptical of BTC, but later he also believed that BTC would "change the world". He installed BTCMining software at home and eventually left the FBI to join a private security company to help companies under Ransomware attack. Der-Yeghiayan currently works for the blockchain analysis company Chainalysis.

As officials around him continue to leave, Benthall does not know how much longer he will work in the government department. In theory, he has been released on bail, but he has not been sentenced, and there is no definite end date for the so-called repentance.

Former prosecutor and Columbia Law School professor Daniel Richman said that Benthall's arrangement is not common, but in cases where someone's "culpability is sufficient to bring charges, but not enough to pose a risk during bail," this situation does occur. "It sounds like indentured servitude," Richman added, "but it is ultimately beneficial to both parties."

By 2020, Covid-19 provided Benthall with a potential way out. When everyone started working from home, Benthall asked the judge if he could live at his parents' house in Houston to work.

In the spring of the second year, Benthall believed that he had done a lot of work for the government, so he asked the court to formally pronounce his guilt. In March, he and his parents flew to Manhattan to attend the hearing. Wearing a suit and ill-fitting shoes, Benthall received the sentence he had hoped for: a completed prison term with a three-year probation period, during which he must continue to work for the government without pay as needed. As the verdict was not made public, Benthall also avoided discussing the matter for fear of jeopardizing this arrangement.

Nevertheless, with a criminal record, Benthall found it difficult to find work. He needed to repay his parents for the legal fees they had paid for him, as well as support his children. After three job offers were rescinded, Benthall decided to start Fathom(x) in the spring of 2022. He said that his 'lifelong dream' was to be a founder, and this time, it was a legal dream.

Benthall spent eight months in prison and assisted the government for many years according to the cooperative protocol. In March 2021, he was sentenced to imprisonment with a three-year probation.

Fathom(x)'s slogan is simple: to verify whether a company owns the Cryptocurrency it claims to own, and whether these Cryptocurrencies are clean. Benthall believes that his many years of government work experience have increased his credibility. He is also pleased that D'Agostino has become an investor in Fathom(x). Benthall said, 'I made the special agent who arrested me believe in me.'

After D’Agostino left the FBI, the two have kept in touch for many years. When Benthall was still living in New York, D’Agostino invited him to barbecue and karaoke together. And when Benthall started this new company, he called D’Agostino for advice. D’Agostino said, "The person talking to me now is not the same person I arrested 10 years ago."

D'Agostino is not the only former 'colleague' Benthall encountered in his new life. Benthall has also promoted his software to government agencies, including the Internal Revenue Service where investigator Alford still works.

"This is how life is so strange," Alford recalled a video conference where Benthall gave a demonstration to him and other I.R.S. agents. While serious criminals are not prohibited from working for the federal government, John Pelissero, a government ethics expert at Santa Clara University, said he was surprised that Benthall was not on the "prohibited employment list". Alford did not disclose whether the I.R.S. is using Fathom(x)."

Benthall is unwilling to disclose the specific clients of the current company or the scale of fundraising. Fathom(x) is very small in scale, with only two contractors, but Benthall claims that the company is profitable.

In addition to running a new company, Benthall also recognized the harm that operating a dangerous goods website could cause to people. During his time in New York, an experience of a friend's death from a drug overdose convinced him that given the large number of users on Silk Road, there must be people who would be harmed by purchasing drugs.

On the way to attend the Consensus conference, Benthall used his middle name when ordering at a coffee shop, partly out of reflex and perhaps also because he was still contemplating how to confront his past. He imagined that when he started using his full name, a victim of the Silk Road might confront him angrily.

"People have the right to do so," he said, "so I often wonder how I should face them."