From Dark Web to Deal Flow: The Redemption of Blake Benthall

At a cryptocurrency convention in Austin in May, Blake Emerson Benthall hustled for investor money alongside scores of other entrepreneurs. But none of them, it is safe to say, could pitch their experience as the leader of a multimillion-dollar criminal drug enterprise. In the convention’s “Deal Flow Zone,” Mr. Benthall, 5-foot-4, cleanshaven and wearing a gray tee with his start-up’s logo, turned his laptop around at a lunch table and began giving his spiel to a bespectacled potential investor. “I’m a lifelong entrepreneur,” Mr. Benthall said as he clicked through a presentation that detailed how he had run Silk Road 2.0, the second iteration of the infamous online bazaar where 1.7 million anonymous customers signed up and used Bitcoin to buy methamphetamine, heroin and other illegal substances. He recounted his eventual arrest by the F.B.I. and the years he spent in the punitive employ of the federal government. Now, with his sentence served and probation ended, Mr. Benthall, 36, is promoting a new business: a two-year-old start-up, Fathom(x), which aims to provide businesses and government agencies with software to track digital currency transactions and ensure legal compliance. Mr. Benthall knows it’s rich for an ex-con to school companies about compliance. But in an industry crawling with hucksters and overnight experts, Mr. Benthall says his criminal experience can help unmask fraud before it leads to another scam like FTX, the now-defunct cryptocurrency exchange whose founder is in prison. While his business is far from proven, his presence at Consensus, the crypto convention, suggested that his decade-long path to legitimacy is close to complete. His story followed some surprising, sometimes baffling twists — from a Christian, home-schooled childhood to running a site that generated $8 million a month in illicit drug sales. Then, to pay for his sins, he spent nearly 10 years secretly helping the government crack down on crypto abuses. It’s a journey that traces Bitcoin’s own evolution from a speculative digital currency associated with dark-web criminals to a Wall Street-approved investment asset. Even some of the skeptical government investigators who worked on the Silk Road cases have been converted into fervent crypto evangelists. One, a former F.B.I. agent named Vincent D’Agostino, even invested in Mr. Benthall’s start-up. Consensus, which started the year after Mr. Benthall’s arrest with heady discussions about Bitcoin and blockchain among 500 techie types, has grown to an exposition of dozens of digital currencies and start-ups attended by more than 15,000 people. Some of them, like the venture capitalist who sat with Mr. Benthall, are looking for big returns in the industry’s ever-expanding goods and services. After Mr. Benthall finished his pitch, he closed his laptop. The investor offered him a $150,000 handshake deal on the spot. Mr. Benthall grew up in Houston, an only child, home-schooled by his parents, who were religious Christians. His mother, Sharon Benthall, a community college instructor, described her boy as “reserved, cautious and very bright.” His father, Larry, a software manager, would hold young Blake on his lap as he worked on a desktop computer that would eventually become his son’s preferred link to the outside world. By age 7, Blake was making websites for hiccup cures and his Beanie Babies collection. At 14, he started a hosting company for online games with another teen he had met on AOL Instant Messenger. He used his mother’s PayPal account to order a computer server to the family home’s doorstep and promised to pay her back with his customers’ subscription fees. “Looking back, there were some things that were just not normal,” Mrs. Benthall said. His parents said they tried to rein in his internet use, but the young Benthall was hooked, finding online a camaraderie and thrill missing at church and Boy Scouts. After briefly attending Florida College, a small Christian school near Tampa, Mr. Benthall moved to San Francisco in 2009 to chase his tech dreams. He worked for a start-up building a play-date-scheduling app for parents. It failed in four months. He bounced back and forth between the Bay Area and Florida and from gig to gig, spending much of his free time going down internet rabbit holes. One of the deepest concerned Bitcoin, the digital currency then worth around $130 that allowed people to make anonymous online purchases. He read a 2013 interview with a mysterious figure calling himself the Dread Pirate Roberts who ran a site called Silk Road, a dark-web marketplace that trafficked mostly in illegal drugs. The site relied on Bitcoin and Tor, a software that anonymizes online identity to provide privacy to buyers and sellers — and authorities seemed helpless to do anything about it. Mr. Benthall liked the idea of browsing the internet without his activity being linked to his computer. He downloaded Tor. One October afternoon in 2013, Mr. Benthall was at an Equinox gym in downtown San Francisco when he saw breaking news on the overhead television: Law enforcement had taken down Silk Road and arrested the Dread Pirate Roberts, whose real name was Ross Ulbricht. Mr. Ulbricht, 29, was a fellow Texan also living in San Francisco. He was arrested at a library within walking distance of Mr. Benthall’s home in the Mission District. Mr. Benthall didn’t use drugs and had never visited Silk Road, but, gripped by the news that authorities had seized 26,000 Bitcoin, he quickly finished his workout and hurried home to indulge in “dark net popcorn,” as he put it. The F.B.I. had already taken Silk Road offline, but the site’s forum was still active. Some users were freaking out about being identified and arrested, but to Mr. Benthall’s surprise, others were already talking about starting a new drug marketplace. Believing that the chatter could be erased at any moment, Mr. Benthall used a computer program to save the forum’s posts. Thus began Mr. Benthall’s new career. A Silk Road moderator who saw that data was being copied from the forum demanded to know who was responsible. When Mr. Benthall revealed himself over an anonymous chat service, the moderator peppered him with technical questions and eventually offered Mr. Benthall $50,000 in Bitcoin to build a new site. Collaborating on an illicit narcotics bazaar while the authorities snooped around sounded like a bad idea, but Mr. Benthall was low on money. He was interviewing for a job at SpaceX, Elon Musk’s up-and-coming rocket manufacturer, but didn’t have an offer. He convinced himself that the Silk Road gig was just some temporary coding. “At 25, I didn’t understand conspiracy laws,” Mr. Benthall said. “I could be this nameless behind the scenes dev guy. It felt like very low risk.” Nor was he thinking much about the criminals the site might be abetting or the harms associated with freewheeling drug use. Mr. Benthall bought into the libertarian argument made by the Dread Pirate Roberts that Silk Road could reduce the dangers associated with narcotics by allowing users to rate their product and sellers. He spent the next three weeks coding what would become Silk Road 2.0, which opened a month after Mr. Ulbricht’s arrest. Mr. Benthall planned to walk away, but the moderator who had hired him offered a 50 percent split of the profits if he continued running the site’s servers. “I was definitely aware that it was illegal,” Mr. Benthall said. But the site received 100,000 sign-ups on its first day. “It was a great feeling like, oh, people are finally using something I’ve built.” Then he got an offer from SpaceX to start as a flight software engineer in December. The pay wasn’t great, and he would have to commute from the Bay Area to the company’s Southern California headquarters every week, but he took it because it was his “dream job.” He was now doubly employed. Silk Road 2.0 grew rapidly, but Mr. Benthall’s partner, later arrested and identified as a 19-year-old who lived in England, wanted out. Mr. Benthall had to choose between shuttering the marketplace or running it alone. “I took over full leadership,” Mr. Benthall said. “Here I am, you know, suddenly in charge of the largest website selling drugs in the world, like overnight.” The work kept him up through the night, and he struggled to focus at his day job. At one point, he crawled into a prototype of SpaceX’s Dragon capsule spacecraft to nap in the middle of the day. By night he was raking in money. Silk Road 2.0 took a roughly 8 percent cut of every transaction, so he was making as much as $500,000 a month, part of which he used to pay a dozen anonymous users to help him with customer service. In January 2014, he treated himself to a $127,000 Tesla Model S, paid for in Bitcoin. He lived it up, flying in turboprop planes to Lake Tahoe, attending the Coachella music festival and sharing spectacular views from boats on his Instagram account. He never took the laptop he used for his dark net life into SpaceX, worried that corporate security would discover what he was up to. While he was at SpaceX one day in February, hackers broke into Silk Road 2.0 and stole Bitcoin worth about $2.7 million. He overheard a co-worker commenting on the hack in the company cafeteria: “Can you believe the idiots who relaunched this stupid site?” Soon after, SpaceX fired Mr. Benthall for poor performance. Mr. Benthall threw himself headlong into his criminal enterprise. The site announced that it would take no profits until customers were made whole. As people continued to use the marketplace, Mr. Benthall relied more on his team of anonymous customer service agents. He said he felt a sense of responsibility to keep the site operating, in spite of the hacks, the constant work and his fear of the law. But the law was closer than he realized. Among the anonymous users whom Mr. Benthall hired to help with customer service was Jared Der-Yeghiayan, an undercover agent from the Department of Homeland Security. Mr. Der-Yeghiayan had helped investigate the original Silk Road, posing as an eager community moderator to gain the trust of Mr. Ulbricht. Now he had to do it all over again. Mr. Der-Yeghiayan knew Mr. Benthall only by his pseudonymous handle, Defcon, and he was impressed by Defcon’s technical acumen. The agent burrowed into the Silk Road 2.0 operation over several months, but the breakthrough came from researchers at Carnegie Mellon University. Around this time, the researchers developed a method to expose the locations of the servers used to host dark websites that Tor had sought to obscure. Federal authorities subpoenaed their findings and were then able to tie Mr. Benthall’s name to the machines hosting Silk Road 2.0. When investigators did a Google search and saw that Mr. Benthall had recently worked for SpaceX, they assumed someone had stolen his identity. They joked that “an actual rocket scientist” was operating the site, said Gary Alford, an I.R.S. agent who worked on the case. They put Mr. Benthall under surveillance for five months to collect more evidence. Then, on a November afternoon in 2014, as he pulled away from his house in his Tesla, three vehicles blocked him in. Federal agents emerged and put him under arrest. Mr. Der-Yeghiayan and Vincent D’Agostino, an F.B.I. agent from New York who had also worked on the original Silk Road case, led him back into his house, sat the handcuffed Mr. Benthall on his bed and got to work. During the months of surveillance, Mr. D’Agostino felt as if he had a pretty good handle on who Mr. Benthall was. He’d read his forum posts, seen his tweets and watched him perform in a college cover band on YouTube. He didn’t strike Mr. D’Agostino, who previously worked the organized crime beat, as a hardened criminal. Nor did he seem to the investigators to be cut from the same cloth as Mr. Ulbricht, a radical libertarian skeptical of government authority. Mr. Ulbricht, who was accused of commissioning the killings of five people he believed would reveal his operation (none of whom died), was eventually sentenced to life in prison for narcotics trafficking. (Republican presidential nominee Donald Trump recently said he would pardon him if elected.) Mr. Benthall, on the other hand, didn’t seem dangerous. His main interest, Mr. D’Agostino said, seemed to be “making the site better.” “Builders want to build, and sometimes builders lose sight of the context of what they’re doing,” Mr. D’Agostino said. “The just sheer joy of building something is the high that they get.” Those skills, he thought, could be useful to the government. So inside Mr. Benthall’s apartment, Mr. D’Agostino and Mr. Der-Yeghiayan told Mr. Benthall that they knew he was Defcon and showed him chat logs that he thought had been long deleted. They told him they had already raided his parents’ home in Houston and urged him to cooperate. Mr. Benthall knew he was in deep trouble. “I need to convince them that I am not a monster,” he said of his thinking at the time. After taking a moment to pray, he agreed to hand over the digital keys to the site and its Bitcoin wallets and huddled in his bedroom with the investigators past midnight, filling in gaps in their knowledge about how Silk Road 2.0 operated. He couldn’t name names, because everyone involved was anonymous, but he did create a tool to extract data they wanted from the site. “There was an immediate remorse from him,” Mr. Der-Yeghiayan said, “and I felt like it was genuine.” Mr. Benthall spent the first nights after his arrest in an Oakland jail, after a federal prosecutor, Katie Haun, argued against bail. At a hearing, a judge told him he faced a minimum of 10 years in prison. He was eventually moved to Queens Detention Center in New York, where he would be prosecuted. A couple of weeks after his arrival, Mr. D’Agostino checked Mr. Benthall out of the detention center and took him to a windowless interrogation room in the F.B.I.’s office near Chinatown. After handcuffing him to the desk, the agent put a laptop in front of him and asked him to provide technical help. Mr. Benthall typed away with one hand, offering answers. “It was a very high-pressure hackathon for my life,” Mr. Benthall said, realizing that he was being offered a rare opportunity. The authorities’ raid on Silk Road 2.0 was the first of dozens of seizures of dark-net marketplaces. The F.B.I. was “drowning in data,” Mr. D’Agostino said, and needed someone with technical skills to help make sense of it. With the blessing of federal prosecutors, the investigators began discussing a cooperation agreement with Mr. Benthall’s lawyer, Jean-Jacques Cabou. If Mr. Benthall assisted the government, a judge might, at some future point, grant him a more lenient sentence. “Most of the time you couldn’t afford someone like that in government,” said Mr. Der-Yeghiayan. The meetings continued. Soon, Mr. Benthall was being left alone in the locked F.B.I. interrogation room to work, the handcuffs off but needing a chaperone to go to the bathroom. One day, Mr. D’Agostino handed him a polo shirt to wear instead of his blue prison top. They drove to a mall in Queens and sat in the food court with their laptops. Mr. D’Agostino even gave the inmate a $5 bill and allowed him to roam the food court. The F.B.I. agent watched him as though Benthall was “a young child,” and asked for his change after Mr. Benthall came back with a Wendy’s coffee. “Your goal is to slowly and gradually build a relationship with this person so that we can trust them more and with more information,” Mr. D’Agostino said. In July 2015, Mr. Benthall pleaded guilty to four counts, including narcotics trafficking and money laundering. He signed a cooperation agreement formalizing his commitment to work for the government. After eight months of incarceration, Mr. Benthall was permitted to move to an apartment in Queens. He became a full-time, ankle-monitor-wearing cybercrime consultant, paid in freedom and a stipend that covered dollar pizza slices, toothpaste and subway rides. Mr. Benthall helped investigate large-scale corporate hacks, traced Bitcoin transactions to try to identify criminals and even conducted a training at the F.B.I.’s office in Quantico, Virginia. “The U.S. government holds a ton of cryptocurrency, and keeping it all safe is a real concern,” he said. Mr. Benthall considers himself lucky that he had the skills the government needed at the right time. But Brian Farrell, who served six years in prison for his role as DoctorClu, one of the anonymous moderators Mr. Benthall once employed, views it as fundamentally unfair that he, “someone lower on the totem pole,” served a much harsher sentence. Mr. Benthall generally declined to discuss specifics about his government work. He mentioned only one case: an individual who threatened to bomb a New York City school unless they were paid in Bitcoin. Mr. Benthall helped identify the person, he said, by tracing their crypto wallet address. (The F.B.I. declined to comment because, a spokesperson wrote, “there are no public documents detailing the actions by Benthall.”) His quasi freedom came with paranoia. “Once you’re surveilled by a nation-state, it really changes the way you see the world,” he said. He felt he was being constantly monitored, and he feared being identified by angry Silk Road 2.0 customers. He went to therapy, paid for by the government. But he also resumed something like a normal life. He sang and played guitar at open mic events. He started going to church again and made friends. But he kept his past hidden. Everyone knew him as Emerson, his middle name. Michael White was then the executive director of CityLight Church in the East Village, which Mr. Benthall attended. “Because of my role as a pastor, people were typically an open book with me,” said Mr. White. “But here comes this guy who I know his name is Emerson, but I know zero other details about him.” Over the next five years, Mr. Benthall worked alongside some of the same agents who had taken down Silk Road and Silk Road 2.0. But as time went on, some of those government employees left for the private sector — more specifically, the crypto industry — as Bitcoin went mainstream and surpassed $10,000. The most prominent was Ms. Haun, the federal prosecutor who had argued against Mr. Benthall’s bail. She joined the venture capital firm Andreessen Horowitz in 2018 to invest in