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Silk Road's alleged mastermind makes first NY court appearance

By Emily Flitter

NEW YORK (Reuters) - A lawyer for 29-year-old Ross William Ulbricht, the man U.S. prosecutors say operated the anonymous online criminal marketplace Silk Road, on Wednesday said his client would plead not guilty to drug trafficking, hacking and money laundering charges.

Joshua Dratel, who spoke after Ulbricht's first appearance in Manhattan federal court, said his client is not the man federal prosecutors are trying to make him out to be. He said he would begin making the case for Ulbricht to be released on bail to await his trial. Ulbricht is currently being held in a federal detention center in Manhattan. His bail hearing is scheduled for November 21.

"The evidence will not establish that he is who they say he is," Dratel said. "He's educated; he comes from Texas; he has a good family and a lot of friends who all express a very strong conviction that he is not the person" authorities described in the criminal complaint against him, Dratel said.

Ulbricht was arrested October 1 in a public library in San Francisco and charged by prosecutors in New York with one count each of money laundering, computer hacking and drug trafficking. U.S. authorities say he is the founder and was the sole operator of Silk Road, where drugs, hacking services and even assassins were sold in exchange for the digital currency Bitcoin.

Standing between two lawyers wearing blue and brown prison clothes, Ulbricht, clean shaven, spoke only to answer a magistrate judge's questions.

When he spoke to reporters after the short hearing ended, Dratel, who has handled several high-profile terrorism cases, said Ulbricht's case covered a range of issues raised by the digital age and largely untested in courts, including the way in which his team would get access to digital evidence used to build the case. He said he had only met Ulbricht for 20 minutes, but that he seemed to be "in good enough spirits."

"He's coherent and engaged," Dratel said.

He said he had not had a chance to see the evidence the government had against Ulbricht, but added he was concerned about "what extent the pervasive surveillance apparatus" played in the government's investigation of Silk Road.

"If you're talking about trying to compromise Tor," Dratel said, referring to an encrypted internet network that afforded users complete anonymity, "you're going to be running into the NSA."

Dratel said he was concerned about the practice of parallel construction, a method Reuters described earlier this year that is used by agencies including the Federal Bureau of Investigation and the Drug Enforcement Administration to reconstruct cases that were originally made on evidence gathered using secret surveillance tactics to hide the secret evidence.

Dratel pointed out that commentators on the internet have engaged in voluminous speculation that Ulbricht's case was one in which parallel construction was used.

"They're instructed to sanitize it," Dratel said of federal law enforcement agencies.

A spokesman for the FBI, Peter Donald, declined to comment.

Meanwhile, as Ulbricht remains in custody, a new anonymous Internet marketplace for illegal drugs debuted on Wednesday, with the same name and appearance as the Silk Road website shut down by U.S. law enforcement authorities a month ago.

The case is U.S. v. Ulbricht, U.S. District Court, Southern District of New York, No. 13-06919.

(Reporting By Emily Flitter; Editing by Alden Bentley)

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