According to The Smoking Gun:
One of the top narcotics dealers on Silk Road, the recently shuttered online drug bazaar, secretly began cooperating with federal agents after his Seattle-area home was raided in late-July, The Smoking Gun has learned.During a hearing:
The disclosure that Steven Sadler, known online as “Nod,” was flipped will likely cause significant distress for his large Silk Road customer base, which included retail and wholesale buyers of heroin, cocaine, and methamphetamine.
Additionally, suppliers for Sadler, 40, will likely also be concerned that they have been exposed to law enforcement scrutiny.
Sadler’s lawyer told [Judge] Tsuchida that her client was in “constant communication with the government."
But this isn't the only Silk Road related snitch. TSG reports:
Investigators also were aided by a confidential informant who agreed to cooperate after agents seized several packages mailed to her by Silk Road heroin dealers. In a TSG interview, the woman--a business owner in her thirties--said she had made several heroin purchases from “Nod” and allowed investigators to take over her Silk Road account to make undercover drug purchases.AND
While Sadler’s narcotics operation was headquartered in his Bellevue apartment, investigators reported that an undercover cocaine buy in mid-June was mailed to a cooperating informant from West Hollywood, California.
Bottom Line: The Feds were all over Silk Road, from every angle you can think of. Those who are using Bitcoin based on the idea that it is an anonymous money transfer system should heed the lessons of Silk Road. The government does have the capabilities to monitor these type activities. It is not anonymous.
That said, gold has no smell.