The Manhattan U.S. Attorney got a judge's sign-off to sell the 29,655 Bitcoins (or $25 million)... [+]
One of the bigger wallets on the Bitcoin blockchain is going to be emptied in the near future. Back in October, when the feds took down the online drug bazaar Silk Road, they seized the nearly 30,000 bitcoins in its coffers. On Thursday, the Manhattan U.S. Attorney's office, which is prosecuting the Silk Road case, announced that a judge had signed off on a forfeiture order for those coins. That means they're now free to get rid of the 29,655 bitcoins, worth about $25 million at Bitcoin's current $850 value.
"We have not yet determined exactly how the Bitcoins will be converted and liquidated," said Manhattan U.S. Attorney Office spokesperson Jim Margolin.
There is no legally certified U.S. Bitcoin exchange dealing in these kinds of volumes, and I doubt the feds want to sell the coins via Mt. Gox, which got in legal trouble last year for operating in the U.S. without a license, or via BTC-e, the mysterious exchange based in Bulgaria. It's likely that the U.S. Marshals will instead auction off the Bitcoins as if they were Bernie Madoff's penthouse or a drug dealer's cars. When the FBI first seized the coins in October, they were worth about $6 million; they're now worth four times that. This is a bust that keeps on paying off. The proceeds will go to the U.S. Treasury.
Secret Money: Living on Bitcoin in the Real World, by Forbes staff writer Kashmir Hill, can be bought in Bitcoin or more traditional currencies.
As for the over 144,000 bitcoins seized from Ross Ulbricht, who is alleged to be Silk Road founder Dread Pirate Roberts, they will remain in the FBI's very large wallet for now.
"Ulbricht has filed a claim in the civil forfeiture action, asserting that he is the owner of the Bitcoins found on his computer hardware, and contesting the forfeiture of those Bitcoins," notes the Manhattan U.S. Attorney's press release. Ulbricht is facing drug, computer hacking and money laundering conspiracy charges; he claims that he is not the creator of the Silk Road, but that the over $100 million worth of Bitcoin found on his computer does belong to him.
Manhattan U.S. Attorney Preet Bharara made clear in the release that the Bitcoin themselves are totally above board, legally speaking. “These Bitcoins were forfeited not because they are Bitcoins, but because they were, as the court found, the proceeds of crimes," he says in the release. Any Silk Road users who had legitimate holdings on the site are out of luck. All Silk Road assets are forfeited because they were "being used to facilitate money laundering," per the order from U.S. District Judge J. Paul Oetken
Spokesperson Jim Margolin could not say exactly when the Bitcoin would go up for sale, but the approximately $25 million worth of Bitcoin will be auctioned off soon. This should be interesting.
I recently spoke with Barry Silbert of SecondMarket, which famously introduced a Bitcoin Trust last year allowing institutional investors to get their hands on Bitcoin through Wall Street channels rather than through street or online buys. When the fund launched in September, it had nearly 18,000 Bitcoin. Now it has 70,000. I asked him how the firm went about acquiring its bitcoin.
"We purchase it from around the world," said Silbert. "Directly from merchants, miners and early adopters. We needed to be able to buy Bitcoin without moving the market and we have to make sure we’re not buying from any illicit sellers."
SecondMarket has a 10-person team which spends most of its time doing Bitcoin sourcing, "banging down doors and networking."
I asked him last week whether SecondMarket was talking with the feds about their Silk Road holdings.
"We're talking to all large holders as you might expect," he said.
