US Marshals Auctioning Silk Road Bitcoins

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Since the demise of Silk Road, the notorious online black market in October and the seizure of the 30,000 bitcoins taken from the server, we have all been waiting to see what happens with those bitcoins. Well today we have an answer!

On Thursday 12th June, the U.S. Marshals’ office announced that it will be selling nearly 30,000 in bitcoins worth about $17.5 million at current exchange rates.

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But instead of offloading the coins through an exchange, they are going to be sold in ten blocks of about 3,000 bitcoins each via an email-based auction held on the Marshals’ service website.

The coins officially go on the block in two weeks, and buyers will have 12 hours to put in their bids.

The U.S. Marshals’ office have put up 29,656.5 coins for sale which is only a small fraction of the total seized bitcoin hoard from the Silk Road case.

There is also another 144,342 coins which no one yet knows what they will do with.

That larger amount, currently worth over $83.6 million, was seized from Ross Ulbricht himself, the 30-year-old alleged to have run the Silk Road under the alias the Dread Pirate Roberts.

In a court motion last December, Ulbricht confirmed that the coins were his but contested the government’s seizure of them, saying they are not real currency so cannot legally be seized.

The government’s bitcoin sale could potentially play havoc with the bitcoins’s already fragile economy.
The current auction represents around only a quarter of a percent of the total number of bitcoins in circulation.

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But the remaining 144,000 coins represent close to 1.1 percent.

If that larger pot of coins is sold off in the same auction style, it could potentially flood the market with cheap coins and lower their price.

In the hour following the Marshals’ news, the price of bitcoin fell about 2 percent and could continue to fall.

Gavin Andresen, the chief scientist of the Bitcoin Foundation, says that the sale could be good for bitcoin the bit coin economy: As he sees it, even the Department of Justice now participates in the bitcoin economy.

“The fact that they’re going to liquidate them instead of destroy them gives bitcoin some legitimacy,” he said in an interview about the potential sale of the coins last year.

“They see them as something of value.”

The auction will doubtless be watched with considerable interest by many people.

It also raises many questions due to the irony in the fact that the U.S. Marshal’ office is selling an asset with demonstrated potential to facilitate crime.
Based on that, the coins will quite probably make their way back into the wallets of other deep web black markets such as Silk Road 2 and Agora.

Here is the original press release from the U.S. Government:

The US Marshals are preparing to auction nearly 30,000 bitcoins in connection with a civil forfeiture and criminal action brought against Ross Ulbricht and the assets of Silk Road in October 2013 in federal court in the Southern District of New York.

The auction will take place during a 12-hour period on June 27 from 6 a.m. until 6 p.m. Eastern Daylight Time. Bids will be accepted by email from registered bidders using a form available from the US Marshals Web page, www.usmarshals.gov/assets/2014/bitcoins.

In order to make a bid in this auction, potential bidders must register between the period of June 16 at 9 a.m. through June 23 at noon EDT and make a refundable deposit of $200,000 via wire transfer from a bank account in the United States. The bitcoins will be auctioned in nine blocks of 3,000 bitcoins and one block of approximately 2,657 bitcoins. The winning bidder(s) will be notified on June 30.

The bitcoins offered in this auction have been ordered forfeited to the United States. In a separate criminal case, Ulbricht has been charged with narcotics trafficking, computer hacking and money laundering offenses in connection with his alleged operation of “Silk Road,” a hidden Web site that was designed to enable its users to buy and sell illegal drugs over the Internet anonymously.

All the bitcoins that were held in an FBI wallet have been transferred to two US Marshals wallets. One wallet is being used for this auction, and the other wallet is being used to hold the remaining approximate 144,342 bitcoins that are part of the civil forfeiture and criminal action brought against Ross Ulbricht and the assets of Silk Road.

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