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.
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“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, 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. The proceeds will go to the U.S. Treasury.
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.
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.
A spokesperson could not say exactly when the Bitcoin would go up for sale, but approximately $25 million worth of Bitcoin are going to 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.
“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.”
He 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.