US Government Announces it Will Sell $25 Million Worth of Silk Road Bitcoins

The 29,655 bitcoins seized by US law enforcement agents from defunct online black market Silk Road will be liquidated by the US government, a 16th January press release from the US Attorney’s Office of the Southern District of New York confirmed.

US District Judge J. Paul Oetken signed off on the forfeiture order on Thursday, clearing the government to sell the assets, which as of press time are worth more than $25m.

While no timetable for the sale was issued, the development brings the government one step closer to unloading its Silk Road holdings, estimated to be 1.5% of all bitcoins, onto the general market. The US Attorney’s Office also estimated the value of the stash a little higher.

Manhattan US Attorney Preet Bharara, whose agency is prosecuting the case against alleged Silk Road mastermind Ross Ulbricht, said:

“With today’s forfeiture of $28 million worth of bitcoins from the Silk Road website, a global cyber business designed to broker criminal transactions, we continue our efforts to take the profit out of crime and signal to those who would turn to the dark web for illicit activity that they have chosen the wrong path. These bitcoins were forfeited not because they are Bitcoins, but because they were, as the court found, the proceeds of crimes.”

Ulbricht’s stash remains

Notably, the sale will not include the more than 144,000 bitcoins (worth $122m as of press time) seized from the personal wallet of Ross Ulbricht, the alleged ‘Dread Pirate Roberts’ who operated Silk Road. The release indicated Ulbricht and his legal team have formally moved to block the larger forfeiture, asserting that he is the owner of the bitcoins.

His filing halts, at least temporarily, efforts by the government to sell the contested coins and could help guard against the consequent price drop many market observers fear.

The 29-year-old was arrested in October for “intentionally and knowingly” violating US narcotics law. The Pennsylvania State University graduate was also charged with possessing controlled substances and committing or conspiring to commit computer hacking offenses, among other charges.

Since the arrest, Silk Road’s notoriety has only grown. A copycat organization called Silk Road 2.0 went live soon after its demise, and an as-yet-unscripted movie is in the works about Ulbricht and the murders-for-hire he is alleged to have plotted in the course of his business.

Questions remain

While the US government has announced its intention to sell the seized bitcoins, its path to the sale is less clear.

“We have not yet determined exactly how the bitcoins will be converted and liquidated,” Manhattan US Attorney Office spokesperson Jim Margolin told Forbes.

This hasn’t stopped speculation as to which exchange, if any, could profit from exposure to the high-profile sale. Forbes’ Kashmir Hill suggests the government could also choose to sell its bitcoin assets in a more familiar manner.

“It’s likely that the US 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 US Treasury,” Hill wrote.

Market effects

At press time, the price of bitcoin remained stable, but previous Silk Road developments have had a significant effect on value. The initial announcement of the Silk Road shutdown in October caused bitcoin values to plummet from about $125 to below the $100 mark, before eventually recovering.

Fears of a large-scale decline in prices is rampant among Reddit users, who worry that a quick sell off would significantly reduce prices. Other observers are more optimistic, predicting a short dip in prices, followed by an influx of capital from investors purchasing undervalued bitcoin.

The Silk Road website was also forfeited, bringing the site’s short and turbulent life to an end.

Drugs Image via Shutterstock