US prosecutors in Manhattan are sitting on a multimillion-dollar bitcoin gold mine. And it could get much bigger.
Federal authorities hauled in 29,655 units of the digital currency — worth $27 million at current exchange rates —through an official forfeiture by Bitcoin this week.
The bitcoins had belonged to Silk Road, an anonymous online black market that authorities say was a conduit for purchases of drugs and computer hacking services - even a place where assassins may have advertised. It was shuttered after an FBI raid in September, when agents took control of its server and arrested the man they say was its founder in San Francisco.
No one stepped forward to claim these bitcoins, which were found in electronic “wallets” used to store the digital currency. An additional 144,336 bitcoins, worth more than $128 million today, were also discovered, but the government’s claim on them is being disputed by Ross William Ulbricht, 29, who US authorities say was the founder and main operator of Silk Road. They had been stashed on his laptop.
It all puts authorities in an unusual position, given their concerns about the way in which bitcoins and other digital currencies are used by criminals to circumvent regulations intended to prevent money laundering. By trading in bitcoins, the government could give the currency some legitimacy.
Bitcoin is essentially software code that defines units of value, which users can move back and forth among themselves. Unlike other virtual money transmitters, its value isn’t pegged to a hard currency like the dollar or the euro; it is determined by the demand for bitcoins.
The US Marshals Service, which is in charge of liquidating such seized assets, will have to decide whether to sell the units on a Bitcoin exchange or find a private buyer, perhaps through an auction.
A spokeswoman for Preet Bharara, the US Attorney for New York’s Southern District, said on Friday that the government is still trying to decide what to do with the forfeited bitcoins.
The timing of any sale could make a big difference in the amount the government could realize.
Bitcoin’s value has fluctuated wildly over the past six months. When