Bitcoins From Silk Road to Be Auctioned by U.S. Government

Jun 12, 2014 6:13 pm ET

June 12 (Bloomberg) -- The U.S. government plans to start selling one of the largest caches of bitcoins, which it seized from the Silk Road marketplace used for buying and selling drugs. The virtual currency’s price fell.

A partial auction for 29,656 bitcoins will be held this month, the U.S. Marshals Service said in a statement today. A total of about 144,341 bitcoins, worth about $86 million at current prices, was transferred to the agency from the FBI, the authorities said.

The hoard for sale represents part of the bitcoins seized in October when Silk Road’s operator, Ross William Ulbricht, was arrested and charged with conspiracy to commit computer hacking and conspiracy to launder money. The website was a “sprawling black-market bazaar” used by drug dealers and other vendors to distribute hundreds of kilograms of illegal drugs and launder hundreds of millions of dollars derived from the illicit transactions, the U.S. said.

The value of bitcoins declined 7.3 percent today to $582 apiece, according to the CoinDesk Bitcoin Price Index, which represents an average of bitcoin prices across leading global exchanges.

The auction is scheduled to start on June 27 at 6 a.m. Bidders will have to register in advance, furnish proof of identity and deposit $200,000 in cash with the U.S. Department of Justice. The winner or winners will be announced on June 30.

Linzey Donahue, a spokeswoman for the U.S. Marshals, said the rest of the bitcoins may be sold at a later date.

“Those other bitcoins are in a wallet controlled by the Marshals,” Donahue said. “They are subject to an interlocutory sale order and may be sold pursuant to a court order at a later date.”

Seized Assets

The U.S. seized about 173,991 bitcoins during the investigation, according to Manhattan U.S. Attorney Preet Bharara. The amount being prepared for auction corresponds to the number that was recovered from servers used to run the Silk Road site. The rest of the total involved bitcoins stored on computer hardware belonging to Ulbrich. On Jan. 15, the bitcoins recovered from Silk Road servers were ordered forfeited in a civil action filed by the U.S. which seeks all of Silk Road’s assets. Ulbricht has filed a claim asserting ownership of the Bitcoins and contesting their forfeiture.