On November 4, when the price of Bitcoin exceeded $15,000, 69,369 Bitcoins were transferred from a Bitcoin wallet address that had been “sleeping” for many years, valued at approximately $1.08 billion. The transfer of this bitcoin is not the ancient “giant whale” or hackers we suspect, but the US Department of Justice. These bitcoins have now been confiscated.
The US Department of Justice said this was the largest amount of cryptocurrency confiscated in the institution’s history. According to statistics, since the birth of Bitcoin, the United States has the largest number of Bitcoins in the world, including a large number of Bitcoins that have been seized.
So, how many bitcoins has the US seized over the years? Where did these bitcoins come from? How did the US government track and confiscate such a huge amount of Bitcoin? How is the confiscated cryptocurrency dealt with?
1. $1 billion in Bitcoin comes from the largest dark web
According to reports, the long dormant address “1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx” is the world’s fourth largest Bitcoin wallet. Since April 2015, no transfer has been made until it was confiscated. The US government statement stated that the authorities seized these bitcoins from an unidentified (“Individual X”) hacker and these funds were related to the dark web “Silk Road”.
On November 5, U.S. Attorney David L. Anderson for the Northern District of California announced that the U.S. had filed a civil lawsuit to confiscate 69,370 bitcoins related to “Silk Road.”
“Silk Road” is the world’s earliest and largest black market website. It uses the anonymity of Bitcoin to pay for drugs and other illegal commodities. This makes “Silk Road” the largest Bitcoin circulation platform. The darknet market was shut down by US federal authorities in 2013, and its founder, Ross Ulbricht, was sentenced to life imprisonment in 2015. Since then, assets worth more than one billion U.S. dollars in the account have disappeared.
So how did the United States track and confiscate these bitcoins?
On the one hand, it is teaming up with some analysis companies to track large changes in Bitcoin; on the other hand, it will track illegal funds through the internal departments of the US Revenue Service.
Elliptic, a London-based blockchain analytics company, said that they have received a notice from the U.S. Department of Justice (DOJ) to track the large-scale movement of Bitcoin. The company’s report stated that 69,369 bitcoins had been taken out of the bitcoin wallet and handed over to the US Department of Justice authorities.
Tokenview monitored on November 4 that these bitcoins were transferred to bc1qa5wkgaew2dkv56kfvj49j0av5nml45x9ek9hz6 by 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx in two times. The former was a hacker address and the latter was controlled by the US government.
In addition, U.S. institutions can track these illegal funds through a department dedicated to tracking virtual currency transactions within the IRS. At the beginning of this year, US government authorities analyzed the “Silk Road” transactions. They tracked 54 transactions and discovered the whereabouts of Bitcoin after the arrest of the founder of “Silk Road”. After the hacker has stolen 69471.082201 address Bitcoin from the “Silk Road” wallet in 2013, 2015 had at that time encryption unauthorized currency exchange BTC-e sent 101 bits coins, the remaining Approximately 69,369 bitcoins remained in the wallet until it was confiscated.
However, the confiscation of these bitcoins is only temporary, and the United States needs to submit some case certificates to the judge in order to fully control these bitcoins.
2. How many bitcoins did the United States seize?
The United States is known as the country with the most bitcoins because it has confiscated a large number of bitcoins in recent years, worth more than 2 billion.
In the United States, there are many institutions that can confiscate cryptocurrency assets, including the Tobacco, Alcohol and Firearms Administration, the Narcotics Administration, the Federal Bureau of Investigation, the Internal Revenue Service, the Office of the Attorney, Customs and Border Protection, the Postal Inspection Service, the Secret Service and other institutions Right to confiscate and process cryptocurrency.
The official website of the U.S. Department of Justice, Forfeiture.gov, usually publishes a comprehensive list of notices for confiscation of assets (including pending forfeiture) by various U.S. government agencies.
Source of asset forfeiture announcement: Forfeiture.gov
The list contains detailed information such as the date of confiscated assets, case information, names, quantities, and asset values. For the valuation of these cryptocurrencies, the United States usually uses “Web-based valuation tools” and CoinMarketCap data to determine the market value of seized and confiscated digital assets.
According to statistics published by the OKEx Intelligence Bureau on the website, the results show that from September to November 2020, the FBI, the Internal Revenue Service, and the U.S. Attorney’s Office confiscated 27.54 bitcoins from individuals. Calculated at the price of $15,700, these bitcoins are worth $432,378. In addition to BTC, there are some other cryptocurrencies, such as ETC, ADA, LINK, etc.
Screenshot source: Asset Confiscation Announcement of the IRS
In addition, previously, in December 2019, the co-founder of Bitcoin wallet Casa Jameson Lopp conducted a survey, and the results showed that the US government had seized a total of 185,230 BTC in recent years. This means that since the birth of Bitcoin, the United States has confiscated more than 180,000 Bitcoins, becoming the country with the most Bitcoins in the world.
Among them, the largest bitcoin “revenue” in the history of the US government came from the US Marshals: In 2013, the US Marshals confiscated 175,000 bitcoins on the dark web “Silk Road”.
3. How to deal with the confiscated Bitcoin?
So, are these encrypted assets confiscated by the US government directly handed over to the national treasury? of course not.
Confiscated bitcoins are usually sold in public auctions conducted by the US Marshals Service. A total of approximately $1 billion in cryptocurrency is kept in the custody of US law enforcement agencies. The U.S. Federal Marshals Service is affiliated to the U.S. Department of Justice. It is the oldest and most comprehensive federal law enforcement agency in the United States.
According to reports, the bitcoins seized from the “Silk Road” were transferred to two different addresses, but they were finally auctioned to the winning bidder. These two wallets were marked by the U.S. Marshals as “Silk Road Seized Tokens” and “DPR Seized Tokens”. One of the addresses received a total of 29679.204 BTC before, and now only has 20.399 BTC; the other wallet address received 144342.301 BTC before, and only 0.76 BTC remains after the auction.
During the auction, due to the huge amount of bitcoin, in order to prevent excessive impact on the market price, the bailiff usually adopts a staggered auction method and try not to sell too many bitcoins at once. Participants in the auction need to be registered with the U.S. Marshals Service before they can participate. Depending on the amount of previous auctions, each auction is usually divided into more than two rounds.
According to statistics from Jameson Lopp in December last year, the United States will auction the previously seized bitcoins in batches, and the total proceeds from the auction of 185.23 million bitcoins totaled approximately $151.4 million (usually auctioned below the market price). Based on the market price of the US dollar, the value of these bitcoins has reached 2.778 billion US dollars.
The number and timing of Bitcoin auctions by the U.S. government
Based on this calculation, the US government has lost $2.6 billion in gains in vain!
So, who took these bitcoins away?
The current public information shows that in the first public auction of “Silk Road” bitcoins conducted by the U.S. Marshals, on June 27, 2014, nearly 30,000 bitcoins were eventually sold Draper) took it all. The remaining bitcoins were all auctioned off in 2015. The US dollars from these auctions of bitcoin are usually confiscated by the US Department of Justice.
The 69,369 bitcoins seized in this confiscation operation are currently in the wallet address controlled by the US government, and no transfer has been performed yet. If these bitcoins are finally auctioned in the same way as before, at the current price of $15,700, who will win these bitcoins in one fell swoop? If these “long-sleeping” bitcoins re-enter the market, it may have some subtle effects on the market.
