Bitcoin worth $1 billion worth of Bitcoin transferred from the fourth address on the Bitcoin rich list this week was actually seized by the US Department of Justice.
Written by: Zhang Gaijuan
In the early morning of November 4th, Beijing time, the huge assets of over $1 billion in the fourth address on the Bitcoin rich list were “ransacked.”
For a time, various conjectures followed by the dark web Silk Road suppliers or founders transferring funds, originating from the Silk Road, and wallet file keys being cracked. Yesterday, the U.S. Department of Justice clarified that this asset once belonged to the founder of the Silk Road, but was later stolen by the mysterious person “X”, and is now seized by law enforcement agencies. In addition, the Ministry of Justice also seeks to confiscate this asset. Undoubtedly, the crypto assets seized by law enforcement agencies this Wednesday are the largest cryptocurrency seized in the history of the United States.
So, how did law enforcement find these bitcoins? Who is the mysterious person “X”? What percentage of the commission income of Silk Road accounted for these assets? After the confiscation, how will the Ministry of Justice dispose of these assets? Before answering these questions, let us first understand the causes and consequences of this matter.
U.S. Department of Justice seizes $1 billion in Bitcoin from mysterious person “X”
The seizure of this large amount of Bitcoin and its forked coins started with the civil lawsuit filed by the U.S. Attorney for the Northern District of California, David Anderson, on November 5.
The lawsuit requires the confiscation of the seized encrypted assets. The plaintiff in the case is the United States, and the defendant’s property is 69,370 bitcoins, as well as the same amount of forked coins BSV, BCH and BTG .
According to the lawsuit, in 2020, agents of the Criminal Investigation Bureau of the Internal Revenue Service, with the assistance of blockchain analysis companies Chainalysis and Excygent, observed that as early as 2012, Bitcoin addresses controlled by Silk Road were sent to two parties through multiple transactions. Bitcoin addresses, these two addresses are: 1BADznNF3W1gi47R65MQs754KB7zTaGuYZ and 1BBqjKsYuLEUE9Y5WzdbzCtYzCiQgHqtPN, a total of 70,411 bitcoins, which were worth 354,000 US dollars at the time.
These transactions are not marked as seller withdrawals or Silk Road employee withdrawals in the Silk Road database, and appear to be Bitcoin stolen from the Silk Road.
Thereafter, in April 2013, these two addresses sent 69,471 bitcoins to the third address starting with 1HQ3G.
Source: Chainalysis
About two years later, in April 2015, the address starting with 1HQ3G sent 101 bitcoins to the unlicensed crypto exchange BTC-e. However, in 2017, the BTC-e exchange and its principal were accused of unlicensed operation and money laundering, and were shut down.
Later, the US Internal Revenue Service’s Criminal Investigation Bureau and the Northern District of California Attorney’s Office further investigated a tracking address for these transactions and discovered that the funds were related to a mysterious person “X” , and it was determined that “X” stole these bits. currency.
Recently, “X” signed the ” Consent for Confiscation ” with the Northern District Attorney’s Office of California, and “X” agreed to transfer these properties to the US government.
In the end, the law enforcement agencies seized 69,370 bitcoins worth nearly $1 billion this week, as well as the same amount of BSV, BCH and BTG.
According to the relevant regulations of the United States Code, the complaint held that the defendant’s property had reason to be traced back to illegal activities such as computer hacking, drugs, money laundering, etc., and therefore the defendant’s property could be confiscated .
However, the civil complaint only claims that these properties can be confiscated, but the US government must prove with sufficient evidence that these items can be confiscated. If the US government wins, the court will order the forfeiture of all the interests of any potential claimants.
This means that at present, the encrypted assets seized by law enforcement agencies only belong to the U.S. government temporarily , and the U.S. government will need to provide evidence to the judge in order to permanently control the funds.
Who is the mysterious person “X”?
In fact, according to the lawsuit, Ulbricht was also aware of “X”‘s online identity and threatened “X” to return the encrypted assets, but “X” has not been returned and has been kept until law enforcement agencies seized it.
According to Fortune quoted informed sources said the complaint filed in San Francisco, “X” also signed a consent form, which means that it is currently located in Northern California, and is working with law enforcement. As for why the Ministry of Justice did not disclose the individual’s name, the source speculated that this was because it might be subject to violent retaliation by criminals related to the Silk Road.
In addition, the Ministry of Justice did not respond to whether “X” was imprisoned, nor did it indicate whether criminal proceedings will be filed in the future. The analysis said that not proceeding with criminal proceedings may mean that “X” has been imprisoned and agreed to hand over Bitcoin as part of cooperation with the authorities.
How will the seized Bitcoin and other assets be disposed of?
At present, the U.S. government has not announced how to dispose of this asset. Fortune, based on the previous handling of similar assets in the United States, believes that if the U.S. government eventually wins the civil lawsuit, it may be auctioned and sold through the U.S. Marshals Bureau under the Department of Justice.
Regarding the auction time, MarketWatch stated that in the past, the US government would conduct an auction within a few months after the seizure.
There are currently more than 370,000 Bitcoins on the Silk Road to be tracked
At the end of 2011, Ross Ulbricht, a student at the time, founded the Silk Road. The original intention was to provide an anonymous bitcoin trading platform. After that, this anonymity gradually prompted the platform to evolve into a large dark web market full of illegal activities. For all kinds of illegal goods and services such as drugs and guns, the payment method only accepts Bitcoin.
Because of this, the Silk Road was eventually closed by the FBI on the grounds of combating criminal activities in October 2013, but it was closed again after it was restored several times. The founder Ross Ulbricht was also sentenced to life imprisonment in 2015 on suspicion of money laundering and drug trafficking. Although Ulbricht is currently serving a sentence, he still regularly updates cryptocurrency market analysis articles on his blog.
According to the data provided by Chainalysis, the total economic activity generated by the Silk Road amounted to 435 million U.S. dollars (calculated at the time of the transaction). In September 2013, the monthly economic activity on the Silk Road platform once occupied nearly 20% of the total economic activity of Bitcoin. Up to nearly 40 million US dollars.
Silk Road transaction volume, source: Chainalysis
According to statistics collected at the time of the seizure in 2015, the sales revenue generated on the Silk Road reached more than 9.5 million bitcoins, and the commission income obtained exceeded 600,000 bitcoins.
In addition, according to Elliptic represent , then, the FBI also seized about 174,000 bitcoins from the hands of Ulbricht, the Bitcoin was later sold at auction by the US government.
Excluding the 69,370 seized this time, there are still more than 370,000 bitcoins to be tracked from the 600,000 bitcoins previously obtained by the Silk Road, accounting for nearly 2% of the current bitcoin circulation. Of course, this also includes Other operating expenses, or a partial sell-off has been carried out before the seizure.
What is the impact on the crypto market?
Some analysts say that the reduction in selling pressure due to the large amount of Bitcoin seized in the United States is an important factor in Bitcoin’s surge today to nearly 16,000 US dollars.
However, it is worth mentioning that this address has not undergone any transfers in the past 5 years, so it is far-fetched to attribute this to the rise in Bitcoin. If the US government can win the civil lawsuit, the auction held in a few months will allow the assets to circulate in the market, which may become a potential risk that the market cannot ignore in the future.
