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FBI Seized 144,000 Bitcoins ($28.5 Million) From Silk Road Bust 162

Posted by Soulskill
from the bet-he-wishes-he-cashed-out-sooner dept.
SonicSpike writes "An FBI official notes that the bureau has located and seized a collection of 144,000 bitcoins, the largest seizure of that cryptocurrency ever, worth close to $28.5 million at current exchange rates. It believes that the stash belonged to Ross Ulbricht, the 29-year-old who allegedly created and managed the Silk Road, the popular anonymous drug-selling site that was taken offline by the Department of Justice after Ulbricht was arrested earlier this month and charged with engaging in a drug trafficking and money laundering conspiracy as well as computer hacking and attempted murder-for-hire. The FBI official wouldn't say how the agency had determined that the Bitcoin 'wallet' — a collection of Bitcoins at a single address in the Bitcoin network — belonged to Ulbricht, but it was sure they were his. 'This is his wallet,' said the FBI official. 'We seized this from DPR,' the official added, referring to the pseudonym 'the Dread Pirate Roberts,' which prosecutors say Ulbricht allegedly used while running the Silk Road."
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FBI Seized 144,000 Bitcoins ($28.5 Million) From Silk Road Bust

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  • Well (Score:5, Interesting)

    by ledow (319597) on Saturday October 26, 2013 @09:46AM (#45244341) Homepage

    They may have "seized" them, but unlike with physical property, how can they be sure they are "unspent" and still worth-ful?

    What if, when they try to convert them to cash, they are told they've already appeared in the blockchain and have been "spent" elsewhere? Would that not be quite embarrassing? That, from under the noses of the FBI, someone has recovered all that money via an anonymous currency exchange and ran off with the proceeds?

    I sincerely hope that they cash in the Bitcoins before something appears on the blockchain from that wallet. Double-spending is blocked, but that doesn't mean the FBI would be the first person to try to spend them. Especially not now they've put it on the news. Anyone could have a copy of that wallet.

    • Re:Well (Score:5, Informative)

      by Immerman (2627577) on Saturday October 26, 2013 @09:58AM (#45244387)

      Why convert them to cash? They can't freeze the account as they could with a bank, but if they have the account credentials they can simply transfer all the bitcoins to a new holding account to which they have the only credentials.

      • Re:Well (Score:5, Informative)

        by Paul King (2953311) on Saturday October 26, 2013 @10:10AM (#45244431)

        ...but if they have the account credentials they can simply transfer all the bitcoins to a new holding account to which they have the only credentials.

        Which is exactly what the article suggests they've done:

        "The FBI official pointed me towards this Bitcoin address, which according to the public Bitcoin transaction record known as the “blockchain” received transfers of close to 144,000 in just the last 24 hours. “They finished moving them at 3am this morning,” said the official."

        • Re:Well (Score:5, Interesting)

          by pla (258480) on Saturday October 26, 2013 @10:57AM (#45244637) Journal
          This leads to an interesting problem for the FBI...

          They can either keep them in that account forever, basically useless to anyone...
          Convert them to US dollars, just about the single most Bitcoin-legitimizing action I can imagine...
          Or they can actually use them as Bitcoins.

          The last one gets interesting, because the FBI has accidentally revealed their own current address by this large transfer to themselves. Bam, we have one "known bad" address. Anyone they trade with, then, becomes tainted by association. Would you trust, for example, a VPN service that has accepted payments from the FBI?
          • Re:Well (Score:5, Insightful)

            by hibiki_r (649814) on Saturday October 26, 2013 @11:19AM (#45244797)

            It's an extremely uninteresting problem.

            Tainted by association makes no sense at all. If you limit the association to direct association, it's trivial to bypass by creating intermediaries. If you make the taint spread, then almost everyone is tainted, so there's nothing to gain. You might as well try to avoid people that are 7 degrees of separation or less from Kevin Bacon.

            • by pla (258480)
              Tainted by association makes no sense at all.

              It works well enough for them to use against us.

              Yes, it catches some innocents. And yes, eventually the "contagious" taint becomes too dilute to take seriously. But for a few layers of transactions, I for one wouldn't touch any BTC within a few generations of separation of this transactions if you offered to just give it to me for nothing.

              By way of analogy - Would you, given the chance, choose to get it on with your favorite supermodel, if you knew that
              • So, your government arresting someone who allegedly tried to have two people executed isn't helping you? Not only tried, but he thought he succeeded. His jaw probably hit the floor when he found out both his hits were nothing more than fantasies in his own mind.

                • by pla (258480)
                  So, your government arresting someone who allegedly tried to have two people executed isn't helping you?

                  Accidentally doing some good in the process of defending corporate interests doesn't redeem them as a whole, any more than a mob boss "keeping the peace" in his home neighborhood make him a net benefit to society.
                  • The FBI really doesn't give a rats ass about corporate interest. They certainly aren't running campaigns or being lobbied, so the best you could claim is weak and indirect influence.

                    However, they are very interested in hitmen and those that hire them.
                    • by pla (258480)
                      The FBI really doesn't give a rats ass about corporate interest.

                      Perhaps you can explain their obsession with Aaron Swartz, then, at worst a two-bit hacker who trespassed on a college campus and made two well-known organizations look a bit silly (if not outright monstrously callous, though that part only came after)?
          • Well previously they had said they would cash them in (http://www.forbes.com/sites/kashmirhill/2013/10/04/fbi-silk-road-bitcoin-seizure/) in.

            I don't see anything in doing that about legitimizing them, as far as I am aware the FBI don't contend them to be illegal anyway.

            I doubt the FBI is worried about them accidentally revealing their own address, in fact if anyone wants to decide that makes someone dealing with them tainted, then they could of course leverage that, pay for a VPN account with every provider

            • Of course they're not illegal. Bit coins are Disney dollars that are useful. The FBI just cares about the drugs and attempted murder.

              • The FBI does have reason to care: Silk Road demonstrated the power of bitcoins in concealing payments for illegal goods, complicating their investigation. If bitcoin usage continues to spread, it could complicate future investigations too. Also, other government departments might apply pressure to the FBI to avoid legitimizing the currency.

                • by Rhacman (1528815)
                  Seized property is auctioned all the time without acknowledging said property as a currency. All they'd be acknowledging is that they possess something they have no use for that someone is willing to buy.
                  • by jonbryce (703250)

                    They seize inventory of drugs quite often in these sorts of heists, and they don't auction that off, because it is illegal property. They will auction off the cars, watches and so on, because it is legal for people own those sorts of things. If they auction off the bitcoins, then they are acknowledging that it is legal to own and sell them.

                    • by jonbryce (703250)

                      If the Fed sells them, then it is an endorsement of their legality. If you buy bitcoins from the Fed, then they can't complain about what you do with them unless they could complain about you doing the same thing with US Dollars or Euros in similar circumstances.

                      I don't know what the position in the US is. I live in Europe, and as far as I can see, they are illegal here because they don't comply with the Electronic Money directive, and I don't think it is possible for them to comply with it.

                      Paypal for exa

                    • More than likely, they'll archive all the data for future possible uses, wipe the drives and auction off the machine.

                      In essence, the money would be locked up unless someone else had access to that wallet.

                      In so far as I know, the federal government doesn't auction off digital goods like iTunes or Steam purchases like they do with seized goods. Why they auction this stuff off is because land is finite and hosting piles of seized cars, boats, computers, etc. takes up space needlessly.

          • This would be fraudulent for the body that is supposedly responsible for the money. They would be tainting the US Dollar in a real way that wouldn't go unnoticed.
          • by PPH (736903)

            I wouldn't be surprised if the NSA has cracked the encryption involved in BitCoin transactions. One day soon, the FBI will examine their account balance and find it empty. The BitCoins having been transferred through the NSA to the CIA to fund some assassinations. Or to the next al Qaida.

          • by ultranova (717540)

            Convert them to US dollars, just about the single most Bitcoin-legitimizing action I can imagine...

            Which might actually be a good move. US dollar is going to undergo hyperinflation when the petrodollar scheme collapses and all those bucks return home, so by moving as much of the economy as possible to alternatives helps minimize the damage. At the far extreme, if the entire US economy uses something else than the dollar the Fed is free to treat it as monopoly money and simply laugh as its debt dissolves. A

            • by drinkypoo (153816)

              I doubt the US government has such foresight and capacity for long-term planning, but an agency leader might.

              Whatever drugs you're on, or medication you're skipping, you should lay off. History shows us that the US government is completely capable of long-term planning, as long as we don't make wild and stupid assumptions about their goals.

          • by pepty (1976012)
            I think they hold on to them for quite a while as "evidence" while they try to find out the identities of people who sent money to/through SilkRoad. Not that spending them would affect that investigation at all, but just for appearances sake when the court cases happen. My guess: four+ years from now they will auction them off.
          • by rtb61 (674572)

            They can also simply close the account and destroy the bitcoins, meaning the remaining bitcoins will be worth slightly more. We all of course know exactly what they are going to do. They will play with the IRS and use those bitcoins in various criminal investigations to catch people foolish enough to now use them.

          • "Would you trust, for example, a VPN service that has accepted payments from the FBI?"

            Why would getting paid make them more or less untrustworthy? Would you trust a VPN service that let's the FBI in for free?

            "Anyone they trade with, then, becomes tainted by association."

            Don't look now, but of the 10 currencies of which I currently have paper bills ALL of them have easily OCR-able serial numbers. Oh noes!

          • by Hentes (2461350)

            Convert them to US dollars, just about the single most Bitcoin-legitimizing action I can imagine...

            It would also cause the biggest crash in BTC history, likely cancelling any "legitimization" factor.

      • Will the government then be auctioning off the proceeds? Holding them for cashing in later like a bond? Who is advising them on managing the funds? There is both a certain irony and legitimacy in a state holding this new stateless currency.
        • Will the government then be auctioning off the proceeds? Holding them for cashing in later like a bond? Who is advising them on managing the funds? There is both a certain irony and legitimacy in a state holding this new stateless currency.

          It is a government agency, of course there are droves of people to advise, manage, and make every sort of decision on what to do with someone else's money.

          • by TheP4st (1164315)
            It's a Government agency and being such it is heavily influenced by revolving door politics, so I can imagine that what will happen is that an external consulting company will be assigned with the task of managing the funds and will invoice them to the tune of 144,001 Bitcoins.
        • by Anonymous Coward
          They will hold them until the Bitcoins are worth enough to pay off the national debt.
        • by slick7 (1703596)
          They will probably consider them spoils of the war on drugs. Then, they will use the concept in government transactions.
    • by Anonymous Coward

      Assuming they have an expert knowledgeable about bitcoin on their staff - I'm sure the first thing they do is transfer them to a new address for "safe keeping", preventing the original owner from doing so at a later time.

      The fact that so much bitcoin was in a single wallet to begin with is pretty poor planning on DPR's part... someone with that much BTC should probably be a bit more careful about where it's located.

    • You clearly have no idea how bitcoins work whatsoever. You can tell if they're spent or not. "Spending" them changes ownership over to a new wallet. The wallet file is basically a deed to bitcoins floating around in the network and it specifically says in realtime how many you own.
    • They're in a brand new wallet; all the coins were transferred in on 10/25/2013. So even if someone had a backup of DPR's wallet (which they don't, otherwise they would have moved them themselves already), the coins are gone from it now. And if the coins had already been spent, it would be obvious, too (the block chain.info link above would show a zero balance).

      Moral of the story; Crime pays. Lots. But what good is that if you can't benefit from that pay?

    • by Shishak (12540)

      Assets seized during a drug bust go to the arresting agency. In this case the FBI gets the asset (bitcoin) which they can do anything they want with. Assuming they have the private key and/or they have brute forced the private key password. They can convert the coins to dollars. Dumping 144k coins into the market will decimate the market price so they will have to do it slowly. They will probably use the money to buy more Bearcats for domestic oppression.

      • by tibman (623933)

        Seems like it wouldn't affect the market more than 3 or 4%

      • But there are political concerns too. The FBI is unlikely to take that route because it could be seen as somehow endorsing bitcoins as a currency. More likely they'll just keep the wallet as evidence until all the legal proceedings are over, then destroy it according to routine procedure.

    • by Agent ME (1411269)

      Checking if they're already used is ... not just a standard feature of every bitcoin wallet, but the way it works practically necessitates that.

      Anyway, they've already moved the bitcoins to an address they control, so there's no chance of someone else moving the bitcoins first before them. https://blockchain.info/address/1FfmbHfnpaZjKFvyi1okTjJJusN455paPH?offset=400&filter=0 [blockchain.info]

  • If the feds have seized the file he had with them in it, would someone be able to sped a copy of that file? Does bitcoin have a way to let you "back up" your money so that in the case of a government raid you secret copy elsewhere can be put into action and use the bitcoins for your defense fund, etc? Because it is well known the feds will seize all assets right away to prevent the accused from being able to afford good council and fight in court. If you don't have access to your money, you cant hire go

    • by Anonymous Coward

      Actually that is exactly how it works. If you have more than one copy of your private keys, any of those copies can spend the coins.

      • Re: (Score:3, Interesting)

        by Paul King (2953311)

        The article states:

        "The FBI official pointed me towards this Bitcoin address, which according to the public Bitcoin transaction record known as the “blockchain” received transfers of close to 144,000 in just the last 24 hours. “They finished moving them at 3am this morning,” said the official."

        So no, they have already "spent" them by transferring them to another address. If they've already been spent then Bitcoin shouldn''t allow them to spent again from a "backup", otherwise it'd be

    • by Immerman (2627577) on Saturday October 26, 2013 @10:07AM (#45244423)

      Your bitcoins aren't in your "wallet" file - they're in an account in the bitcoin block chain "bank". The file simply contains your credentials to be able to transfer those coins. You can back up those credentials, in fact it's strongly recommended since if you lose them (say to a hard drive crash) the coins in the account become permanently unspendable. And anybody with a copy of those credentials can indeed spend the money in the account. I would imagine though that a seizure involves gaining access to the credentials and transferring those bitcoins into an exclusively FBI controlled account to avoid just such a scenario.

      By the same token, if you securely encrypt your credentials and refuse to give them the key despite any threats they may bring, they can't meaningfully seize those assets. Of course that "sharing" may come involuntarily via surveillance software surreptitiously installed on your computer.

      • By the same token, if you securely encrypt your credentials and refuse to give them the key despite any threats they may bring, they can't meaningfully seize those assets. Of course that "sharing" may come involuntarily via surveillance software surreptitiously installed on your computer.

        If it's a legal case (and not some black-ops) and they have a legitimate order, they can compel you to transfer the money or throw you in jail for contempt (note, I didn't say you have to give them the key, only transfer th

        • by Immerman (2627577)

          Well, no, they can't directly compel you to do such a thing - they can threaten you, and possibly carry out those threats if you fail to comply, but it has to be a voluntary action. They can also (and several times have) go directly to the financial institution and freeze or seize the assets via that route, bypassing your will entirely. And that is the route that bitcoin removes. Unlike cash they can't physically seize the assets. And unlike a bank there is no third party to compel. If it's important en

    • Re: (Score:2, Funny)

      by nospam007 (722110) *

      "If the feds have seized the file he had with them in it, would someone be able to sped a copy of that file? "

      That's exactly right. The new Dread Pirate Roberts already spent them, even if the FBI finds that 'Inconceivable!'

      They keep using that word, but I don't think it means what they think it means.

    • by bill_mcgonigle (4333) * on Saturday October 26, 2013 @11:14AM (#45244757) Homepage Journal

      This is my real take-away from the article: DPR trusted nobody for important things that need trust and trusted many people for things that should not have had trust (e.g. doing co-lo in San Franscisco). He could have easily hired two(+) attorneys in foreign jurisdictions and had them combine the key parts in the event of his capture and transfer the funds to a legal defense fund. Obviously, he didn't or the FBI would have bupkis.

      Trust needs to be managed, not avoided.

    • by Agent ME (1411269)

      DPR's bitcoins were moved to a new wallet by the FBI to prevent that from happening already.

      https://blockchain.info/address/1FfmbHfnpaZjKFvyi1okTjJJusN455paPH?offset=400&filter=0 [blockchain.info]

  • by Razalhague (1497249) on Saturday October 26, 2013 @10:12AM (#45244445) Homepage
    I wonder if this "Dread Pirate Roberts" is only one person, given how the name was used in The Princess Bride.
    • He's at least the second - google should find you the longer version. Suffice it to say, the first DPR is retired and living like a king in Patagonia.

      • by Agent ME (1411269)

        No, the person they caught was the one who originally advertised the Silk Road. Read the investigation documents. The story he told reporters about him being the second DPR and completely replacing the first are false.

    • The should be glad he didn't call himself Spartacus.

  • Sounds like feds are going to have uphill battle in court trying to prove all these beyond reasonable dought. After all in court its not what they say, but what they can actually prove. Lets just hope some innocent people docent come forward and claim those bitcoing to be stolen by feds from them... Would be embarrashing, not to mention blow feds case out of water...
    • Would be embarrashing, not to mention blow feds case out of water...

      Just because somebody comes forward with that claim doesn't mean that the jury's going to believe them. The defense would have to provide enough supporting evidence to show that there's a good chance that they're telling the truth, and the prosecution would have the chance to cross examine them and tear holes in their story. The important word in this is "reasonable." Just because somebody's willing to give you an alibi in court does
  • If that kind of "evidence" holds a drop in water in court, good night legal system.

    • by Urkki (668283)

      If that kind of "evidence" holds a drop in water in court, good night legal system.

      If they seized that amount in dollars from inside his mattress and transferred the cash to FBI custody, how much proving would they have to do? What would happen to the money?

      After answering that, how is seizing bitcoin wallet from inside his computer and transferring the coins to FBI custody any different?

      • I've been long enough in IT security to no longer believe that simply because something is on someone's computer or because some data originated from someone's computer that it actually has something to do with that someone. Computers are far harder to secure, far easier to break into and such a break in far harder to notice than your average home would be, especially considering the recent discoveries how "your" system is not necessarily "yours" at all.

        • by Urkki (668283)

          I've been long enough in IT security to no longer believe that simply because something is on someone's computer or because some data originated from someone's computer that it actually has something to do with that someone. Computers are far harder to secure, far easier to break into and such a break in far harder to notice than your average home would be, especially considering the recent discoveries how "your" system is not necessarily "yours" at all.

          But about the same can be said about cash found in a mattress. It' quite possible it was put there in a factory already as a part of mob money transfer scheme (and somebody got their kneecaps removed, because it was lost), or perhaps a fugitive broke in and hid the booty there (and was then caught or killed and never came to get it, lucky you), or perhaps it simply belongs to the Significant Other, who is secretly running an entirely different illegal business, completely unrelated to the first case.

          All of

    • by Agent ME (1411269)

      If it came from his computer, ... I can't imagine in what reality that wouldn't hold a lot of water in court.

  • Just like last time, the market moves over the last few days strongly suggest that the FBI is already selling, or has already sold these bitcoins into the market.

    • As the link in the summary shows: https://blockchain.info/address/1FfmbHfnpaZjKFvyi1okTjJJusN455paPH [blockchain.info]

      The bitcoins are still in the FBI seizure account. Not only that, entrepreneurs are sending small amounts to the account, with advertising attached, for online casinos, or cursing out the FBI. I find that amusing. If you scroll down past the tiny (0.0001 BTC) transactions, you will see the big transfers in for 324 BTC at a time. On a phone that spells out "FBI", so that is pretty clear who is doing the tr

      • by dgenr8 (9462)

        Unless the FBI cares to prove it, nobody knows who controls the receiving address. It could easily be someone who paid for the coins.

        For example, an exchange who then sold an offsetting amount from other controlled addresses.

    • by Agent ME (1411269)

      The price was just in another bubble after rapdily rising recently, and is cooling off again. Nothing about the recent price movements was very unusual to support an explanation like that. (Also, as another person linked, you can see that the confiscated bitcoins are all sitting still in a certain address.)

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