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US To Auction 29,656 Bitcoins Seized From Silk Road 232

Posted by Soulskill
from the enjoy-your-windfall dept.
ClownP writes with news that the U.S. Marshals Service is selling off 29,656.51306529 Bitcoins that were seized when the Silk Road website was shut down. At current exchange rates, they're worth around $17-18 million. The coins will be auctioned off in nine blocks of 3,000 coins, plus one block with the remainder. The USMS said that the first deadline for bidders will be 9am Eastern Time on June 16, 2014. All bidders must complete the government's Bidder Registration Form, which requires that you provide a copy of a government-issued ID as well as a $200,000 deposit sent by wire transfer from an American bank. The government added that the highest bidder will win, and he or she cannot finance its payment in installments — the winner must pay the full amount in cash. The USMS added one final stipulation. "The USMS will not sell to any person who is acting on behalf of or in concert with the Silk Road and/or Ross William Ulbricht, and bidders will be required to so certify," the USMS stated.
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US To Auction 29,656 Bitcoins Seized From Silk Road

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  • by puddingebola (2036796) on Friday June 13, 2014 @08:53AM (#47228991) Journal
    On the first bitcoin, I bid one bitcoin.
    • by hodet (620484) on Friday June 13, 2014 @08:59AM (#47229029)

      I'm out

      • Re:Initial Offer (Score:5, Insightful)

        by rmdingler (1955220) on Friday June 13, 2014 @09:50AM (#47229411)
        You likely are if you can't access $200,000 for the right to bid.

        That sounds fair and Democratic first rattle out of the box.

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          You're a few decades too late on that one, the requirement to put up surety money to show you're not wasting the auctioneer's time is a long-established practice that arose because of more than a few spoilers who had no real intention of fulfilling their obligations and were effectively....damn, the word for it is on the tip of my tongue. You know, when you don't have the assets for anybody to make a claim on you regardless.

          • Perhaps you're looking for "judgment-proof".

            The problem arises not just from wasting the auctioneer's time, although that is certainly a problem. Allowing people not serious about paying also wastes the seller's time, the other bidders' time, the time of the banks and accountant of the other bidders if the price is high enough, and potentially the time of the courts. Another big problem is that it tends to waste the money of the winning bidder in favor of the seller as the only real reason to bid without th

          • Re:Initial Offer (Score:4, Insightful)

            by mrchaotica (681592) * on Friday June 13, 2014 @11:50AM (#47230379)

            The problem is not putting up surety money, the problem is auctioning off the assets in blocks so large that only very wealthy people or institutional investors can participate. That's what's antidemocratic about it.

            • Really? It's a filtering mechanism based on some assumptions as to what the final bids will be. I don't see anything anti-democratic about it. As Rick Masters said:

              "The fact is that if you can't come up with the front money you're not for real." [imdb.com]

              • by TheCarp (96830)

                You are missing the point of GPs statement. There is no reason all 29,656 have to be auctioned in a single block. There is no reason they couldn't be auctioned off in blocks small enough to let a person with far less be able to participate in trying to get some of the bitcoins they stole from a legitimate businessman.

              • Why did you bother to reply if you weren't going to even slightly address the point I made?

                The point I made was not that requiring surety money is unreasonable -- it is reasonable. The point I made was that 3000-bitcoin blocks, which requires every bidder to have $1.5M in liquid assets in order to participate, is unreasonable when it would be almost as easy and much more democratic to sell them either individually or in 10-coin blocks. You could still have a surety -- again, that's completely reasonable! --

              • They could have split the 29656 BTC into as many lots as they wanted. They intentionally split it into a few lots worth over $1M rather than more blocks worth less. Arguing over the amount of the surety money is missing the point. $200K is a reasonable amount assuming the final bids will be over $1M, but that is just ignoring the question as to why the blocks are that large in the first place. The intentional decision to auction the bitcoins in the completely arbitrary size of 3,000 blocks presumably simpl

              • by sir-gold (949031)

                If they have 29,000 bitcoins, why do they have to sell them in such large chunks? Even switching to 29 lots of 1000 would open the door to significantly more bidders/
                When they bust a drug dealer, they don't sell his entire car collection in a single massive lot, so why are they doing such large bundles this time?

                I think the government doesn't really want the public to have these bitcoins, and they are only selling them because they are legally required auction-off seized assets.
                Their ideal buyer would be so

        • That's a non-issue. The bitcoins are being auctioned in lots of 3,000 which means each lot is worth about 1.7 million dollars. Anyone who can afford to make a reasonable bid will have no difficulty putting up a $200k deposit.

    • by sribe (304414)

      That doesn't seem like a very profitable plan.

    • Re:Initial Offer (Score:4, Insightful)

      by prefec2 (875483) on Friday June 13, 2014 @08:59AM (#47229037)

      You should give two bit coins. This would drive the auctionators crazy.

    • Re:Initial Offer (Score:4, Insightful)

      by Thanshin (1188877) on Friday June 13, 2014 @09:02AM (#47229057)

      Not possible. You'll have to buy one block of 3000 bitcoins. ... Let's start out with 3000 bitcoins. There's 3000 bitcoin. Do I hear 3001 bitcoin? 3001 bitcoin? 3001 bitcoin? Do I hear 3001 bitcoin? Sold for 3000 bitcoin to the man in the funny hat.

    • Re:Initial Offer (Score:4, Informative)

      by BitZtream (692029) on Friday June 13, 2014 @09:23AM (#47229191)

      Can't read eh? The summary quotes the article so you just had to read the summary ...

      But I'll help you out ...

      the winner must pay the full amount in cash.

    • I bid fifty quatloos on the newcomer.

  • by ComfortablyAmbiguous (1740854) on Friday June 13, 2014 @08:58AM (#47229025)
    Do they accept payment in Bitcoins?
  • Laundering (Score:5, Interesting)

    by Talderas (1212466) on Friday June 13, 2014 @09:08AM (#47229087)

    They're laundering the coins. The high bidders will end up being shell companies for TLAs.

    • Re:Laundering (Score:5, Insightful)

      by dotancohen (1015143) on Friday June 13, 2014 @09:27AM (#47229223) Homepage

      Even worse than laundering: the US government is ensuring that only the rich have access to these bitcoins sold at a reduced price.

      The coins should be sold on the open market and the proceeds put in the same coffers as tax money to reduce that burden. Instead of doing that, they are ensuring that the wealthy can acquire more items of value that can then be directly liquefied.

      • Re: (Score:3, Insightful)

        by thesandtiger (819476)

        Which "open market" should the government use? What system should they use to manage the sail of those coins? How should they ensure that the market they use is legit and secure? What process should they use to ensure that the Silk Road guys aren't just re-buying their stuff? Who will handle oversight to make sure this all goes off accordingly?

        Pretty much answering any one of those questions would be a process that costs far more than the estimated value of the bitcoin they have.

        Far better for them to use t

        • Far better for them to use their existing process of auctioning off random shit they seize.

          So, you're saying that when they seize some drug dealer's $5000 car they wait until they have a lot of 3,000 cars to sell off at once?

          I ask because that's exactly as stupid and unfair as what they're doing here, which is excluding all "normal person" bidders by aggregating the bitcoins into huge lots instead of selling them individually for no good reason.

          • I didn't say anything about the intelligence of the process, or the fairness - just it is what it is.

            They want their money as fast as they can get it, and couldn't care less about being "fair." They organize the sales of their items in whatever ways will make it more likely to sell and to make it as easy as possible for them to get rid of those things because they are not in the business of managing assets.

            They are allowed to bundle things in a way that allows them to sell stuff and minimize overhead. To wi

          • You can sell something either at retail or wholesale. Retail has higher overhead so things cost more. And I am not sure how much retail business the government should be in.

            To your point, when you sell cars at wholesale you tend to do it by the car. That is the natural lot size.

            The government would only be favoring the reach and well-connected if the spread between auction price and the market price was higher – which can be hard to tell when you are dumping a huge supply of something – but the

      • So excuse my ignorance, but can 17 million$ worth of BTC be liquidated easily? What's the volume of BTC transactions, and wouldn't selling those crash the prices?
        • There are exchanges that handle that many coins daily: http://bitcoincharts.com/marke... [bitcoincharts.com]
          And three investment funds on Wall Street with more than that amount already.

          All you need to do to not crash the price is arrange a private sale, or release the coins gradually. About 3800 newly created coins are generated every day, and the market absorbs that, so just keep your daily sales smaller than that, like 1000 a day or less.

      • The coins should be sold on the open market

        Other than the restriction about not acting in concert with Silk Road et al., there's precisely nothing closed about this market. "Open market" does not mean "cheap".

    • Why would a TLA want bitcoins? How would it help for a TLA to use a government-granted budget to buy bitcoins? Theres still a paper trail.

  • by ILongForDarkness (1134931) on Friday June 13, 2014 @09:31AM (#47229243)

    If not couldn't they end up 5 years later getting a judge ordering them to return the bitcoins at whatever the going rate is? Does the government routinely sell off shares in companies they seize too?

  • by Virtucon (127420) on Friday June 13, 2014 @09:37AM (#47229301)

    I don't want to get into the "is it money" argument but since this case is still pending [bloomberg.com] isn't it a bit premature to be selling assets of any kind until guilt is proven in a court of law? I guess we've completely trampled on the constitution here especially the fifth amendment.

    • Re:Due Process (Score:5, Interesting)

      by jandrese (485) <kensama@vt.edu> on Friday June 13, 2014 @09:47AM (#47229381) Homepage Journal
      Civil Asset Forfeiture doesn't require that you're found guilty. The government gets to take your stuff and sell it just to make sure you don't have money to defend yourself with.
      • Re:Due Process (Score:5, Interesting)

        by Virtucon (127420) on Friday June 13, 2014 @10:01AM (#47229493)

        Well that's the seizure portion of it and the recent Supreme Court ruling, one of the worst in history, [washingtonpost.com] doesn't say anything about the sale of those assets. That decision is so horrible because a lot of prosecutor's budgets are funded by seized assets creating a conflict of interest and violating the 5th and 6th amendments. We've seriously gone to far on the war on drugs and the police state mentality [distractify.com] in this country and it has to stop. If this guy is convicted then the assets obtained illegally should be forfeit, agreed but wait until the fucking trial is at least concluded and guilt or innocence is determined. Defendants also must have the right, as written in the 6th amendment to choose their own counsel and that requires funds to provide an adequate defense. If the assets are seized, then you have no right to chose your counsel creating a no win situation. That's a secondary consideration but as a citizen I'm very concerned that something like this could happen to me or my family and while I'm fighting in court the government is just selling everything off that we've worked our entire lives to acquire and protect. Right now the government has built a case but it's only been seen by a grand jury in the Ulricht case, that doesn't mean a conviction and selling the assets is a violation of his 5th amendment rights.

        • by ADRA (37398)

          That's all well and good assuming Ulricht was actually claiming ownership over the said bicoins, but assuming the other commentors above are correct, he never claimed ownership over them. If true, the gov after a small amount of time waiting for someone to step forward, can then liquidate property. It makes sense a lot more when they're houses, boats and cars but the same applies to BitCoins.

          Now in a situation where police break up a million dollar coke bust with a mil in coke and a million in dollar bills,

          • by Virtucon (127420)

            That's all well and good assuming Ulricht was actually claiming ownership over the said bitcoins

            You know that's a good point but something a trial would surely explain. In this case the feds are acting the the role of judge and jury, sure if the evidence is there that Ulricht is the Dread Roberts and they can prove that the bitcoins are associated with illegal activities, forfeiture can occur. For all we know he was probably stealing the bitcoins from mgtox. [forbes.com]

        • Except, the distinction here is that Ulbricht is claiming that he is completely innocent, and has no part in the situation.
          As such, the seized assets in this case are 'believed to be associated to Ulbricht, however are at present only known to belong to the previous "DPR", the former operator of Silk Road'. And no one else has stepped up to claim them, so the government is putting them up for auction, because why not.

          Really, it is an interesting case... 100M equivalency of a cryptocurrency that the clai
          • by Virtucon (127420)

            the government has to prove that the 100m in bitcoin were used in illegal activities, that's for a court to decide not the police or the prosecutors. It's not like bitcoins can be impregnated cocaine residue [theguardian.com] to prove their connection to illegal activities. Nor does the possession of those indicate that something was done illegally. If that were the case we'd all be guilty of drug trafficking.

            • Re:Due Process (Score:4, Informative)

              by tysonedwards (969693) on Friday June 13, 2014 @12:57PM (#47230847)
              You mean like paying an undercover cop $80,000 equivalency from the same Bitcoin wallet that was seized to arrange to kill someone?

              I completely agree with you that it is improper to conduct the auction before the trial because it sets a dangerous precedent that all it takes is a cop to lie for prosecutors to liquidate the assets of anyone they don't like.

              The question is whether someone who claims to be innocent should have access to someone else's assets to mount their defense.

              Should Ulbricht maintain that he is not DPR, his 5th Amendment rights are not being violated because he asserts that the property "wasn't his". Regardless, his 6th Amendment rights are not being violated because he has not been denied the Assistance of Counsel for his defense.

              The only noteworthy thing here is that should he admit perjury that he is in fact DPR, or another party come forward and either party later be found innocent of any wrongdoing, the government would be required to provide whatever funds they generate through the auction back to the innocent party; something that incentivizes them to sell at below market value.
    • There's a matter of due process, sure. Go ahead and step forward as the owner of these coins. They won't sell them out from under you until they are done prosecuting you for claiming to have run Silk Road. Right now it's unclaimed property.

  • That pretty much renders moot the Crypto-currency's primary advantage of anonymity.

    Could you even pretend surprise when the public purchase of a large block of the coinage placed you on the interesting list with the TLAs?

    On the economic side of the equation, wouldn't they keep the price higher if they spread out the block auctions a bit more? That's a lot of coin to dump quickly.... unless taking down the coins value is the intent.

    • It's kind of adorable that you think they don't already know this kind of thing, given the amount of internal snooping they do already.

      Also that you think they couldn't tank the value much more easily through other means, if they cared to.

      Or that they actually care much about bitcoin beyond "how can we tax it?" type of questions.

      They have a thing that they want to turn into cash. They want to do this as quickly as possible, and they don't want to spend time or money trying to take into account the vagaries

      • And sorry, I didn't mean to be condescending there by saying adorable - I was more trying to shit on the snooping the US government does on random, inconsequential shit.

        • I am not yet fully onboard with the theory they already know everything.

          There is just too much information out there in to be sifted through, so unless you behave in a manner that arouses their interest, you can still fly under the radar.

          And I can live with condescending. It's practically the price of admission to speak with a lot of smart people. Just don't ever renege on "adorable" again.

          • Okay - I take it back, and you will forevermore be considered "adorbs."

            With regards to they (in this case law enforcement agencies involved in busting Silk Road) knowing everything:

            I think as part of their investigation and bust of Silk Road, they almost certainly became aware of the identities of multiple people who are both interested and able and willing to buy the bitcoins at auction. I'm also willing to bet, given the strong libertarian/fuck the federal government bent of many people participating in b

    • by alphatel (1450715) *

      Bitcoins will be transferred to winning bidders in the order that each winning bid was received. No bitcoin transfer will be made until the USMS has confirmed receipt of all purchase funds. The winning bidder(s) will be given private instructions related to the transferring of the bitcoins.

      You'll note it doesn't provide a deadline for when the bitcoins will be transferred to the winning bidder. Hence, if it takes 60 days to transfer, BTC could be worth 1/10th of its current value.
      Would not touch this US Marshall's mess with a 10 foot fuckstick.

  • If it did as opposed to going to a standard exchange this would make sense. If it would normally just change them for Dollars at a bank at a KNOWN RATE then this Bitcoin auction makes no sense. The government may get only 50% of the value or less of these Bitcoins by doing it this way when a known US company such as Bitpay or Coinbase could do it for them at a pre-arranged rate.

  • "Why do you rob banks?"

    "Because that's where the money is."

    He never knew about the US government's War on Drugs (TM). FedGov's peers would term it a 'good earner'.
  • kinda makes you wonder why they are selling them at this point in time, and whether they know about something that is soon going to affec tthe price of bitcoins (beyond their own big auction).

  • To all those complaining about the minimum bid... I think that's fair. If they had a yacht, you would expect a minimum bid. If it was a piece of land, you'd expect a minimum bid. If it's some crypto currency worth 1.7mil.... You should expect a minimum bid.
    • by sir-gold (949031)

      But you generally don't see 100 yachts sold as a single item.
      They have $18 million worth of property, and there only breaking it into $2 million chunks.

      A more real-world example would be a car collection seized from a drug dealer, they don't auction the entire collection as one single item do they?

  • by Technician (215283) on Friday June 13, 2014 @04:02PM (#47232483)

    What is it called when someone's property is taken by force?

    What do you call the one who takes what does not rightfully belong to them?

    Now the stolen goods are up for sale. Are there laws against receiving stolen property?

  • by jonwil (467024) on Friday June 13, 2014 @05:50PM (#47233245)

    If the US government seized Euros or Yen or Pesos or whatever, they would just convert them to USD through foreign exchange. Why aren't they simply converting these Bitcoins through a Bitcoin exchange into USD and getting their money that way?

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