The United States Department of Justice (DOJ) has announced the largest seizure in its history, involving cryptocurrencies believe to be the proceeds of defunct dark-web marketplace ‘Silk Road’.
- 69,370 Bitcoin
- 69,370 Bitcoin Cash
- 69,370 Bitcoin Gold
- 370 Bitcoin SV
Just the Bitcoin alone which was seized equates to roughly $1 billion USD. This, along with the various forks make the seizure a momentous achievement for the DOJ.
DOJ Behind the Curtain
Investors trying to understand and profit from Bitcoin markets, will often watch for events which hold the potential to influence prices. As such, there are those that continually monitor the movement of assets within sizable Bitcoin wallets. A wallet transferring a sizable amount of Bitcoin to an exchange may indicate intent to sell, while the reverse may indicate intent to hold.
Recognizing this, one transaction caught the eye of investors earlier this week, when roughly $1 billion USD worth of Bitcoin was transferred from a long dormant wallet. Speculation ran wild, as investors tried to determine who was behind the curtain and responsible for such a move.
Fast forward to November 6th, and we now have our answer – the United States Department of Justice (DOJ).
What was Silk Road?
Silk Road was the name of a dark-web marketplace, orchestrated by Ross Ulbricht, which rose to prominence in 2011 – essentially acting as ‘eBay’ for illegal items and services. Unfortunately, Silk Road is arguably the main reason that Bitcoin is still associated with illegal activity to this day. At the time, Bitcoin acted as the perfect medium for such activities.
As the main orchestrator behind Silk Road, Ross Ulbricht was found guilty of various crimes in 2015 – conspiracy to traffic narcotics, money laundering, etc. As a result of these convictions, Ulbricht is now serving multiple life sentences in prison.
How Did They Do It?
Silk Road has been gone since 2013, which raises the question – how are these funds just being retrieved now by the DOJ?
Over time, capabilities of regulators and authorities such as the DOJ have become much more sophisticated. As the world of cryptocurrencies continues to grow at unprecedented rates, such capabilities are a necessity to ensure illicit activity is kept in check. With a greater understanding of cryptocurrencies and new means of tracking transactions, the DOJ was able to do just that.
“In 2020, law enforcement officers used a third party bitcoin attribution company to analyze Bitcoin transactions executed by Silk Road. From this review they observed 54 transactions that were sent from Bitcoin addresses controlled by Silk Road, to two Bitcoin addresses,”
Things get even more interesting however – the DOJ has noted that while it believes these funds are the proceeds of Silk Road activity, they were actually stolen from the marketplace.
“…These 54 transactions were not noted in the Silk Road database as a vendor withdrawal or a Silk Road employee withdrawal and therefore appear to represent Bitcoin that was stolen from Silk Road.”
Further solidifying its belief that the funds were stolen, is the fact that the DOJ was able to identify the individual associated with the original transaction that moved the funds from Silk Road.
“According to the investigation, Individual X was able to hack into Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal the illicit cryptocurrency from Silk Road and move it into wallets that Individual X controlled. According to the investigation, Ulbricht became aware of Individual X’s online identity and threatened Individual X for return of the cryptocurrency to Ulbricht. Individual X did not return the cryptocurrency but kept it and did not spend it…On November 3, 2020, Individual X signed a Consent and Agreement to Forfeiture with the U.S. Attorney’s Office, Northern District of California. In that agreement, Individual X, consented to the forfeiture of the Defendant Property to the United States government.”
Still in Limbo
It should be noted that while the DOJ has managed to seize these funds, they are not yet officially the property of the government. While the funds are now in the possession of the DOJ, the case being built must now be proven in court.
Based on past events, it would stand to reason that if/when an official forfeiture of funds takes place, the DOJ will eventually put the cryptocurrencies up for auction – a proceeding which has occurred on multiple occasions in the past.