Feds auctioning off massive stash of confiscated bitcoins

AFP Photo / Karen Bleier

AFP Photo / Karen Bleier

​The bidding began early Friday for bitcoin enthusiasts eager to acquire cryptocurrency seized by the United States Marshals Service during last year’s crackdown of the infamous Silk Road online marketplace.

On Friday, federal authorities officially opened up the auction
of 29,656 bitcoins brought into their possession after Ross
Ulbricht, a 29-year-old San Francisco man accused of operating
the Silk Road website, was arrested last October and charged with
counts ranging from money laundering and computer hacking, to
conspiracy to traffic narcotics and plotting an assassination

Authorities took into their possession millions of dollars’ worth
of bitcoins seized from Silk Road, an online-only black market of
sorts where customers could use the encrypted and
anonymity-centric cryptocurrency to order goods ranging from
Schedule I narcotics to highly illegal weapons.

When the Marshal Service announced the auction would be occurring earlier
this month, the agency admitted that the bitcoins up for grabs
were contained in wallet files that resided on the servers of
Silk Road, which initially shut down with the arrest of Ulbricht.
The site has since resurfaced once again on the so-called “dark
web,” where special clients are required to view content hidden
from ordinary internet browsers.

Taking into account the current bitcoin market rate, the seized
cryptocurrency is worth a combined total of around $17.48 million
USD. Instead of putting the whole cache up for grabs, the feds
are selling off the seized digital coins in nine blocks of 3,000
and one of 2,656.

The 12-hour online bidding period for the Silk Road coins opened
Friday morning at 6:00 a.m. EDT, during which time interested
parties are allowed to make offers by emailing to the Marshals
signed PDF copies of an official form. All bidders were required
to submit a $200,000 deposit ahead of this week’s auction.

Last week, the Marshals accidentally leaked the identities of
more than a dozen people who had emailed authorities ahead of the
auction to express an interest in bidding. The Marshal Service
has since apologized for the error, but meanwhile the mix-up
revealed that COOs, investment professionals, entrepreneurs,
lawyers and musicians were among those wanting to participate in
the bidding.

“Either this was a very clever piece of disinformation or a
very careless error by the government. It’s a little hard to know
which from a distance,”
David L. Yermack, a professor at New
York University’s Stern School of Business, told the New York Times. “You want to create the
illusion that there’s immense demand for this if you’re the
government because you want people to bid as much as they’re
willing to.”

Steven Englander, a research analyst at Citigroup, reportedly
told clients that there’s no telling what direction the action
will take ahead of Mondays’ expected announcement.

“Selling bitcoin with its somewhat liquid market is not the
same as auctioning off a 1998 Chevy with a couple of bullet holes
in the driver’s door,”
Englander wrote in a note obtained by
the Times.

“If it’s a Picasso, or if it’s an oil field where basically
you don’t know what the correct price is, you might say that the
Picasso is anywhere from a million to 10 million,”
told the paper. “It’s not like a Treasury bond, where you
could get the price to four decimal places.”

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