$ 1 billion value of bitcoin associated to the U.S.-seized Silk Highway
Omar Marques | LightRocket | Getty Images
The US government seized an unprecedented $ 1 billion bitcoin related to the criminal market, the Silk Road.
Thousands of bitcoins were taken by law enforcement agencies this week. According to the Justice Department, this was the largest seizure of cryptocurrency in the agency’s history.
“The Silk Road was the most notorious online marketplace of its time,” said US attorney David Anderson from the Northern District of California in a civil lawsuit on Thursday. “The successful persecution of the founder of the Silk Road in 2015 left a billion-dollar question open. Where did the money go?”
The Silk Road enabled people to buy and sell drugs and other illegal goods and use Bitcoin to anonymously fund these transactions. The dark web marketplace was closed by the US federal authorities in 2013 and its founder Ross Ulbricht was sentenced to life imprisonment two years later.
Bitcoin has established itself as a mainstream investment vehicle in recent years. It surged over USD 15,000 on Thursday and hit its highest level since January 2018. The cryptocurrency has more than doubled since the start of the year.
This week, London-based blockchain analytics firm Elliptic announced that it had picked up on the massive move in Bitcoin sparked by the DOJ. The company reported that 69,369 bitcoins – valued at around $ 1 billion – had been withdrawn from a bitcoin wallet that had the fourth-highest balance in the world ever. Tom Robinson, Elliptic’s co-founder and chief scientist, said the movement of bitcoins “could represent Ulbricht or a silk street vendor moving his money” but it was “unlikely that Ulbricht could conduct a bitcoin transaction out of prison”.
The US authorities were able to track down these illicit funds through a unit within the IRS that specializes in tracking virtual currency transactions. The IRS agents identified 54 new Bitcoin transactions that were carried out by the Silk Road. This appears to be a result of some of these illegal activities, the complaint states. The agency was then able to trace that money back to a specific Bitcoin address that apparently hacked the Bitcoin funds from the Silk Road.
While the Silk Road was operating, thousands of drug dealers and other illicit sellers distributed illicit drugs, illegal goods and services to well over 100,000 buyers. At the time of the shutdown seven years ago, the Silk Road had nearly 13,000 ads for illegal drugs and “many more ads” that offered illegal services such as computer hacking and murder for rent, according to the complaint. These achieved a turnover of more than 9.5 million bitcoins. The complaint also alleges that the Silk Road used a process to make it difficult to track individual cryptocurrency transactions.
However, the loss could be temporary. The US has yet to prove its case in front of a judge before it can finally control the Bitcoin funds.
— CNBC’s Ryan Browne contributed to the coverage.