Silk Road Bitcoins Worth Over $1 Billion Are Target of U.S. (2)

The U.S. is suing for the forfeiture of more than $1 billion in Bitcoins it says are linked to the criminal marketplace Silk Road it shut down seven years ago.

The thousands of Bitcoins, which the Justice Department seized on Tuesday, represent the largest cryptocurrency bust the government has ever made, it said in a statement on Thursday.

“The successful prosecution of Silk Road’s founder in 2015 left open a billion-dollar question. Where did the money go?” the U.S. said in the statement. “Today’s forfeiture complaint answers this open question at least in part.”

The announcement comes amid a resurgence in Bitcoin, which jumped on Thursday almost to a three-year high, dating back to just after the collapse of the cryptocurrency bubble. The digital currency surged as much as 9% to $15,300. It peaked at around $20,000 in December 2017 before plunging to about $3,000 less than a year later.

Individual X

U.S. authorities seized the Bitcoins from an alleged hacker who had gained access to them, identified in the statement as Individual X. Researcher Elliptic flagged that the crypto was on the move on Tuesday.

Read More: Bitcoin Haul of $1 Billion on Move, Possibly With Silk Road Tie

The case began when agents of the Internal Revenue Service Criminal Investigation Division identified 54 previously undetected Bitcoin transactions executed by Silk Road, the U.S. said. The transactions involved funds the agents traced to a Bitcoin address through which they were able to pinpoint the alleged hacker, according to the Justice Department.

The Bitcoin address is the world’s fourth-richest, according to a BitInfoCharts ranking.

The Silk Road website, which the U.S. called “the most sophisticated and extensive criminal marketplace on the Internet,” used Bitcoin to peddle everything from drugs to murder-for-hire until it was shut down by U.S. agents in 2013.

The Hunt

Operated by Ross William Ulbricht from 2011 to 2013, Silk Road used Bitcoins to generate the equivalent of $1.2 billion in illicit sales and reap $80 million in commissions in less than three years, according to court documents. Ulbricht was convicted in 2015 by a New York federal jury of seven criminal counts, including conspiracy to distribute narcotics and money laundering.

Crypto researcher Chainalysis said that it assisted law enforcement in tracking down the funds, lending its tools to help identify the largest cryptocurrency wallets with connections to Silk Road. Silk Road accounted for nearly 20% of total Bitcoin economic activity at its peak in 2013, according to Chainalysis data.

The current Bitcoin surge is part of a longer rally that Guy Hirsch, managing director for U.S. at eToro, thinks is likely to prove more enduring than prior run-ups.

“For starters, there are solid macro fundamentals behind this run, including continued uncertainty around the U.S. elections and surprising weakness in the job market as the Covid pandemic rages on,” Hirsch said, adding that a better outlook for the crypto sector itself is also driving the upturn.

It “almost feels like Bitcoin’s perfect storm,” he said.

The case is U.S. v. Approximately 69,370 Bitcoin, Bitcoin Gold, Bitcoin SV, and Bitcoin
Cash seized from 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh, 20-cv-07811, U.S. District Court, Northern District of California (San Francisco).

(Updates with details, context and quotations starting in third paragraph.)

--With assistance from Vildana Hajric.

To contact the reporter on this story:
Olga Kharif in Portland at okharif@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Peter Jeffrey, Dave Liedtka

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