The final chapter in the case of the United States of America vs Ross Ulbricht’s assets, from the Silk Road seizure, is coming to a conclusion in a few short weeks. The US Marshals Service (USMS) has now announced that the remaining 44,341.55308401 BTC, held in connection with the criminal conviction and civil forfeiture action against Ulbricht, will be auctioned off in early November.
The Silk Road was started and operated by Ulbricht in approximately January 2011 and was shut down by law enforcement authorities in October 2013. Ulbricht was arrested on October 1, 2013, and was indicted on February 4, 2014. The US Department of Justice announced that approximately 173,991 Bitcoins, worth over $150 million at the time, had been seized in the course of the investigation.
Out of the total bitcoin seized, approximately 29,655 were recovered from servers used to run the Silk Road website, and approximately 144,336 were from computer hardware belonging to Ulbricht, and were seized when he was arrested.
There have been four USMS auctions for bitcoin relating to Ross Ulbricht and the Silk Road case, two in 2014 and two in 2015, with the very last auction scheduled for November 5. All auctions are online-only, and bidders must be pre-approved by the USMS.
Before the first auction, all of the bitcoins that were part of the civil forfeiture and criminal action brought against Ross Ulbricht, and the assets of Silk Road previously held in an FBI wallet, were transferred into two U.S. Marshals wallets. The first wallet held bitcoin for the first auction, and the other wallet held approximately 144,342 remaining bitcoins.
The first auction took place on June 27, 2014, from 6 a.m. until 6 p.m. EST, lasting 12 hours. Almost 30,000 bitcoins were auctioned in 10 blocks, and the duration of this first auction was twice as long as the other auctions. The price of bitcoin dropped before the end of the auction but rose substantially by the end of the auction period.
At the end of that historic first auction, the USMS said on their website that one bidder had stepped forward to pick up all of the blocks, worth about US$17.7 million. A few days later, on July 2, Bitcoin VC Tim Draper announced to the world that he was the winning bidder, and would be using those coins for liquidity on the OTC derivatives platform Mirror. July 2 was another bullish day for bitcoin, with a similar volume spike.
The second auction came almost six months later, on December 4, 2014, from 8:00 a.m. until 2:00 p.m. EST, when exactly 50,000 bitcoins were auctioned in 20 blocks. This time the auction lasted only six hours, and similar to the first auction, the price of bitcoin rose, although a major selloff had occurred just two hours before the auction commenced.
Almost immediately after the second auction the winner of 19 of those 20 blocks, worth about US$18m, revealed themselves. It was a syndicate of 104 investors pooling their money together to buy some cheap coins, all led by bitcoin advocate and Venture Capitalist Barry Silbert.
The following day the USMS confirmed it was Silbert’s group, saying "Because SecondMarket has voluntarily come forward, we can confirm that it was the winner of 48,000 bitcoins, and the transfer of those bitcoins was completed Monday.” They also revealed that the number of bidders registered for the second auction was about a quarter of the number of those registered for the first. We later learned that the remaining block of 2,000 bitcoins had been picked up by Tim Draper, adding to his holdings.
Three months later, on March 5, and also for six hours between 8:00am EST and 2:00pm EST, the USMS auctioned the third batch of 50,000 more bitcoins, which were put up for auction in 20 blocks. The price of bitcoin dipped slightly during the sale, only to shoot up soon after the auction. Again, a major selloff preceded the auction, this time by 15 hours.
Less is known about the winners of this auction, except that there were three winners, and New York-based exchange itBit reported that it had picked up the first 3,000 coins. The second winner is completely unknown, but the final winner is suspected of having ties to a mysterious company called Cumberland Mining & Materials LLC, which has a very cryptic website displaying a mining cart and an email address. So basically, there are 47,000 bitcoins out there from this auction that are no longer in the government’s hands, but only the USMS knows the real identity of their owners.
Here we are, almost eight months later, and the final auction for 22 blocks of bitcoins is round the corner. Like the two previous auctions, this auction will be for six hours, and run from 8 a.m. to 2 p.m. EST on November 5.
As with previous auctions, interested participants must first pre-register through the USMS website, between October 19 and November 2. Potential bidders must have completed all registration requirements and received an official Bid Form from the USMS to participate in the auction. Bids will only be accepted by email, and foreign citizens can participate as long as all deposit and purchase funds are from a US bank.
After this auction there should be no more large caches of confiscated, federally held bitcoins, as the US Department of Justice has not announced any more substantial bitcoin seizures. In addition, the USMS has not announced any more holding of bitcoins either. Therefore, the risk of the US government releasing a substantial amount of bitcoin, flooding the market and sending the price of bitcoin on a downward spiral at exchanges, should soon be eliminated.
With the potential risk of bitcoin flooding the market substantially reduced, investor confidence in the price of bitcoin should improve to some extent. As we’ve seen in the three previous auctions, some sell-offs were observed either before or during the auction, but bitcoin prices eventually finished higher during or soon after the auction period.