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13 Jun, 2014 09:00

US govt to auction $18mn worth of bitcoin seized from Silk Road

US govt to auction $18mn worth of bitcoin seized from Silk Road

The US government is set to auction off $18 million worth of bitcoins seized from an online drugs market known as Silk Road. The Department of Justice is looking to make a considerable windfall from the sale with bitcoin increasing in value recently.

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The now-defunct cyber-black market was closed down in October of last year, with authorities confiscating 30,000 bitcoin. The FBI also arrested the alleged kingpin of the online drugs bazaar, Ross Ulbricht, seizing roughly 144,000 bitcoin in the process.

Ulbricht, also known by his alias Dread Pirate Roberts, now faces charges of computer hacking, money-laundering and conspiracy to traffic narcotics. He denies all of the charges set against him, but insists the bitcoin are his and has demanded their return.

Nine months on the US Marshals service – the body tasked with selling off the seized assets – is preparing to auction 30,000 bitcoin of the Silk Road stash.

"This auction is for the bitcoin contained in wallet files that resided on Silk Road servers," the US Marshals Service wrote in a press release. "This auction does not include the bitcoins contained in wallet files that resided on certain computer hardware belonging to Ross William Ulbricht that were seized on or about October 24.”

The sale of the bitcoin will take the form of an online auction which will take place on June 27. Participation in the auction will not be cheap, with buyers required to make a refundable deposit of $200,000 to a government bank to take part. The bidding itself will take place over a period of 12 hours where blocks of 3,000 Bitcoin (or about $1.8 million each) will be up for grabs.

“Bids will be accepted by email from registered bidders using a form available from the US Marshals web page,” says the release.

The government’s decision to sell off the bitcoins could cause a significant shake-up on the crypto currency market. Many worry that if Ulbricht’s larger stash of 144,000 is sold in the same auction style as the Silk Road asset, the market will be flooded with cheap coins which will lower the value of the currency.

After the Marshals’ announcement of the auction, the value of bitcoin dropped by around 2 percent, reflecting market anxiety.

There is speculation as to why the government has decided to auction off the bitcoin. Ulbricht’s lawyer Joshua Dratel believes US Marshals service may have planned the sale to coincide with the recent upturn on the bitcoin market.

“I wouldn’t be surprised if they’re watching the price of bitcoin on the market just like everyone else,”
he told Wired.