The US Department of Justice on Thursday filed a legal request to take control of more than $1bn in Bitcoin (BTC) generated from the sales of illicit goods at defunct dark web market Silk Road.
Between 2011 and 2013, Silk Road sold a variety of illegal drugs and services online, until it was shut down by US law enforcement. In 2015, the site’s operator, Ross Ulbricht, was sentenced to life in prison without the possibility of parole. Now the Feds say they have an agreement to get a billion-dollar payday with Bitcoins used on the site.
In that brief period, the site racked up total revenue of more than 9.5m BTC resulting in about 600K BTC from sales commissions, according to the DoJ forfeiture filing.
When Ulbricht was arrested in October, 2013, the FBI said it had seized 144,336 BTC from Ulbricht’s hardware, plus 29,655 BTC from a prior seizure, totaling 173,991 BTC, which was worth about $33.6m at the time or about $2.6bn at the current exchange rate.
Prior to that, in May, 2012, according to Tom Robinson, chief scientist and co-founder of cryptocurrency analytics biz Elliptic, about 70,000 BTC left Silk Road’s digital wallet before being moved to a Bitcoin wallet with the address
1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx in 2013.
Since then, there have been a few transactions between BTC addresses related to the Silk Road funds that have remained beyond the reach of US authorities. According to a court filing [PDF] today, law enforcement officers earlier this year worked with a third-party Bitcoin attribution company to analyze unattributed transactions and noticed an unusual pattern among some of them.
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“These 54 transactions were not noted in the Silk Road database as a vendor withdrawal or a Silk Road employee withdrawal and therefore appear to represent Bitcoin that was stolen from Silk Road,” the court filing explained, noting that they amounted to 70,411.46 BTC. Worth about $354K at the time of the transfers, the value of that digital currency has skyrocketed to over $1bn today.
Investigators managed to link an unidentified individual with these transactions and the Bitcoin wallet identified above that begins
“According to the investigation, Individual X was able to hack into Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal the illicit cryptocurrency from Silk Road and move it into wallets that Individual X controlled,” the filing stated. “…Ulbricht became aware of Individual X’s online identity and threatened Individual X for return of the cryptocurrency to Ulbricht.”
The government contends that Individual X failed to return the funds and kept the cryptocurrency without spending it.
The complaint goes on to state that on Tuesday, Individual X signed an agreement with the US Attorney’s Office in Northern California to surrender the hacked funds.
Also on Tuesday, the
1HQ3 wallet shows a transfer of 69,369 BTC, worth about $1bn – presumably this represents Individual X providing the government with access to the funds it claims to have seized.
The Register has asked the Department of Justice to confirm that it controls the receiving digital wallet but we’ve not heard back.
The DoJ legal filing signals the court that the government will present evidence that the cited property can be lawfully forfeited. If the court approves the forfeiture, the feds will gain control of the funds. ®