FBI Seized 144,000 Bitcoins ($28.5 Million) From Silk Road Bust

SonicSpike writes "An FBI official notes that the bureau has located and seized a collection of 144,000 bitcoins, the largest seizure of that cryptocurrency ever, worth close to $28.5 million at current exchange rates. It believes that the stash belonged to Ross Ulbricht, the 29-year-old who allegedly created and managed the Silk Road, the popular anonymous drug-selling site that was taken offline by the Department of Justice after Ulbricht was arrested earlier this month and charged with engaging in a drug trafficking and money laundering conspiracy as well as computer hacking and attempted murder-for-hire. The FBI official wouldn't say how the agency had determined that the Bitcoin 'wallet' — a collection of Bitcoins at a single address in the Bitcoin network — belonged to Ulbricht, but it was sure they were his. 'This is his wallet,' said the FBI official. 'We seized this from DPR,' the official added, referring to the pseudonym 'the Dread Pirate Roberts,' which prosecutors say Ulbricht allegedly used while running the Silk Road."

Comments

Well

[ledow]

They may have "seized" them, but unlike with physical property, how can they be sure they are "unspent" and still worth-ful?

What if, when they try to convert them to cash, they are told they've already appeared in the blockchain and have been "spent" elsewhere? Would that not be quite embarrassing? That, from under the noses of the FBI, someone has recovered all that money via an anonymous currency exchange and ran off with the proceeds?

I sincerely hope that they cash in the Bitcoins before something appears on the blockchain from that wallet. Double-spending is blocked, but that doesn't mean the FBI would be the first person to try to spend them. Especially not now they've put it on the news. Anyone could have a copy of that wallet.

Re:Well

[Immerman]

Why convert them to cash? They can't freeze the account as they could with a bank, but if they have the account credentials they can simply transfer all the bitcoins to a new holding account to which they have the only credentials.

Re:Well

[p.g.king]

...but if they have the account credentials they can simply transfer all the bitcoins to a new holding account to which they have the only credentials.

Which is exactly what the article suggests they've done:

"The FBI official pointed me towards this Bitcoin address, which according to the public Bitcoin transaction record known as the “blockchain” received transfers of close to 144,000 in just the last 24 hours. “They finished moving them at 3am this morning,” said the official."

Re:Well

[pla]

This leads to an interesting problem for the FBI...

They can either keep them in that account forever, basically useless to anyone...
Convert them to US dollars, just about the single most Bitcoin-legitimizing action I can imagine...
Or they can actually use them as Bitcoins.

The last one gets interesting, because the FBI has accidentally revealed their own current address by this large transfer to themselves. Bam, we have one "known bad" address. Anyone they trade with, then, becomes tainted by association. Would you trust, for example, a VPN service that has accepted payments from the FBI?

Re:Well

[hibiki_r]

It's an extremely uninteresting problem.

Tainted by association makes no sense at all. If you limit the association to direct association, it's trivial to bypass by creating intermediaries. If you make the taint spread, then almost everyone is tainted, so there's nothing to gain. You might as well try to avoid people that are 7 degrees of separation or less from Kevin Bacon.

Re:Here is my question....

[Immerman]

Your bitcoins aren't in your "wallet" file - they're in an account in the bitcoin block chain "bank". The file simply contains your credentials to be able to transfer those coins. You can back up those credentials, in fact it's strongly recommended since if you lose them (say to a hard drive crash) the coins in the account become permanently unspendable. And anybody with a copy of those credentials can indeed spend the money in the account. I would imagine though that a seizure involves gaining access to the credentials and transferring those bitcoins into an exclusively FBI controlled account to avoid just such a scenario.

By the same token, if you securely encrypt your credentials and refuse to give them the key despite any threats they may bring, they can't meaningfully seize those assets. Of course that "sharing" may come involuntarily via surveillance software surreptitiously installed on your computer.

Dread Pirate Roberts

[Razalhague]

I wonder if this "Dread Pirate Roberts" is only one person, given how the name was used in The Princess Bride.

Re:No proof

[Immerman]

No, not even a little. Have you studied the technology? It's all pseudonymous, which is a completely different thing. Anybody who wishes to can completely monitor all activity on any account, the only anonymity resides in how well you hide the connection between yourself and your account number. Publish your account number publicly, like any legitimate business would do to accept payments, and there is no anonymity whatsoever, and every transaction past and present with that account is now known to be a transaction with that business. If you want to be anonymous then the onus is completely on you to make sure a link between your account number and your real identity is never discovered, the technology offers nothing in that regard.

Frankly, take away the gauze of anonymity and what you have is every financial analyst's wet dream of a currency - *every* transaction laid bare for all the world to see, in real time, and with a permanent record.