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US Government To Convert Silk Road Bitcoins To USD

Posted by samzenpus on from the real-cash dept.

angry tapir writes "The founder of the Silk Road underground website has forfeited the site and thousands of bitcoins, worth around $28 million at current rates, to the U.S. government. The approximately 29,655 bitcoins were seized from the Silk Road website when the Federal Bureau of Investigation (FBI) moved to close it in late September. 'The United States Marshals Service shall dispose of the Silk Road Hidden Website and the Silk Road Server Bitcoins according to law,' wrote Judge J. Paul Oetken, of the U.S. District Court for the Southern District of New York, in a court order that was issued this week. The ruling represents the largest-ever forfeiture of bitcoins. 'It is the intention of the government to ultimately convert the bitcoins to U.S. currency,' said Jim Margolin, a spokesman for the U.S. Attorney's office for the Southern District of New York."

22 of 408 comments (clear)

  1. Government sells seized assets by Anonymous Coward · · Score: 1, Insightful

    News at 11.

    I understand that some people at slashdot love to argue about bitcoin, one way or another. But do we really have to have an article whenever someone decides to buy or sell some of them?

    1. Re:Government sells seized assets by Anonymous Coward · · Score: 5, Insightful

      I understand that some people at slashdot love to argue about bitcoin, one way or another.But do we really have to have an article whenever someone decides to buy or sell some of them?

      A forfeiture worth ~$28M is surely news?

      Also, it is interesting to know that as long as you are charged with something (not convicted or anything, mind you), so much money can go poooof...

    2. Re: Government sells seized assets by Anonymous Coward · · Score: 2, Insightful

      I think you need to retake Economics 101. Reality doesn't bend to your will. Just because you think Bitcoins shouldn't be in demand, doesn't make it so. What an exceedingly dumb thing to say.

    3. Re:Government sells seized assets by Anonymous Coward · · Score: 4, Insightful

      And gold is just a nice-looking metal that has some uses in electronics. Besides food and oxygen, every object we use to determine wealth is kind of bs, so bitcoin is no more or less credible than what we've got now.

  2. Killing two birds with one stone? by Anonymous Coward · · Score: 5, Insightful

    Are there even enough BTC exchanges out there to actually convert that much BTC into USD?

    If there aren't, and the US government is persistent enough, wouldn't they be able to effectively "lock out" everyone else from getting money out of the system by basically draining the exchanges dry?

    Like it or not, BTC is worthless unless you can exchange it for IRL bucks. It's a cute experiment and all, but at the end of the day your average shop keeper has to turn his BTC into something he can pay his rent with. If the US government is somehow able to effectively launch a "DoS" attack against all the exchanges, then what is going to happen to BTC?

    1. Re:Killing two birds with one stone? by Anonymous Coward · · Score: 3, Insightful

      There is not enough liquidity on all the exchanges to sink such a large amount. It will drive the price rock-bottom if done in one swoop. What you need to do is milk it for a few months. This way the market can absorb the Bitcoins and you can get all of the 28 million.

      What about the rest of the Silk Road stash ? It's worth 600 million dollars at today's prices.

      I love it how the government ends up being the largest winner of the Bitcoin bubble. "Our commitment for America in 2014: make the junkies and internet speculators balance the Medicare budget."

    2. Re:Killing two birds with one stone? by Anonymous Coward · · Score: 5, Insightful

      That's such an awesome argument. I hear it all the time from BTC fanatics.

      "Well if such and such accepted BTC, there'd be no problem. It's their fault for not accepting BTC!".

      In what fucking universe do you exist in where this is a logical rebuttal to "I live in the real world, and my real world landlord doesn't accept BTC"? Right now, I can't buy groceries with BTC. I can't pay for parking with BTC. I can't take a friend out for lunch and pay with BTC. I can't buy a car from a local dealership with BTC, I can't go see a movie in the theatres with BTC.

      I can exchange BTC for my local currency and then go about my business, but that's about it.

      So really, I have no idea what dream world you live in where BTC is some magical universally accepted currency, because that isn't the universe we all occupy at this exact instant. The GP was right, and it's a legitimate question. What happens to the BTC market if the US government basically blocks all the exchanges by hitting them all with $23M worth of withdrawals?

    3. Re:Killing two birds with one stone? by Kjella · · Score: 5, Insightful

      No really, I have no idea what dream world you live in where BTC is some magical universally accepted currency, because that isn't the universe we all occupy at this exact instant. The GP was right, and it's a legitimate question. What happens to the BTC market if the US government basically blocks all the exchanges by hitting them all with $23M worth of withdrawals?

      Withdrawals? Do you think it's some kind of bank account? It's an exchange rate, set by buy and sell offers. Now the government could of course say they'll sell these, all at once and at any rate and the exchange rate would tank to zeroish because they'd fill every buy order but all I'd have to do is put up an offer for $0.001 / BTC and I'd get all the government's bitcoins for $23. Which would, given that they were trading for $1000 before, probably be a very good deal. In fact so good that somebody would probably scoop them up for $1 ($23,000) or maybe $100 ($2.3M), if they think this dip is purely market technical and temporary. No matter exactly where the exchange rate would end up nothing would be "blocked", sure some of the speculators would potentially lose a lot of money/potential profit - particularly if they were forced to cash out at the bottom, just like in the stock market - but trade would resume at whatever the new price would be. And eventually the government's store of bitcoin would be exhausted and their influence on the price gone.

      --
      Live today, because you never know what tomorrow brings
    4. Re:Killing two birds with one stone? by geekmux · · Score: 5, Insightful

      That's such an awesome argument. I hear it all the time from BTC fanatics.

      "Well if such and such accepted BTC, there'd be no problem. It's their fault for not accepting BTC!".

      In what fucking universe do you exist in where this is a logical rebuttal to "I live in the real world, and my real world landlord doesn't accept BTC"? Right now, I can't buy groceries with BTC. I can't pay for parking with BTC. I can't take a friend out for lunch and pay with BTC. I can't buy a car from a local dealership with BTC, I can't go see a movie in the theatres with BTC.

      I can exchange BTC for my local currency and then go about my business, but that's about it.

      So really, I have no idea what dream world you live in where BTC is some magical universally accepted currency, because that isn't the universe we all occupy at this exact instant. The GP was right, and it's a legitimate question. What happens to the BTC market if the US government basically blocks all the exchanges by hitting them all with $23M worth of withdrawals?

      Replace BTC with USD in your entire statement, and you'll have your answer as to why everyone (including governments) sees the USD as some sort of "magically universally accepted currency".

      On top of that, who the hell pays with cash anymore? The true universally accepted currency is the one sitting behind that piece of plastic you keep swiping everywhere. If that happens to be dollars, pesos, or rupees, it doesn't really matter, because the conversion all happens in the background at your bank. Because of this, there is little or no reason BTC couldn't start up their own credit card and BECOME as universally accepted as anything else. The only thing stopping this is the current "magically universally accepted currency" and all the corruption behind it.

    5. Re:Killing two birds with one stone? by oodaloop · · Score: 5, Insightful

      I can't buy groceries with BTC

      Can you use gold to buy groceries? What, they don't accept gold at the supermarket? I guess it doesn't have any value, other than being able to exchange it for cash. What a waste!

      --
      Tic-Tac-Toe, Global Thermonuclear War, and relationships all have the same winning move.
    6. Re:Killing two birds with one stone? by jratcliffe · · Score: 3, Insightful

      You arguments about Bitcoin's level of acceptance can be equally applied to PayPal in 1999. There where almost no sites accepting PayPal balance and you certainly could not pay your groceries and rent with PayPal. If someone sent you money with PayPal, all you could do was withdraw it to your bank account in local currency and that was about it.

      This is exactly why PayPal is a completely inaccurate analogy. Paypal wasn't a currency, it was a payment method - you knew that, if you accepted Paypal, you had a guaranteed way to turn $X in Paypal balance into $0.95X in your checking account. For bitcoins to be in any way similar, you'd have to have a reliable third party willing to exchange them for USD/EUR/JPY at a fixed, or close to fixed rate.

  3. "according to the law" by dnaumov · · Score: 4, Insightful

    According to the law, the guy hasn't actually been convicted of anything yet, so WTF?

    1. Re:"according to the law" by Anonymous Coward · · Score: 3, Insightful

      Or unless the U.S. government (or your competitors, for that matter) claim it's connected with illegal narcotics.

    2. Re:"according to the law" by Rich0 · · Score: 5, Insightful

      Has Ulbricht actually been found - in a court of law - to be either, or confessed to being so? Not so far as I've heard.

      This is an asset forfeiture case. He isn't being tried or punished. His assets are being tried in a court of law, and the constitution doesn't give any human rights to assets, so they aren't entitled to such novelties as "trial by jury" or "innocent until proven guilty" or the "right to confront witnesses." Don't worry though, every time a stack of money was asked to speak up if they had any concerns with the proceedings it went along in silent acquiescence.

      In drug cases the first thing the US Government typically does is seize any assets they can find and use forfeiture to confiscate them with only an administrative procedure. The owner of the assets has no standing in the court to speak or prevent this - he is technically not under trial.

      Of course, when the accused is finally under trial he'll have a much harder time of it now that he has no assets with which to pay a lawyer. Oh, and if he is found to be innocent it doesn't change the fact that his assets were already found to be guilty. Apparently you can try to sue to get your money back, but you need to prove the innocence of the assets in question.

      And yes, if this sounds absolutely insane, that merely demonstrates that you aren't.

    3. Re:"according to the law" by Kjella · · Score: 3, Insightful

      His assets are being tried in a court of law, and the constitution doesn't give any human rights to assets

      The Bill of Rights was supposed to, this part:

      The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures

      Unfortunately all it takes is an unreasonable court to come up with an unreasonable definition of "unreasonable" and you've done an end-run around the Constitution. It's like defining slaves as property and not people, hence none of the rights guaranteed to the people are being violated. Sadly you need a bunch of lawyers to write a lawyer-proof definition and the Bill of Rights is very far from that.

      --
      Live today, because you never know what tomorrow brings
    4. Re:"according to the law" by bill_mcgonigle · · Score: 3, Insightful

      or more specifically:

      No person shall ... be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

      But since when has the US Federal Government operated according to the Law? We're living under the Rule of Man, with the color of Law.

      --
      My God, it's Full of Source!
      OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
  4. Re:So the US government buys bitcoins now? by ledow · · Score: 4, Insightful

    They aren't.

    They are seized goods.

    Same way they'd sell your car if that's what you had illicitly gained and they'd seized it - and they'd sell it for US$.

    This is just conversion of a seized good to monetary value (and probably at way below current rates, if "police auctions" etc. are any measure of how they'll go about it).

  5. Re:Marked as forfeited? by Anonymous Coward · · Score: 2, Insightful

    Was the wallet taken and extracted from without the owners' permission, yes or no?

    Even if the owner was a complete scumbag, it doesn't mean much. The exchanges do not want to deal with the US government nor this wallet and they don't have to.

  6. Re:Marked as forfeited? by Anonymous Coward · · Score: 5, Insightful

    I don't think you understand. No one gives a shit about what US law you think applies here or what rights the US gov't does or doesn't have here. To the Bitcoin community they were stolen.

  7. Re:Marked as forfeited? by Anonymous Coward · · Score: 2, Insightful

    Who is this "Bitcoin community" who decided that the bitcoins were stolen? And why should I trust that group of people? After all, if they decide that those Bitcoins are stolen, how can I be sure that they won't mark my Bitcoins as stolen should I ever do something they don't like (whatever that may be)?

    Captcha: trapped

  8. so because SR made money by ihtoit · · Score: 1, Insightful

    and deprived the Fed of tax revenue because they did it in a currency that the Fed don't control, the Fed get pissy and fucking STEAL IT!?

    Something is VERY FUCKING WRONG with this picture!

    --
    Political debates have me rolling my eyes so much I think I got optical whiplash. I should sue. - Foamy The Squirrel
  9. the government also sells office chairs by raymorris · · Score: 5, Insightful

    The government sells their surplus office chairs.
    Office chairs aren't tender.

    The government sells radio channels.
    Radio channels aren't tender.

    The government sells bitcoins.
    Bitcoins aren't tender.

    Legal tender is whatever type of payment you are REQUIRED to accept.
    If you eat at a restaurant and when the bill comes you try to pay with a check, they can say "we don't accept checks." If you refused to pay with anything other than a check, they could call the police or sue you for the $12. They can also say "we don't accept credit cards.". They HAVE to accept cash. If they refused your cash and then tried to sue you, the judge would laugh and tell them to read the $20 bill. It says right on the bill "this note is legal tender for all debts, both public and private.". That means you can't refuse cash and then claim that someone didn't pay. THAT is legal tender.

    Office chairs are not a tender because you can't force the restaurant to accept office chairs as payment. The fact that the government sells office chairs has nothing to do with it. They are still chairs, not money. The government can sell toys. Bitcoins are still toys, not money.