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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."

24 of 408 comments (clear)

  1. 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: 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?

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

      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.

      While I'm not claiming Bitcoin is comparable to PayPal, you arguments are weak. Bitcoin is already serving niche markets that can't take PayPal, say online drugs. It also enables deals that would not have been possible with reversible payment methods. Between the high fees of Visa, NSA's prying eyes and PayPal's overall suckiness, cryptocurrency like Bitcoin really has place.

      Should you "invest" in Bitcoin ? Probably not.

    3. Re:Killing two birds with one stone? by Njovich · · Score: 4, Informative

      According to bitcoincharts.com, trading volume in the past 24h was over 540k bitcoins. Not sure what part of that is from exchanges, but I doubt 30k extra bitcoins are going to really be earth shattering. I could be wrong though, Bitcoin prices are volatile and this kind of news can affect things and cascade.

    4. 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
    5. 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.

    6. 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.
    7. Re:Killing two birds with one stone? by thunderclap · · Score: 4, Interesting

      Overstock.com is taking BTC. So are many others. If you actually look back in our history you will see that the dollar didn't reach wide acceptance to post civil war. So BTC is a viable currency in its growth stages. You being a luddite is fine. Its your right. Just don't whine when your Landlord in 2025 does only take BTC.

    8. Re:Killing two birds with one stone? by michelcolman · · Score: 5, Informative

      Right now, I can't buy groceries with BTC.

      Wrong. Whole Foods accepts bitcoin.

      I can't take a friend out for lunch and pay with BTC.

      Wrong again

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

      Overstock.com, Amazon, CVS, Target, Victoria's Secret, Zappos, the list keeps growing.

      Of course most of these stores actually use a payment processor that immediately converts the bitcoins to USD for them, but if more and more stores start accepting it, at some point the currency may become so practical that such conversions will no longer need to be made. If a company does business with another company that accepts bitcoin, they may as well take bitcoin from their clients and then use those bitcoins to pay their suppliers. Transaction fees are much lower than those for credit cards, you don't even need any middle men.

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

      540K is the total number of bitcoins moved by the network, including coins shuffled around between wallets of the same persons. It has nothing to do with trading volume.

      If you tally up all daily volumes listed here in the last column: http://bitcoincharts.com/markets/ you get about 40K bitcoin traded daily. Bear in mind that most of that is daytrade, money circulating inside the exchange with equal buying and selling pressure. That statistic is also impossible to verify, many exchanges publish fake volume data to bolster perceived market share.

      A 28K exit into dollars will definitely dive the price and block any single exchange.

    10. Re:Killing two birds with one stone? by martin-boundary · · Score: 4, Informative

      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".

      Totally. wrong. The magic words that exist on USD and don't exist on BTC are "legal tender". It means the bad boys with guns of the US government protect the purpose of your USD's on US soil, as a means of exchanging goods and services. In other words, currencies become accepted because regional powers are willing to kill, maim, and imprison if need be to make it so.

  2. "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 Kaenneth · · Score: 5, Informative

      No, but his money and property has.

      Civil Forfeiture law is insane.

    2. Re:"according to the law" by wvmarle · · Score: 4, Informative

      Not likely.

      The US prosecution already decided that The Silk Road is an illegal venture, and on those grounds they have seized the property linked to it. This is exactly the same grounds on which they can seize say a boat load full cocaine, plus the stack of cash that's on the same vessel.

      A totally different issue is to find and prosecute the individuals responsible for running the venture (e.g. those operating the boat or responsible for the cocaine on board). These people may in turn also have property linked to the illegal venture, which then may be seized as well (I don't know what US law says about that).

      Now if the person is found not guilty, he can prove the seized bitcoin (and possibly other property) are his, and that the operation was in fact not illegal or that the seized property was not linked to that operation, then he may be able to get back his property.

    3. 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.

    4. Re:"according to the law" by SirGarlon · · Score: 4, Informative
      Well, presumably you would need a US attorney and a Federal judge to _agree_ that it's connected to illegal narcotics. TFA makes a couple of relevant points:

      The bitcoins that Ulbricht forfeited are a fraction of the total amount seized by the government in connection with the case.

      What the article doesn't say is why these assets have been seized, ahem, "forfeited," already, and what legal process was involved. I'll understand if you don't give the Federal government the benefit of the doubt, and assume the legal process was the prosecutor saying "those are mine, thanks." ;-)

      TFA does say:

      The government still holds an additional 144,336 bitcoins, worth around $130 million at present, and has asked a court to order the forfeiture of those assets, too. Ulbricht filed a claim contesting the government's move

      (emphasis added). So it looks like there is a legal process going on to seize more assets, in parallel with the criminal trial, and Ulbricht has some right to be heard in court before the rest of his Bitcoins get seized.

      I do agree, though, that this looks like an erosion of the presumption of innocence, which combines poorly with rapidly-growing Federal authority.

      --
      [Sir Garlon] is the marvellest knight that is now living, for he destroyeth many good knights, for he goeth invisible.
  3. 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).

  4. Marked as forfeited? by Anonymous Coward · · Score: 4, Interesting

    Wasn't those bitcoins marked as forfeited on the various block watching sites?

    If nobody want those bitcoins, they might be very hard to sell while other bitcoins can be sold without a problem.

    1. 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.

    2. Re:Marked as forfeited? by Dr_Barnowl · · Score: 5, Interesting

      You're running into one of the properties of BitCoin here - it's not anonymous, it's pseudonymous. You can't hide the transaction history of a given coin, because that's how BitCoin works - it's a single vast verifiable public transaction log. If someone doesn't want to accept coins that passed through a particular wallet, then it's easy to verify this. And if there are enough people who won't touch Silk Road coins, then their value will be dubious to the people who ordinarily would.

      It's impossible to "launder" BitCoin for this reason - you can always trace the entire transaction history for a given coin or subdivisions thereof.

      That said, I think it's unlikely that people will turn them down.

  5. 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...

  6. Value of Gold by Firethorn · · Score: 4, Interesting

    Gold is at least pretty and useful in a number of industrial and electrical applications.

    Of course, I don't trade in gold coins anyways - assessment costs* will eat up any 'profits' from gold price increases 9 times out of 10.

    *To determine the purity of the gold hasn't changed since you got the coins.

    --
    I don't read AC A human right
  7. 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.

  8. 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.