US To Auction 29,656 Bitcoins Seized From Silk Road

ClownP writes with news that the U.S. Marshals Service is selling off 29,656.51306529 Bitcoins that were seized when the Silk Road website was shut down. At current exchange rates, they're worth around $17-18 million. The coins will be auctioned off in nine blocks of 3,000 coins, plus one block with the remainder. The USMS said that the first deadline for bidders will be 9am Eastern Time on June 16, 2014. All bidders must complete the government's Bidder Registration Form, which requires that you provide a copy of a government-issued ID as well as a $200,000 deposit sent by wire transfer from an American bank. The government added that the highest bidder will win, and he or she cannot finance its payment in installments — the winner must pay the full amount in cash. The USMS added one final stipulation. "The USMS will not sell to any person who is acting on behalf of or in concert with the Silk Road and/or Ross William Ulbricht, and bidders will be required to so certify," the USMS stated.

Comments

Initial Offer

[puddingebola]

On the first bitcoin, I bid one bitcoin.

Re:Initial Offer

[hodet]

I'm out

Re:Initial Offer

[sribe]

That doesn't seem like a very profitable plan.

Re:Initial Offer

[prefec2]

You should give two bit coins. This would drive the auctionators crazy.

Re:Initial Offer

[Thanshin]

Not possible. You'll have to buy one block of 3000 bitcoins. ... Let's start out with 3000 bitcoins. There's 3000 bitcoin. Do I hear 3001 bitcoin? 3001 bitcoin? 3001 bitcoin? Do I hear 3001 bitcoin? Sold for 3000 bitcoin to the man in the funny hat.

Re:Initial Offer

[Anonymous Coward]

Welcome to the world of Bitcoin.

Re:Initial Offer

[BitZtream]

Can't read eh? The summary quotes the article so you just had to read the summary ...

But I'll help you out ...

the winner must pay the full amount in cash.

Re:Initial Offer

[K. S. Kyosuke]

Which finally explains how to get cash for your bitcoin. Step #1: be a government. :-)

Re:Initial Offer

[rmdingler]

You likely are if you can't access $200,000 for the right to bid.

That sounds fair and Democratic first rattle out of the box.

Re:Initial Offer

[wonkey_monkey]

I bid fifty quatloos on the newcomer.

Re:Initial Offer

[Anonymous Coward]

You're a few decades too late on that one, the requirement to put up surety money to show you're not wasting the auctioneer's time is a long-established practice that arose because of more than a few spoilers who had no real intention of fulfilling their obligations and were effectively....damn, the word for it is on the tip of my tongue. You know, when you don't have the assets for anybody to make a claim on you regardless.

Re:Initial Offer

[mr_mischief]

Perhaps you're looking for "judgment-proof".

The problem arises not just from wasting the auctioneer's time, although that is certainly a problem. Allowing people not serious about paying also wastes the seller's time, the other bidders' time, the time of the banks and accountant of the other bidders if the price is high enough, and potentially the time of the courts. Another big problem is that it tends to waste the money of the winning bidder in favor of the seller as the only real reason to bid without the means to buy is to shill and run up the price.

Re:Initial Offer

[Anonymous Coward]

I regularly sell bitcoin for USD on coinbase. There's many places to do it.

Re:Initial Offer

[hodet]

maybe he can use his bitcoin to buy you a sense of humor.

Re:Initial Offer

[Anonymous Coward]

Can't read eh? The summary quotes the article so you just had to read the summary ...

But I'll help you out ...

I assume you have Aspbergers or similar, so here's a tip: If it says (Score:5, Funny) you should just assume that the author (and most other people) realizes that the content isn't actually accurate.

Re:Initial Offer

[mrchaotica]

The problem is not putting up surety money, the problem is auctioning off the assets in blocks so large that only very wealthy people or institutional investors can participate. That's what's antidemocratic about it.

Re:Initial Offer

[tehlinux]

Can you imagine what that would do to the markets if everyone thought one bitcoin was worth two bitcoins?!

Re:Initial Offer

[amaupin]

Oh look, someone from the year 2010 who hasn't kept up with Bitcoin. How adorable.

Re:Initial Offer

[skovnymfe]

But say you buy one bitcoin and then sell it later at twice the value, and then you wait for the value to drop again so you buy two bitcoins for the money you made off of one bitcoin. It's genius! Patent pending.

Re:Initial Offer

[UnanimousCoward]

Really? It's a filtering mechanism based on some assumptions as to what the final bids will be. I don't see anything anti-democratic about it. As Rick Masters said:

"The fact is that if you can't come up with the front money you're not for real."

Re:Initial Offer

[Strider-]

I bid fifty quatloos on the newcomer.

I see your fifty quatloos, and raise you 5 ningis.

Re:Initial Offer

[Anonymous Coward]

That's what's antidemocratic about it.

It's an auction, not an election. A government run by elected individuals decided this was the most efficient way to sell of these seized assets. That's democratic. I think the word your looking for is egalitarian or something similar. Democracy doesn't mean social welfare for Bitcoin lovers.

Re:Initial Offer

[mmell]

No, but republic credits will be fine.

Re:Initial Offer

[GrumpySteen]

That's a non-issue. The bitcoins are being auctioned in lots of 3,000 which means each lot is worth about 1.7 million dollars. Anyone who can afford to make a reasonable bid will have no difficulty putting up a $200k deposit.

Re:Initial Offer

[BasilBrush]

I've kept up with them. They were work more than $1100 six months ago. Now about $580. The bubble burst.

Re:Initial Offer

[dubbreak]

Or go to a bitcoin ATM, . Of course some jurisdictions require a fingerprint scan etc.

Re:Initial Offer

[TheCarp]

You are missing the point of GPs statement. There is no reason all 29,656 have to be auctioned in a single block. There is no reason they couldn't be auctioned off in blocks small enough to let a person with far less be able to participate in trying to get some of the bitcoins they stole from a legitimate businessman.

Re:Initial Offer

[mrchaotica]

Why did you bother to reply if you weren't going to even slightly address the point I made?

The point I made was not that requiring surety money is unreasonable -- it is reasonable. The point I made was that 3000-bitcoin blocks, which requires every bidder to have $1.5M in liquid assets in order to participate, is unreasonable when it would be almost as easy and much more democratic to sell them either individually or in 10-coin blocks. You could still have a surety -- again, that's completely reasonable! -- but the surety would be something like $200 (for coins sold individually) or $2000 (for 10-coin lots).

Re:Initial Offer

[harperska]

They could have split the 29656 BTC into as many lots as they wanted. They intentionally split it into a few lots worth over $1M rather than more blocks worth less. Arguing over the amount of the surety money is missing the point. $200K is a reasonable amount assuming the final bids will be over $1M, but that is just ignoring the question as to why the blocks are that large in the first place. The intentional decision to auction the bitcoins in the completely arbitrary size of 3,000 blocks presumably simply for the purpose of limiting bids to institutional investors and the otherwise wealthy is what people are arguing is undemocratic.

Re:Initial Offer

[sir-gold]

If they have 29,000 bitcoins, why do they have to sell them in such large chunks? Even switching to 29 lots of 1000 would open the door to significantly more bidders/
When they bust a drug dealer, they don't sell his entire car collection in a single massive lot, so why are they doing such large bundles this time?

I think the government doesn't really want the public to have these bitcoins, and they are only selling them because they are legally required auction-off seized assets.
Their ideal buyer would be someone who never shares them and never spends them, effectively removing them from circulation.

I suspect that there is some other law setting a maximum value for lots, otherwise they would have just sold the entire thing as one lot, in the hope that NOBODY would buy them, and the asset could be declared valueless and simply destroyed.

Re:Initial Offer

[Anonymous Coward]

You didn't even read the summary. It's not being auctioned off in one 29,656-sized block. It's being auctioned off in 10 blocks, the first 9 of which are 3,000 and the final block is 2,656. That already seems pretty fair to me. I mean, at what point do you expect them to stop splitting it up? You certainly don't expect them to do 29,656 auctions of 1 bitcoin each, do you?

Re:Initial Offer

[DanielRavenNest]

The peak of $1107.92 on 30 Nov 2013 only lasted one day. That's cherry-picking your data.

One year ago today the 24-hour average price was $109.36, so at $575 we are up 425% for the past year.

The 12-month moving average is about $425, and we are comfortably above that.

Re:Initial Offer

[Anonymous Coward]

insightful to be a complete idiot? slashdot = stagnated

what happens when a drug cartel has their $10,000,000 yacht confiscated? rip out all the teak and sell that separate?

"antidemocratic"???? if a democracy chooses capitalism, then the application of capital cannot be antidemocratic. YOU are antidemocratic, and thus an ignorant hypocrite.

Re:Initial Offer

[UnanimousCoward]

Agreed. But it would be interesting to find out how they came up with 9x3000 + the leftover. Do they try to limit dividing divisible property to 10 blocks?

Re:Initial Offer

[BasilBrush]

The peak of $1107.92 on 30 Nov 2013 only lasted one day. That's cherry-picking your data.

When pointing out the decline after a bubble, it's usual to "cherry pick" the peak of the bubble.

If you're still investing in this, you're a fool.

Re:Initial Offer

[Anonymous Coward]

Or use any of the crypto exchanges like everyone else. I don't get your joke.

Re: Initial Offer

[Anonymous Coward]

You complained about the money and didn't specify that you would be content with smaller blocks.

Re:Initial Offer

[amaupin]

You implied there's no way to convert Bitcoin to cash. That's laughably out of date.

Re:Initial Offer

[jonbryce]

There are lots of people with $600[1] in the bank who could bid for one bitcoin. There are not so many people with $1.8m in the bank who can bit for a block of 3000 bitcoins. Therefore they will probably sell for less than market value, and the winning bidders will likely make a profit from selling them off individually.

[1]$600 is based on the current prices quoted on Bitcoin Charts rounded to one significant figure.

Re:Initial Offer

[Anonymous Coward]

Well technically the peak of ANYTHING will only last for one moment in time... That is why they call it the peak after all ;D

Re:Initial Offer

[James McGuigan]

There are several reasons I imagine for keeping the bidding to institutional investors:

1. They can't sell the coins directly on a non US based bitcoin exchange
2. They have a stated aim of keeping these coins from going back into the underground economy (ie individuals)
3. A high barrier to entry limits the number of bidders to an amount manageable via a bureaucratic paper/in-person auction
4. Less to go wrong technically, institutional investors are less likely to claim they didn't receive their coins.
5. They get to enforce a set of unoffical financial regulations on institutional investors, which they hope to become a defacto trading standard
6. A low number of auctions/bidders makes for a more strategic bidding process, rather than "market rate" approach over hundreds/thousands of small auctions
7. Lots of small bids would likely see these coins almost immediately dumped on the exchanges, possibly causing a price crash before the auction ended
8. The fear that if the process was opened up to the public, then "digital pirates" may attempt to interfere with the process as a form of activism
9. An unofficial kickback to the financial elite, to keep them friendly to the FBIs requests

Re:Initial Offer

[Anonymous Coward]

On the first bitcoin, I bid one bitcoin.

Why would you (or anyone) bid anything on something that inherently has no value? The way I understand it Bitcoin wallets are encrypted, if you don't have Ross Ulbricht's pass-phrase the bitcoins in the wallet can't be accessed.

Re:Initial Offer

[NemoinSpace]

Inadvertently setting the ask price of a bitcoin at $66 is going to wonders for the market. Pull up a chair, there are going to be a lot of losers before June 27.

Re: Initial Offer

[Anonymous Coward]

I'm willing to bet it's not accidental.

Re:Initial Offer

[Anonymous Coward]

No, but they could just place sell-orders of them all on the existing exchanges at the current exchange-rate...

Re:Initial Offer

[Anonymous Coward]

What happens when a drug cartel has $100,000,000 in Euro or some other currency confiscated? Sold off to the highest bidder in 10 chunks or exchanged into local currency at a bank?

Re:Initial Offer

[BasilBrush]

No I didn't.

Re:Initial Offer

[Anonymous Coward]

But I'll help you out ...

the winner must pay the full amount in cash.

So some guy walks into an FBI office with $200,000 in cash to place a bid, the FBI tazes the bidder, and charges the $200,000 with the crime of being in the wrong place at the wrong time in civil court, and throws the bidder out on the street without charging him with anything. The broke bidder can't afford a lawyer, the FBI keeps the $200,000, and they can do this without even losing control of the bitcoins. Brilliant!

Re:Initial Offer

[Jack Griffin]

It's neither democratic nor undemocratic. When an organisation auctions off surplus stock their primary goal is not giving you a good deal, they just want the stock gone. By auctioning less lots, with larger amounts, they will go a lot quicker with less fuss. Even if they get 10% of the market rate it's all profit. If you've ever been to a govt auction, this is pretty much standard practice.

Re:Initial Offer

[unitron]

You should give two bit coins. This would drive the auctionators crazy.

There wouldn't be an auction. The value of the two-bit coin is permanently pegged to one fourth of a dollar.

Re:Initial Offer

[rpstrong]

Groan.

Do they accept

[ComfortablyAmbiguous]

Do they accept payment in Bitcoins?

Re:Do they accept

[Anonymous Coward]

I wonder if they registered with fincen. Otherwise, they are setting the precedent of of auctioning bitcoins as a loophole...

Re:Do they accept

[BitZtream]

You fail at reading comprehension.

From the summary that you apparently partially read

the winner must pay the full amount in cash.

Re:Do they accept

[Anonymous Coward]

whoosh

Re:Do they accept

[Bazman]

Expected riposte from bitcoinfanbois insisting that bitcoin is a form of cash in 3...2..1..

Re:Do they accept

[ncc74656]

I wonder if they registered with fincen. Otherwise, they are setting the precedent of of auctioning bitcoins as a loophole...

<sarcasm>
When the government does something, it's not illegal.
</sarcasm>

Re:Do they accept

[ArcadeMan]

The only people who are literally too stupid to live are the people who can't remember how to breathe.

Re:Do they accept

[Linzer]

The only people who are literally too stupid to live are the people who can't remember how to breathe.

And even then, we put those on breathing machines.

At this point what we are stuck with is a bunch of people who are too stupid to die.

Re:Do they accept

[rogoshen1]

why the sarcasm tags?

Re:Do they accept

[Anonymous Coward]

why the sarcasm tags?

Because when government A does thing A, it is not illegal. If government B does thing A, it is illegal.

Secondly, government breaks their own laws too.

That's why the comment is tongue-in-cheek.

Re:Do they accept

[rogoshen1]

Well, the sad thing though.. the US government *does* play by those rules. It is literally a true statement at this point.

Re:Do they accept

[ncc74656]

why the sarcasm tags?

To make clear that it was a sarcastic remark. The two nitwits who put in -1, Troll downmods are apparently too dense for even that to register.

Laundering

[Talderas]

They're laundering the coins. The high bidders will end up being shell companies for TLAs.

Re:Laundering

[Anonymous Coward]

This is exactly what they are doing.

Re:Laundering

[dotancohen]

Even worse than laundering: the US government is ensuring that only the rich have access to these bitcoins sold at a reduced price.

The coins should be sold on the open market and the proceeds put in the same coffers as tax money to reduce that burden. Instead of doing that, they are ensuring that the wealthy can acquire more items of value that can then be directly liquefied.

Re:Laundering

[Anonymous Coward]

Only the rich? If they sell at reduced prices, anyone can get a loan in order to immediately re-sell at full price. A no-risk business - if they really sell at reduced prices.

Re:Laundering

[thesandtiger]

Which "open market" should the government use? What system should they use to manage the sail of those coins? How should they ensure that the market they use is legit and secure? What process should they use to ensure that the Silk Road guys aren't just re-buying their stuff? Who will handle oversight to make sure this all goes off accordingly?

Pretty much answering any one of those questions would be a process that costs far more than the estimated value of the bitcoin they have.

Far better for them to use their existing process of auctioning off random shit they seize.

Also, the government couldn't care less if you can't afford to buy the stuff they auction off.

Re:Laundering

[LordLimecat]

Why would a TLA want bitcoins? How would it help for a TLA to use a government-granted budget to buy bitcoins? Theres still a paper trail.

Re:Laundering

[Anonymous Coward]

What process should they use to ensure that the Silk Road guys aren't just re-buying their stuff?

Why shouldn't they have the same opportunity to throw money at the government and speculate on cryptocurrency as every other person? They might be prosecuted, but how is this auction linked to that?

Re:Laundering

[jtownatpunk.net]

Anyone? Really? You're gonna run down to Speedy Cash and get a loan for $200,000 just for the ability to place a bid? And, when you win at $500 per, they're going to give you another $1,300,000 to pay the balance? Let us know how that goes for you.

Re:Laundering

[thesandtiger]

I'm going by the stated intent to prevent that which is in the summary. I don't know if there are laws about those associated with a civil forfeiture being eligible to bid on items from that forfeiture, but it seems like that's the intent, and it seems like since it's stated there it would be something worth investigating if trying to set up an entirely new process for handling this kind of disposition of assets.

My point here being not so much "what is right" but more "there are a lot of questions to be asked and answered about changing the way this kind of thing is done, and they are all very expensive to resolve, probably more expensive than the potential improvement of efficiency will ever be worth."

Re:Laundering

[AnOnyxMouseCoward]

So excuse my ignorance, but can 17 million$ worth of BTC be liquidated easily? What's the volume of BTC transactions, and wouldn't selling those crash the prices?

Re:Laundering

[Anonymous Coward]

Why would a TLA want bitcoins?

To make purchases from certain organizations that don't accept credit cards.

How would it help for a TLA to use a government-granted budget to buy bitcoins?

Because the federal government cannot print bitcoins.

Theres still a paper trail.

Yes, but "Arty's Assassination Association" won't see that trail as connecting to a TLA and some undercover buyers can find out whether Arty is guilty of murder-for-hire or only guilty of false advertising.

Re:Laundering

[deKernel]

If that is how you would have to operate...guess what...you can't afford to buy them show you should not be participating in the auction. See how easy that is.

Re:Laundering

[DerekLyons]

The coins should be sold on the open market

Other than the restriction about not acting in concert with Silk Road et al., there's precisely nothing closed about this market. "Open market" does not mean "cheap".

Re:Laundering

[DocSavage64109]

From the gggp: "Even worse than laundering: the US government is ensuring that only the rich have access to these bitcoins sold at a reduced price."

Apparently you agree.

Re:Laundering

[Anonymous Coward]

Which "open market" should the government use? What system should they use to manage the sail of those coins?

i would imagine they would want a boat

Re:Laundering

[mrchaotica]

Far better for them to use their existing process of auctioning off random shit they seize.

So, you're saying that when they seize some drug dealer's $5000 car they wait until they have a lot of 3,000 cars to sell off at once?

I ask because that's exactly as stupid and unfair as what they're doing here, which is excluding all "normal person" bidders by aggregating the bitcoins into huge lots instead of selling them individually for no good reason.

Re:Laundering

[thesandtiger]

I didn't say anything about the intelligence of the process, or the fairness - just it is what it is.

They want their money as fast as they can get it, and couldn't care less about being "fair." They organize the sales of their items in whatever ways will make it more likely to sell and to make it as easy as possible for them to get rid of those things because they are not in the business of managing assets.

They are allowed to bundle things in a way that allows them to sell stuff and minimize overhead. To wit:

If there were a ton of buyers out there who would be willing and able to buy 3000 $5000 cars in one go, then yes, you bet your ass they would lump the sales of cars they take in that way. But, there aren't many buyers out there willing to spend 15 million dollars on a bunch of shitty used cars, so they instead sell them in smaller lots or individually, because that's the only way that those cars will sell.

With bitcoin, there are a ton of buyers out there who would be willing to pony up the deposit of $200k, as well as who would be willing to buy lots sized of 3000 coins at ~500-1000 dollars per coin, and it's a LOT easier to sell to those people than it is to sell to thousands of people who are buying a single coin or whatever.

And, actually, this is in a way MORE fair than having it open to everyone. Normal people - read: not rich - would not be able to get their hands on a single one of these coins UNLESS the bidding got up so high that the people with tons of money decided that yeah, there's no potential for profit to be made by buying them at that price. So "normal people" wind up paying so much/taking on risk for the coin that moneyed interests aren't willing to touch.

And, to pre-empt any silly "how is this different than the car auction" comparisons again, it's different in that selling a bitcoin on an exchange is (probably) easier to do than selling a used car is. When there are easier ways to make money, shitty used cars aren't worth snapping up to keep away from other people. And, actually, if you ever go to an auction of non-shitty cars, they wind up going almost ALWAYS to someone who has plans to flip the car, not actually use it. "Normal people" aren't going to be getting to participate in the auctions that are about making money rather than just obtaining a shitbox to help with your daily commute.

Re:Laundering

[Anonymous Coward]

The problem is that a bitcoin price is very malleable, so a reduced price is likely to adjust the market price. You may pay a million, but actually buy something you can only sell for $800,000. In the simpleton's mind, what you pay is the value, in the sophisticate's mind, what you can sell it for is the value. It is only a discount if it can be unloaded with a guaranteed profit.

Re:Laundering

[Anonymous Coward]

Arty is an idiot if he can't look at the blockchain and see that the coins were sold by the government to large organizations who can buy 3000 at a time and then realize that it's probably a trap.

Because the federal government cannot print bitcoins.

Yeah, right. The government could probably mine 30000 coins in thirty minutes on spare CPU power on some defense computer system. If the NSA doesn't already have ASIC ready to attack hashes of any flavor, then their power is already overstated.

Re:Laundering

[alexander_686]

You can sell something either at retail or wholesale. Retail has higher overhead so things cost more. And I am not sure how much retail business the government should be in.

To your point, when you sell cars at wholesale you tend to do it by the car. That is the natural lot size.

The government would only be favoring the reach and well-connected if the spread between auction price and the market price was higher – which can be hard to tell when you are dumping a huge supply of something – but the principle holds. If the spread is lower than the cost of running a retail store then action it should be. (That being said, I would think more and smaller lots should be the way to go - ,su)

Re:Laundering

[Anonymous Coward]

So, you're saying that when they seize some drug dealer's $5000 car they wait until they have a lot of 3,000 cars to sell off at once?

Actually, that is (almost) exactly what they do. They never just auction off one seized vehicle. They wait until they have a large lot of them that they can sell at one event.

At some point, splitting up the bitcoins becomes unwieldy, expensive, and inconvenient for them. They probably figured this was a low enough value that they could find bidders, but a small enough number of lots that they could get rid of them quickly and efficiently. More lots at lower prices also means more bidders and more background checks. They also probably figured that they'd end up with the exact same buyers they're getting now, but it would just take more of their time. The same kind of financial institutions and rich individuals that can afford the $200k deposit are the same ones who would simply outbid the people who can't afford the $200k deposit.

Re:Laundering

[DanielRavenNest]

There are exchanges that handle that many coins daily: http://bitcoincharts.com/marke...
And three investment funds on Wall Street with more than that amount already.

All you need to do to not crash the price is arrange a private sale, or release the coins gradually. About 3800 newly created coins are generated every day, and the market absorbs that, so just keep your daily sales smaller than that, like 1000 a day or less.

Re:Laundering

[DanielRavenNest]

> The government could probably mine 30000 coins in thirty minutes on spare CPU power on some defense computer system.

No they can't. The combined hashing power of the bitcoin network is 1.15 million Petaflops. The top 500 supercomputers in the world have a combined power of 250 Petaflops ( http://s.top500.org/static/lis... ). Even if there are hidden NSA machines or whatever, they don't account for that big a discrepancy.

The reason the bitcoin network is so much faster is they use custom chips that do nothing but the SHA1 hash calculations used in mining. It's directly wired into the transistors, they can't be used for other math. But you can pack tens of thousands of copies of that algorithm on one chip, and mining rigs have boards with ~36 chips each, and multiple boards.

Also, the network difficulty adjusts every 50,400 coins (2016 blocks @ 25 coins per block), so if someone *could* mine that fast, the difficulty adjustment would bring it back to the normal rate (300 coins per hour) rather quickly. Lastly, that high a mining rate would be considered a "51% attack" on the network, and the rest of the network would rapidly reject the blocks and fork the history.

Re: Laundering

[bill_mcgonigle]

the government is being superficially lazy to benefit wealthy interests? You don't say. Organize a protest outside Goldman Sachs when the auction is over - if you're lucky it'll be on the same day that the government sold a few billions of dollars of Fed bonds through them so they could take their percentage.

Re:Laundering

[Anonymous Coward]

Of course they can, 50 million to 150 million USD volume per day on average.

Re:Laundering

[david_thornley]

The government's liquidating them easily. What the purchasers do is up to the purchasers. Trying to immediately cash out on the exchanges will depress the price (the amount depending on volume), and would lose money, so it isn't likely to happen.

Re:Laundering

[Anonymous Coward]

The reason the bitcoin network is so much faster is they use custom chips that do nothing but the SHA1 hash calculations used in mining. It's directly wired into the transistors, they can't be used for other math. But you can pack tens of thousands of copies of that algorithm on one chip, and mining rigs have boards with ~36 chips each, and multiple boards.

Yes, and you're talking about an organization that has its own CPU fabs and measures its computing power in acres, not petaflops.

I hope they get whatever they can for them

[EzInKy]

It really isn't a governments job to sell of fake currency though. They should be only dealing in whatever is accepted as the coin of the realm as it would be, and imprisoning all those who try to subvert it.

Re:I hope they get whatever they can for them

[alen]

IRS said bitcoin is property

Re:I hope they get whatever they can for them

[Anonymous Coward]

and the auction by the government only legitimizes it further as a real asset worth real money.

Re:I hope they get whatever they can for them

[Richard_at_work]

Governments deal with foreign currency all the time, but as the other poster says, the IRS have already stated they consider BitCoin to be property rather than currency - and the government auctions property even more frequently than they auction foreign currency.

Re:I hope they get whatever they can for them

[thesandtiger]

This isn't any different from them auctioning off any asset seized by law enforcement though.

They're basically treating bitcoins like anything else. It's the same as them auctioning off Beanie Babies or baseball cards. They want to convert things they take into US currency and auctions are how they get what the market will bear from it while doing so quickly.

Re:I hope they get whatever they can for them

[Richard_at_work]

The government has never been against that, so it doesn't need 'legitimising' in that manner.

Re:I hope they get whatever they can for them

[Salgat]

What's your point?

Re:I hope they get whatever they can for them

[thesandtiger]

No, it doesn't, actually, or at least not any more than it somehow makes cars, homes, or other items seized and auctioned off suddenly become money.

What would legitimize it would be if they kept them and used them as money to buy things. They aren't. They're getting rid of them and explicitly NOT treating them like money.

It's literally no different than if they'd seized any other thing that some people think is worth buying.

Re:I hope they get whatever they can for them

[kruach aum]

Let me blow your mind right now: all currency is fake. That's what makes it currency instead of bartered goods.

Re:I hope they get whatever they can for them

[Anonymous Coward]

Do you bitcoin people think this is something new?

They are trying to get some money back from property they confiscated. It could be a truck load of grass seed, a house, stocks, bonds, a bunch of plastic bottles filled with tap water or even a bunch of widgets. It does not matter what it is. The government only wants the value of "it" in US currency. When it comes to getting rid of seized property, they are not a reseller, a property owner, a speculator, a bitcoin trader, a car dealer, an ebay store front or a thrift store. They just auction it in bulk in as few transactions as possible to those that may be.

Re:I hope they get whatever they can for them

[Anonymous Coward]

Actually, in the eyes of the court, it does. If a future government were to declare the use of bitcoins (or alternatives) as currency 'illegal' - as in the exchange of bitcoins for tangible goods, or in this case, US currency - this constitutes precedent. Your claim that they are "NOT treating them like money" is nonsense. You are making shit up. As ridiculous as bitcoins may be, they are being treated as a commodity.

Re:I hope they get whatever they can for them

[LordLimecat]

So is a collection of national geographic magazines.

That doesnt make it currency.

Re:I hope they get whatever they can for them

[thesandtiger]

You're very confused.

Being able to pay for something with legal tender (US dollars) does not somehow make the things you buy with legal tender into legal tender itself. Nor does it somehow turn it into a currency. It sets no precedent.

Selling bitcoin - or ANYTHING ELSE - at an auction in exchange for US dollars does not set ANY kind of precedent establishing that bitcoin - or ANYTHING ELSE - is now legal tender. In fact, it establishes the opposite.

What WOULD set a precedent is if the government called up some suppliers and gave them bitcoin directly in exchange for things that aren't legal tender, because then they would be saying that bitcoin is the same as US dollars.

What they are doing here is saying "we have these bitcoins (and other things) and we would rather have US dollars, which are legal tender. We will give you these bitcoins for dollars, which we will then go and use like real money."

This isn't difficult.

Re:I hope they get whatever they can for them

[CanHasDIY]

and the auction by the government only legitimizes it further as a real asset worth being taxed.

FTFY. And now you know their motivation.

Re:I hope they get whatever they can for them

[cellocgw]

and the auction by the government only legitimizes it further as a real asset worth real money.

Only if they actually get some bids. I'd love to see a scenario where only one bidder shows up and (despite the $200k honest money requirement) bids 50cents.

Oblig: why doesn't the USgovt put it on eBay with a BIN of $Xmillion?

Re:I hope they get whatever they can for them

[Anonymous Coward]

You're very confused.

No, he's not. You see to be though, because he never said this makes bitcoins legal tender.

Re:I hope they get whatever they can for them

[cpghost]

Selling bitcoin - or ANYTHING ELSE - at an auction in exchange for US dollars does not set ANY kind of precedent establishing that bitcoin - or ANYTHING ELSE - is now legal tender. In fact, it establishes the opposite.

You're right. It would make bitcoin legal tender only if you could pay for the auctioned bitcoins with... bitcoins. But then again, that would be pretty pointless, wouldn't it?

Re:I hope they get whatever they can for them

[thesandtiger]

If the government sold US dollars for bitcoin, I would say that sets a precedent that they are treating bitcoin like legal tender. A weak precedent, since the argument could be made that they "sell" US dollars for fighter jets, and yet fighter jets are not legal tender.

If the government accepted bitcoin for other things they offer, I would say that sets a precedent that they are treating bitcoins like legal tender. That would be a much stronger precedent.

If the government purchased things with bitcoin directly - as in used it to settle debts - then that would be the strongest possible precedent (short of them flat out saying "bitcoin is now legal tender") that they are treating bitcoin as legal tender.

The government is not treating bitcoins like they treat legal tender, not in any way, shape or form. I know you're probably just being silly with the "buy bitcoin with bitcoin" line, but there are - as I pointed out above - ways that you could establish a precedent that don't involve sophistry.

Re:I hope they get whatever they can for them

[Anonymous Coward]

An extension of your logic leaves houses, cars, airplane tickets, bread, milk, and cheese as "currencies". Basically this idea would recast bartered items as currencies, and would eventually make any commodity a currency. I agree that commodities have value, but in many respects they are not currencies, because I can't pay my electric bill in cheese, without some sort of prior agreement. However, I can pay it using a currency, because the government supports payment in currency as the basis for financial agreements. It's implied through all business transactions, and therefore useful as a means of valuing the transaction.

Re:I hope they get whatever they can for them

[mmell]

"a real asset worth real money"

Which means they aren't money themselves. Good to know.

Re:I hope they get whatever they can for them

[Anonymous Coward]

You are the only one talking about legal tender. Perhaps that is the source of disagreement.

Re:I hope they get whatever they can for them

[Karl Cocknozzle]

Let me blow your mind right now: all currency is fake. That's what makes it currency instead of bartered goods.

This. Times a million

Every currency (Yes, Virginia, even gold-standard currencies) are completely fake and arbitrary. The difference between fake and arbitrary fiat currency and fake and arbitrary gold-standard currency is exactly one layer of abstraction, because the "value" of gold is in itself pretty arbitrary. It is somewhat rare, but it's "value" is completely generated by the human mind. Which is actually for the best--can you imagine how high the price of gold would be if it was actually useful for something besides making jewelry and helping Fox News scam old people out of their savings with terrible gold investment opportunities?

Humans assigned "value" to gold because it was rare-enough to avoid hyper-inflation, but common enough that you didn't have to worry about deflation. And that worked just fine for a few tens of thousands of years... until there were too many humans for the world supply of gold to adequately represent new wealth and value as they're created.

If a more numerous race of aliens had evolved on this planet they might have assigned value to blades of grass, pebbles, or certain kinds of trees in a similar matter based on their own needs.

Which is why the entire "gold standard" argument (that "our money is fake and worthless") is so stupid: Yes, it is fake and worthless. So is all other money, everywhere--the value comes from the perception. So it doesn't matter if its "backed by gold" or "backed by Jell-O Pudding pops" the fact is, the value is based totally on the perception of value of something. With fiat currency, it's the perception of the value of what you can buy, with "gold-standard" currency it's the perception of the value of the gold. But neither has any "real" value without that perception.

Re:I hope they get whatever they can for them

[EuclideanSilence]

The real distinction of legal tender, I.M.O., is when you don't have to pay taxes on transactions or capital gains. That's why one could argue that capital gains tax on gold is unconstitutional, because it undermines it's distinction as legal tender. "No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts..."

Re:I hope they get whatever they can for them

[jonbryce]

When the Feds bust a normal street-corner drug dealer, they get "legal" property, such as cars, and illegal property such as their inventory of drugs. The illegal property is retained as evidence until the court case is concluded, then destroyed. The legal property gets sold off.

The Silk Road bust is subject to the same laws as any other drug-dealer bust, so by auctioning off the bitcoins, they are declaring that they are legal property.

Re:I hope they get whatever they can for them

[jonbryce]

Legal tender means that it must be accepted as settlement of debt. The IRS will in practice accept checks and bank transfers as settlement of tax liabilities, but that does not make them legal tender.

Re:I hope they get whatever they can for them

[david_thornley]

Trading one thing for another is legal, even if neither thing is money, and even if it's a commercial transaction. I know of a case in which some advertising was paid for with boat covers for the agency owners (my wife was doing the accounting there, and had to find out how to enter it). All the government cares about is picking up the proper amount of taxes.

Re:I hope they get whatever they can for them

[david_thornley]

Logic fail. The Constitution permits states to make gold into legal tender. That doesn't mean gold is inherently legal tender. BTW, what transactions and capital gains are you talking about? I have to pay taxes on my interest income, and since there's only one legal tender in the US it can't be bought and sold.

The real distinctions between dollars and bitcoins: (1) The government requires dollars in payment of taxes and fees. (2) The government requires accounting in dollars, so as to calculate taxes. (3) Courts will normally award dollars as damages in civil cases.

Re:I hope they get whatever they can for them

[aNonnyMouseCowered]

"but it's "value" is completely generated by the human mind"

All value is all in the mind. A juicy BigMac can be way more valuable than gold or diamonds to a starving man. Now if there's anything that's naturally valuable it's the biological necessities like oxygen (free for almost everybody except those with severe breathing problems), water, food, and possibly sex to person (man?) of breeding age. Everything else is an acquired taste.

By using such large blocks

[Anonymous Coward]

It guarantees the uber rich and organized crime will be the only people able to afford them. why not drip them onto a reputable exchange? let everyone buy any amount of them at market rates?

Re:By using such large blocks

[Anonymous Coward]

It's an auction of property they seized. If the property value is expected to sell for more money than you have, you will not be the highest bidder. This is the way auctions (government and non government) have been for just about ever. This has nothing to do with the rich or poor. There is no incentive to split them into 29,000 individual items either. That would be a waste of time and money.

Re:By using such large blocks

[Culture20]

Using an "exchange" would legitimize it as currency. Auctioning it treats it as property. Imagine the government was auctioning dollar bills seized in a drug raid, or tried trading seized sports cars for dollars on a currency exchange.

Re:By using such large blocks

[thesandtiger]

Because that's not how the government works in this regard?

They take shit, they auction it off to the highest bidder. The government is not in the business of managing an inventory, they want to convert whatever they take into cash as fast and efficiently as possible.

They think 3000 coin lots is the most efficient way for them to sell them, and couldn't give a shit as to who buys them as long as they pass the vetting process.

Re:By using such large blocks

[timrod]

I can actually imagine the government being incompetent enough to try auctioning off dollar bills from a drug raid. It makes me laugh, but not quite as much as the thought of idiots bidding ten dollars for that dollar bill.

Re:By using such large blocks

[Anonymous Coward]

Do you get a certificate that it is one of real Authentic Dread Pirate Roberts' Dollar Bills? If yes, this kind of idiots is called "collectors".

Though at 17 million run it's not that collectible...

Re:By using such large blocks

[sir-gold]

They could still do 29 lots of 1000, instead of 9 lots of 3000
They just don't want the public to have bitcoins.

Re:By using such large blocks

[DanielRavenNest]

> They just don't want the public to have bitcoins.

It's a bit too late for that, given that there are 3.2 million online bitcoin wallets between just the two largest services (Coinbase.com and Blockchain.info), and about 150,000 unique bitcoin addresses are used daily ( https://blockchain.info/charts... ) Addresses are not equal to users, they hold some number of bitcoins each. Wallets hold the private keys that control addresses, and you can have multiples, but the point is lots of people already have access, and it's moving around a fair amount.

Re:By using such large blocks

[DanielRavenNest]

> The government is not in the business of managing an inventory,

Tell that to the Bureau of Land Management, or the General Services Administration.

Re:By using such large blocks

[sir-gold]

Then why are they trying so hard to make sure that only the wealthiest of the wealthy have any hope of winning even a single bitcoin from this auction?

It's not like a house or car or something that can't be subdivided and must be sold as a single item. They could break this auction into any number of smaller lots, but they intentionally chose to break it into as few as possible, in order to artificially raise the barrier to entry so that only those people with a spare $2 million in cash are allowed to bid.

Re:By using such large blocks

[Anonymous Coward]

Because they do not care and they shouldn't. They want rid of them in the easiest and least time and administrative consuming method possible. This is how ALL auctions are done. The auction should start and finish in a few hours. If there is a market for them and they can sell 3000 at a time, they will sell them. If not, they will break them up and try again. Is that really hard to understand? Different government agencies have probably thousands of auctions a year, this process and method of quickness and get rid of it is nothing new.
Separate yourself from your delusional attachment to everything bitcoin and think outside the box. If bitcion ever does become a common form of currency and not just a bunch of geeks loathing and speculating over the concept, it will be treated just like.... Every other form of currency that has ever existed. Your days in the shadows talking about freedom and the ideology behind it and your part in the system and fiat this and that will be long forgotten. No world problems will be solved by any form of crypto currency.

Re:By using such large blocks

[Anonymous Coward]

Then you would have 29 people outbidding you instead of 10. If someone can afford to buy one of these lots, they can afford to buy 3 of your lots.

Re:By using such large blocks

[Anonymous Coward]

I've bought various things from a government auctions before. Back in the mid 90's I has highest bidder on a single lot of computer stuff. It was roughly 200 CRT monitors, 30 LJ printers, 50 desktops, random KB and mice. I think it was around $6K. I had 12 hours to get all of the equipment off site. Why didn't they separate out the different components into different lots? Why didn't they sell 20 lots of 10 monitors separately? Wouldn't that have been more fair? Who has the storage space for all of that and can get it off site in 12 hours? Who knows and they do not care. That is the way they do it. They are not in the retail, storage, or resale business, they want rid of it and they get rid of it the easiest way there is with as few transactions as possible.

Re:By using such large blocks

[Anonymous Coward]

Adding comments together, it seems they do not favor the rich. That is just merely more convenient.

Which makes no difference to the non-rich.

It does have everything to do with the rich and poor. It is simply more "efficient" to destroy all the poor.

You can spin all you want, but that is the truth.

Re:By using such large blocks

[Anonymous Coward]

The poor being destroyed through efficiency? What does that even mean?

You typed your message on a computer from the comfort of your desk or from your smartphone while sitting in the park and posted it for the world to see. That is more efficient than typing or hand writing 100K copies to paper and distributing it to people around the world. How many poor people did you destroy with your efficiency? Using more efficient methods is good for you but not for other people?

Re:By using such large blocks

[Anonymous Coward]

Don't worry. The buyers will probably split the lots and resell them for a profit. The public will get the bitcoins.

Re:By using such large blocks

[unitron]

I can actually imagine the government being incompetent enough to try auctioning off dollar bills from a drug raid. It makes me laugh, but not quite as much as the thought of idiots bidding ten dollars for that dollar bill.

Maybe they think that dollar bill had soaked up $10 worth of cocaine or whatever from being stashed with the drugs.

I heard several years ago that there are basically no one hundred dollar bills in circulation for any length of time that do not have traces of cocaine.

has there been a trial?

[Anonymous Coward]

Selling off his stuff implies he or Silk Road were found guilty.

Re:has there been a trial?

[Anonymous Coward]

Perhaps you haven't been paying any attention to the American judicial system ...

Re:has there been a trial?

[Anonymous Coward]

Well, the owner of Silk Road would first have to actually claim the coins. Right now, no one is taking ownership of said coins so they are considered abandoned. The government is not a storage locker. You get a set amount of time to claim your property or its abandoned. It's the same as if your car was towed and you didn't come get it. Or if someone steals some of your stuff and is later caught by police. The police will hold the items until someone claims them or they are considered legally abandoned then auction them off.

As far as this move showing the feds find Ulbricht guilty without trial, he says he didn't run Silk Road so why would auctioning off SR assets matter to him? Ulbricht objecting to the sale would be as legitimate as me objecting to the sale. I don't have any rights to the coins, and he disavows any rights to them.

Re:has there been a trial?

[Anonymous Coward]

great answer thx

Re:has there been a trial?

[tompaulco]

I would imagine that most of those coins were being held in accounts at Silk Road but actually belonged to other individuals. If they were using them to buy drugs it is no surprise that they don't claim them. However, if the CEO of Bank of America went and sold some drugs, I wouldn't expect to have my savings account confiscated and sold off to the highest bidder.

Re:has there been a trial?

[Anonymous Coward]

didn't he claim they were his last year? http://yro-beta.slashdot.org/story/13/12/24/0318204/ulbricht-admits-seized-bitcoins-are-his-and-wants-them-back

Re:has there been a trial?

[Anonymous Coward]

The government is not a storage locker. You get a set amount of time to claim your property or its abandoned. It's the same as if your car was towed and you didn't come get it.

Virtual and physical are not the same thing bro.
Destroy the coins.
EOL

are the appeals all done?

[ILongForDarkness]

If not couldn't they end up 5 years later getting a judge ordering them to return the bitcoins at whatever the going rate is? Does the government routinely sell off shares in companies they seize too?

Re:are the appeals all done?

[Anonymous Coward]

This is Silk Road's seized assets - as in, separate from Ross Ulbricht's seized assets. I'm not quite sure who's going to be appealing it and on what grounds, mind elaborating on that?

IIRC, in civil forfeiture there's a period where you can come and claim that a bag of money found in a cannabis grow op was actually just left there by you (an innocent citizen) for keeping.

Given how much time passed since DPR's arrest, I guess this period is over.

Re:are the appeals all done?

[drinkypoo]

IIRC, in civil forfeiture there's a period where you can come and claim that a bag of money found in a cannabis grow op was actually just left there by you (an innocent citizen) for keeping.

But these days any significant amount of cash has to be justified or it will simply be seized by the police, and the burden of proof is on you in order to get it back.

before the trial?

[Anonymous Coward]

and what if they lose? little hard to return them

Re:before the trial?

[Anonymous Coward]

To who? Silk Road the site isn't getting a trial. Ulbricht? Why should he get them? He says he didn't run Silk Road.

Auction?

[Anonymous Coward]

They use the word "auction", but the procedure described isn't what I call an "auction". In a normal auction the auctioneer keeps on raising the price until only one buyer remains, so the person who is prepared to pay the most gets the item while paying only a little bit more than what the person in second place was prepared to pay.

Re:Auction?

[Talderas]

You're thinking of English auctions. There's also Dutch auctions where the price is lowered from the seller's reserve price and then sealed auctions in which everyone submits a single bid.

Re:Auction?

[alexander_686]

Then there is the reverse Dutch auction, people put in their bids, the auctioneer figures out the price to clear the market, and everybody who bid above that price pays that price. It works best when you have many lots that are basically the same. I would hope they would use this method – but then again I would hope that there would be more and smaller lots.

Google use this method when the IPOed their stock. Unlike other dot coms where the price pops after a IPO (implying they left money on the table), Google's price initially slumped (which implies that they did not.)

Re:Auction?

[Talderas]

That's actually not a Dutch auction. Basically, English, Dutch, and sealed are the three methods of conducting the auction while you can have variances thereof. An English auction works by having the auctioneer start at the reserve price and asks bidding to go up. In a Dutch auction the auctioneer starts at the reserve prices and lowers until a participant accepts. Sealed auctions require participants to all submit their bids silently and they're only permitted to submit a single bid.

What you described is a uniform price auction. Multiple identical items. Each person submits a bid of how many he will buy and at what price. The highest bidder gets his allotment and it progresses downward. Then everyone pays the lowest price that received goods.

Re:Auction?

[mythosaz]

For non-identical items, it can get ever weirder. For example:

Be a bidder on 10 poker tables seized from an underground casino.

Winner bids $230 and gets first pick. He's then allowed to take any more he wants at $230. Then the second highest bidder can have one at $220 if he still wants one, and so on, until they're all gone.

Due Process

[Virtucon]

I don't want to get into the "is it money" argument but since this case is still pending isn't it a bit premature to be selling assets of any kind until guilt is proven in a court of law? I guess we've completely trampled on the constitution here especially the fifth amendment.

Re:Due Process

[jandrese]

Civil Asset Forfeiture doesn't require that you're found guilty. The government gets to take your stuff and sell it just to make sure you don't have money to defend yourself with.

Re:Due Process

[Virtucon]

Well that's the seizure portion of it and the recent Supreme Court ruling, one of the worst in history, doesn't say anything about the sale of those assets. That decision is so horrible because a lot of prosecutor's budgets are funded by seized assets creating a conflict of interest and violating the 5th and 6th amendments. We've seriously gone to far on the war on drugs and the police state mentality in this country and it has to stop. If this guy is convicted then the assets obtained illegally should be forfeit, agreed but wait until the fucking trial is at least concluded and guilt or innocence is determined. Defendants also must have the right, as written in the 6th amendment to choose their own counsel and that requires funds to provide an adequate defense. If the assets are seized, then you have no right to chose your counsel creating a no win situation. That's a secondary consideration but as a citizen I'm very concerned that something like this could happen to me or my family and while I'm fighting in court the government is just selling everything off that we've worked our entire lives to acquire and protect. Right now the government has built a case but it's only been seen by a grand jury in the Ulricht case, that doesn't mean a conviction and selling the assets is a violation of his 5th amendment rights.

Re:Due Process

[Anonymous Coward]

THIS is the real story. Mod up.

Re:Due Process

[Anonymous Coward]

prosecutor's budgets are funded by seized assets creating a conflict of interest

If the assets are sold whatever the judgement, they don't have any conflit of interest in framing the guy guilty or innocent.

Re:Due Process

[Anonymous Coward]

Aynd you can thank your Randian messiah Ronny Raygun for that legal feature!

Re:Due Process

[Anonymous Coward]

You're not allowed to profit from an illegal venture. If your assets from an illegal venture like gambling, drugs, counterfeiting, etc., then why should you be allowed to keep them to defend yourself? Should the government have to exchange counterfeit dollars for real ones so you can defend yourself from counterfeiting claims? And in this case your comments is even dumber. The assets were taken from Silk Road not Ulbricht specifically. Ulbricht's trial will be about whether he ran Silk Road or not. Starting to see the problem, yet?

If you give the bitcoins to Ulbricht to defend himself, by claiming that he didn't run Silk Road, then you're giving assets from one entity to another entity that has no legitimate claim to the assets. What sense does that make?

Or, maybe you're saying that if Ulbricht admits that he ran Silk Road then the assets gained via illegal venture should be given to him to defend himself against the charge that he ran Silk Road.

Right now the government is just auctioning off abandoned property, because no owner of the assets has come forward to make a claim. If you think Ulbricht should get the coins for his defense then you have already decided he's guilty or at least that his defense should be that Silk Road was legit. However, his defense is that he didn't run Silk Road.

Re:Due Process

[mr_mischief]

There's a matter of due process, sure. Go ahead and step forward as the owner of these coins. They won't sell them out from under you until they are done prosecuting you for claiming to have run Silk Road. Right now it's unclaimed property.

Re:Due Process

[mrchaotica]

You're not allowed to profit from an illegal venture. If your assets from an illegal venture like gambling, drugs, counterfeiting, etc., then why should you be allowed to keep them to defend yourself?

Because the assets haven't been proven to be gained from an illegal venture yet! That doesn't happen until the conviction occurs.

Right now the government is just auctioning off abandoned property, because no owner of the assets has come forward to make a claim. If you think Ulbricht should get the coins for his defense then you have already decided he's guilty or at least that his defense should be that Silk Road was legit. However, his defense is that he didn't run Silk Road.

I agree that Ulbricht shouldn't get the assets unless he claims them (and that claiming them would be bad for his defense). However, that doesn't mean the government should derive benefit from them either! Instead, the assets should be held until all legal actions related to them have been concluded.

Re:Due Process

[ADRA]

That's all well and good assuming Ulricht was actually claiming ownership over the said bicoins, but assuming the other commentors above are correct, he never claimed ownership over them. If true, the gov after a small amount of time waiting for someone to step forward, can then liquidate property. It makes sense a lot more when they're houses, boats and cars but the same applies to BitCoins.

Now in a situation where police break up a million dollar coke bust with a mil in coke and a million in dollar bills, should the money be seized or simply held in order for guilt be offered? Its a tricky thought, because regardless of if a crime is commited or not, the object can be involved in crime outside of personal guilt. If my car's stolen and used to hit and run a pedestrian, the vehicle was involved and was a factor in the crime but I wasn't involved at all. Would a justice dept. be able to hold the car until after trial? Absolutely. Could they liquidate? Maybe, but I should at least get compensation for material losses.

Re:Due Process

[tysonedwards]

Except, the distinction here is that Ulbricht is claiming that he is completely innocent, and has no part in the situation.
As such, the seized assets in this case are 'believed to be associated to Ulbricht, however are at present only known to belong to the previous "DPR", the former operator of Silk Road'. And no one else has stepped up to claim them, so the government is putting them up for auction, because why not.

Really, it is an interesting case... 100M equivalency of a cryptocurrency that the claim of ownership comes along with it the implication that you are ran an international drug ring and attempted to orchestrated the murders of several parties.

Acknowledge the property as yours, it remains seized and is instead held in your name until after trial for those acts, or walk away from it and claim that it is all someone else.

Devils Advocate to your argument, let's assume that Ulbricht is telling the truth and that he truly is not DPR; should he be entitled to use the seized SR assets that the government is asserting are his to mount his defense?

Re:Due Process

[Virtucon]

That's all well and good assuming Ulricht was actually claiming ownership over the said bitcoins

You know that's a good point but something a trial would surely explain. In this case the feds are acting the the role of judge and jury, sure if the evidence is there that Ulricht is the Dread Roberts and they can prove that the bitcoins are associated with illegal activities, forfeiture can occur. For all we know he was probably stealing the bitcoins from mgtox.

Re:Due Process

[Virtucon]

the government has to prove that the 100m in bitcoin were used in illegal activities, that's for a court to decide not the police or the prosecutors. It's not like bitcoins can be impregnated cocaine residue to prove their connection to illegal activities. Nor does the possession of those indicate that something was done illegally. If that were the case we'd all be guilty of drug trafficking.

Re:Due Process

[Anonymous Coward]

And give them to who? No one is claiming them. If someone wants to claim them, they can attempt to prove they were legal, otherwise they should be liquidated for public use (which means government money).

Re:Due Process

[tysonedwards]

You mean like paying an undercover cop $80,000 equivalency from the same Bitcoin wallet that was seized to arrange to kill someone?

I completely agree with you that it is improper to conduct the auction before the trial because it sets a dangerous precedent that all it takes is a cop to lie for prosecutors to liquidate the assets of anyone they don't like.

The question is whether someone who claims to be innocent should have access to someone else's assets to mount their defense.

Should Ulbricht maintain that he is not DPR, his 5th Amendment rights are not being violated because he asserts that the property "wasn't his". Regardless, his 6th Amendment rights are not being violated because he has not been denied the Assistance of Counsel for his defense.

The only noteworthy thing here is that should he admit perjury that he is in fact DPR, or another party come forward and either party later be found innocent of any wrongdoing, the government would be required to provide whatever funds they generate through the auction back to the innocent party; something that incentivizes them to sell at below market value.

Re:Due Process

[Anonymous Coward]

Someone mod this guy up some more. It's certain that these coins belong to the guilty party, regardless of whether or not it's Ulbricht.

Re:Due Process

[Anonymous Coward]

... gets to take your stuff and sell it just to make sure you ...

... gets to take your stuff and sell it just to make sure you can't stop their thieving and libelous accusations.

Fixed that for you.

Re:Due Process

[david_thornley]

If the police get a million dollar bills, and seize the money, and the court orders the money returned, they aren't necessarily going to return the bills, but rather just hand over $1M. In this case, if somebody winds up being the legitimate owner of the bitcoins, the government can settle it with dollars. Only when something isn't currency or a commodity does this get complicated.

Re:Due Process

[Anonymous Coward]

Pretty sure he did claim they were his http://yro-beta.slashdot.org/story/13/12/24/0318204/ulbricht-admits-seized-bitcoins-are-his-and-wants-them-back

Re:Due Process

[Anonymous Coward]

http://yro-beta.slashdot.org/story/13/12/24/0318204/ulbricht-admits-seized-bitcoins-are-his-and-wants-them-back

Re:Due Process

[Anonymous Coward]

That decision is so horrible because a lot of prosecutor's budgets are funded by seized assets creating a conflict of interest and violating the 5th and 6th amendments.

If any money from a fine or any form of seized asset can be used to fund government operations, that inherently creates an ethical conflict of interest on the part of government officials. There is, after all, only so much money available to pay for the salaries and benefits that go to these officials, and any contribution to a budget effectively increases that amount (or at least provides protection from budget shortfalls).

Further, having money to spend helps politicians in government get re-elected, which in turn gives them an incentive to reward government officials implementing policies which increase the available money for government to spend, creating another level of ethical conflict of interest involving those officials.

The right to ethical government and ethical practice of law is the most important right arising under the 9th Amendment, as a right retained by the people.

Any policy of using fines or seized assets as part of the government's budget is thus a prima facie violation of the 9th Amendment. The oaths of office police officers, judges, prosecutors, and many other government officials swear to uphold the Bill of Rights are violated by participation in such conduct, and - those oaths being preconditions for holding any position of public trust or responsibility - the persons involved immediately and permanently cease to be government officials.

In the eyes of the 9th Amendment, government officials engaging in such conduct are indistinguishable from private citizens engaged in criminal armed robbery.

In case that wasn't sufficiently clear, I'll restate it in different words: prosecutors that fund their operations through seizures are engaged in criminal conduct, as a consequence of the right to ethical government.

Also as a consequence of rights retained by the people under the 9th Amendment, it is not within the legal authority of any entity to grant immunity or right to pardon for such conduct.

Legal professionals being in a position of ethical conflict of interest with respect to recognizing the authority of the 9th Amendment, the profession as a whole is behaving unethically if it refuses to recognize the authority of 9th Amendment in general, or with respect to ethics in government or law. All members of the profession have an individual and personal responsibility to speak out against, and act against, such unethical and illegal practices.

The right to ethical government and ethical practice of law can be considered fundamental, inalienable human rights. The government of any society must recognize such rights and limit itself accordingly to be a legitimate government.

Re:Due Process

[unitron]

Someone mod this guy up some more. It's certain that these coins belong to the guilty party, regardless of whether or not it's Ulbricht.

Guilty of what? Has it been proven in a trial of anyone that these bitcoins were received as payment for illegal items yet?

Perhaps they want to see who's interested in it.

[rmdingler]

That pretty much renders moot the Crypto-currency's primary advantage of anonymity.

Could you even pretend surprise when the public purchase of a large block of the coinage placed you on the interesting list with the TLAs?

On the economic side of the equation, wouldn't they keep the price higher if they spread out the block auctions a bit more? That's a lot of coin to dump quickly.... unless taking down the coins value is the intent.

Re:Perhaps they want to see who's interested in it

[thesandtiger]

It's kind of adorable that you think they don't already know this kind of thing, given the amount of internal snooping they do already.

Also that you think they couldn't tank the value much more easily through other means, if they cared to.

Or that they actually care much about bitcoin beyond "how can we tax it?" type of questions.

They have a thing that they want to turn into cash. They want to do this as quickly as possible, and they don't want to spend time or money trying to take into account the vagaries of all the different kinds of things that they take in order to get maximum value.

Seriously, asking them to try and deal with the details of getting as much as possible from bitcoin would be like asking them to restore classic cars they seize and then try and sell them at various shows or through private channels to get the maximum return. Sure, they could squeeze a few extra bucks out of it, but who gives a shit?

"Worth" $17-18 million

[dugancent]

We'll see...

Re:"Worth" $17-18 million

[alphatel]

Bitcoins will be transferred to winning bidders in the order that each winning bid was received. No bitcoin transfer will be made until the USMS has confirmed receipt of all purchase funds. The winning bidder(s) will be given private instructions related to the transferring of the bitcoins.

You'll note it doesn't provide a deadline for when the bitcoins will be transferred to the winning bidder. Hence, if it takes 60 days to transfer, BTC could be worth 1/10th of its current value.
Would not touch this US Marshall's mess with a 10 foot fuckstick.

Re:So is this the US govt giving Bitcoin legitimac

[mr_mischief]

It's an auction. The great thing about an auction is it sets a data point for market value in the fact that people are paying for something in a competitive manner.

The size of the deposit does set a minimum expectation of the value of a block, although I've made deposits (much smaller ones) on auction items that went for less than the deposit. That's not common, but in the case that it happens the balance of the deposit is just returned to the buyer.

They're worth $0

[Anonymous Coward]

The one overwhelming advantage of Bitcoin is that it's anonymous, and they want people to register to buy it? Irony at its finest.

Re:They're worth $0

[Anonymous Coward]

what is anonymous about it? you can track every transaction of a bitcoin.

the only anonymous bit coin is one you mined yourself and don't spend.

Re:They're worth $0

[Paco103]

You can transfer it to other addresses. Just because it's known that I own address A, doesn't mean it's known that I own address B. A transaction can be proved to have transferred from address A to address B, and that B now owns it, but there is no way to prove that the owner of address A also owns address B *without* gaining access to the local wallet file that contains the keys. This is how "offline" storage works. You generate a new address on a machine that never sees a network connection. The coins are still "stored" on the network, and anyone can see where they are, but nobody has access to the private key to sign it over to a new address without having physical access to the machine with the private key (or copies that have been made).

So yes, it can still be anonymous. You take the 3000 BTC as a known and identified user. You immediately transfer these coins to a bunch of other random addresses that you create. For all anyone else knows, you sold them to some guy on the street, some guy on ebay, some guy on craigslist, your brother Phil for that pizza. Prove I own that address? You would need my private keys to do that, and there's nothing preventing me from destroying the private keys as I empty the accounts. I have a coworker that pays me for lunch in BTC all the time. He only assumes that's my address he's sending money to. It could be my Grandmother in Switzerland, or a charity or open source project I'm fond of. He has no way of really knowing that without catching me with my private key.

Re:They're worth $0

[sir-gold]

If you destroyed the keys (and they were the only copy) wouldn't you be effectively destroying the bitcoins as well (since they can never again be spent)?

Re:They're worth $0

[Anonymous Coward]

The full quote was:

... there's nothing preventing me from destroying the private keys as I empty the accounts.

I.e. the bitcoins are sitting in another account and (as long as the private key for that account haven't been destroyed) they can be spent without any problems.

Re:They're worth $0

[mythosaz]

Correct.

If you have BTC, and you lose your wallet and/or keys to your wallet, those bitcoins are (effectively) destroyed.

Re:Perhaps they want to see who's interested in it

[thesandtiger]

And sorry, I didn't mean to be condescending there by saying adorable - I was more trying to shit on the snooping the US government does on random, inconsequential shit.

If Feds sized BCs, spend from backup?

[Anonymous Coward]

If the feds "sieze" your bitcoins, but you have a backup copy of your wallet, what's to stop you spending them (ignoring any legal issues)?

Re:If Feds sized BCs, spend from backup?

[Anonymous Coward]

Well they avoided this issue by sending the BTC to another address, which is a fairly standard thing to do.

Re:If Feds sized BCs, spend from backup?

[carlhaagen]

The coins aren't contained in the wallet as such, but rather they reside in the blockchain. The wallet holds the private keys that allow you to move coins away from their public address counterpart. Once that is done, it doesn't matter how many backups of that wallet there is, because the coins are already somewhere else - already locked to another private key in the blockchain. Also, his coins have already been "secured" (moved to another address), so there is nothing anyone can do.

Also also, DRP is in custody, without access to the internet, and thusly was never able to do anything.

Re:If Feds sized BCs, spend from backup?

[hodet]

The FBI swiped tens of thousands of them in 324 Bitcoin transactions last time. 324 spells FBI on a telephone keypad. Who knew the feds can have a sense of humor.

Re:If Feds sized BCs, spend from backup?

[Anonymous Coward]

Because the first thing they'll do after seizing them, is move them out of your wallet into their own. At which point you won't be able to spend them.

Mr Thomos Dah Auditing and Accounting Department

[Anonymous Coward]

Good day,

With warm heart I offer my friendship, and my greetings,and I hope this letter meets you in good time.

It will be surprising for you to receive this proposal from me since you do not know me personally.

However, I am sincerely seeking your confidence in this transaction,which I, propose with my free mind and as a person of integrity.

This should normally not be a requirement, but when you understand the transaction then you will understand why it is important that you live far away from me.

The amount of money involved in this transaction is $17-18 Million in bitcoins which is too much for a man of modest means like myself to handle in my country.

I hereby ask for you to send an application to the the U.S. Marshals Service to get this fund transfered into your bank a/c.

All I need is for you to follow my instructions closely because I am experienced in matters here and i am on ground here to advice you on every step until you receive the money. Please provide a copy of a government-issued ID as well as a $200,000 deposit sent by wire transfer from an American bank.

I also indulge you not to make undo use of the information given to you, I need also to trust that you will not tell people or your bank about this business.
Yours truly,

Mr Thomos Dah

NB:Please contact me via my private email above.

Re:So is this the US govt giving Bitcoin legitimac

[thesandtiger]

I dunno how meaningful it will be as a data point:

- You have a seller who (probably) doesn't give 2 shits about what happens to the value of what they are selling once the sale is complete dumping the things as fast as they can.

- It's a one-off transaction selling the things in bulk, through a process that is unique/doesn't follow the regularly used methods for bitcoin selling.

- It's getting a lot of attention because.

One way or another, whatever they get sold at, this bit of data isn't really too meaningful, except, maybe as just being kind of interesting to nerds.

Re:Perhaps they want to see who's interested in it

[rmdingler]

I am not yet fully onboard with the theory they already know everything.

There is just too much information out there in to be sifted through, so unless you behave in a manner that arouses their interest, you can still fly under the radar.

And I can live with condescending. It's practically the price of admission to speak with a lot of smart people. Just don't ever renege on "adorable" again.

I hope...

[Anonymous Coward]

The value of Bitcoin plummet because of this.

Cash?

[bluehenbear]

So when is the government auctioning off $100 bill or T-Bills?

Re:Cash?

[iggymanz]

the Treasury department indeed does "treasury auctions" with T-Bills

Re:Cash?

[Bob the Super Hamste]

Looks to be on average about every other day (PDF warning) but there are often multiple auctions on the same day for T-Bills. As far as $100 bills I think you need to be a member bank of the Federal Reserve.

Re:Perhaps they want to see who's interested in it

[thesandtiger]

Okay - I take it back, and you will forevermore be considered "adorbs."

With regards to they (in this case law enforcement agencies involved in busting Silk Road) knowing everything:

I think as part of their investigation and bust of Silk Road, they almost certainly became aware of the identities of multiple people who are both interested and able and willing to buy the bitcoins at auction. I'm also willing to bet, given the strong libertarian/fuck the federal government bent of many people participating in bitcoin, they probably at least sent a memo to other agencies not involved in the Silk Road case directly.

The converse of this is that anyone who participates in this auction AND who cares about the privacy/anonymity aspects of bitcoin would have to be catastrophically stupid and pettily greedy. Not an uncommon combination, unfortunately, but they probably weren't flying under the radar to begin with, you know?

Basically this is just going to be a chance - maybe - for someone who already has money to make a few more bucks; the privacy/anonymity angle is interesting, but it doesn't seem like anything with teeth, I guess.

The real reason...

[Anonymous Coward]

Viola, the real reason the cops steal from 'criminals' is so they can make money auctioning off the 'criminals' property. Seizure is a big income stream for government and a driving force behind criminalization and legislation.

Would the government auction off Euros?

[beltsbear]

If it did as opposed to going to a standard exchange this would make sense. If it would normally just change them for Dollars at a bank at a KNOWN RATE then this Bitcoin auction makes no sense. The government may get only 50% of the value or less of these Bitcoins by doing it this way when a known US company such as Bitpay or Coinbase could do it for them at a pre-arranged rate.

Re:Would the government auction off Euros?

[Anonymous Coward]

If it did as opposed to going to a standard exchange this would make sense. If it would normally just change them for Dollars at a bank at a KNOWN RATE then this Bitcoin auction makes no sense. The government may get only 50% of the value or less of these Bitcoins by doing it this way when a known US company such as Bitpay or Coinbase could do it for them at a pre-arranged rate.

(Paragraph VII (1), Attorney General's Guidelines on Seized and Forfeited Property, July 1990.) This policy applies to all cash seized for purposes of forfeiture. Therefore, all currency seized that is subject to criminal forfeiture or to civil forfeiture, must be delivered to the United States Marshals Service (USMS) for deposit in the USMS Seized Asset Deposit Fund either within 60 days after seizure or 10 days after indictment, whichever occurs first. (This policy does not apply to the recovery of buy money advanced from appropriated funds. To the extent practical, negotiable instruments and foreign currency should be converted and deposited.) Where appropriate, photographs or videotapes of the seized cash should be taken for later use in court as evidence.

That wasn't hard, now we can argue about the practicality of the U.S. government converting a huge chunk of bitcoin into dollars.

Re:Would the government auction off Euros?

[u38cg]

Yes, but exchanges only turn over on the order of 15,000 bitcoin per day. It's very doubtful whether you could successfully put through 29,000 once word got about there was a massive seller in the marketplace.

Re:Would the government auction off Euros?

[beltsbear]

Why is there a requirement to turn them over in a single day? When the US offloaded GM shares it did it at a slower pace. In this case the government could offload them over two weeks and maximize return.

Re:Would the government auction off Euros?

[u38cg]

Doesn't really matter whether it's a day or two weeks. It's still supply way in excess of normal demand. Yes, if they dripped them out over the course of a year or longer it would have minimal market impact but the government -rightly - doesn't want to get involved in these things. They want them off their hands, period.

Willie Sutton

[ThatsNotPudding]

"Why do you rob banks?"

"Because that's where the money is."

He never knew about the US government's War on Drugs (TM). FedGov's peers would term it a 'good earner'.

why now?

[JustNiz]

kinda makes you wonder why they are selling them at this point in time, and whether they know about something that is soon going to affec tthe price of bitcoins (beyond their own big auction).

Re:why now?

[Anonymous Coward]

Why not now?

Quite Fair

[whistlingtony]

To all those complaining about the minimum bid... I think that's fair. If they had a yacht, you would expect a minimum bid. If it was a piece of land, you'd expect a minimum bid. If it's some crypto currency worth 1.7mil.... You should expect a minimum bid.

Re:Quite Fair

[sir-gold]

But you generally don't see 100 yachts sold as a single item.
They have $18 million worth of property, and there only breaking it into $2 million chunks.

A more real-world example would be a car collection seized from a drug dealer, they don't auction the entire collection as one single item do they?

Re:Quite Fair

[Anonymous Coward]

No, but they might offer the contents of a lockup/storage-unit as one item.

bitcoin

[Anonymous Coward]

How do I know if the bitcoin that is up for auction is any good ?

Re:So is this the US govt giving Bitcoin legitimac

[mr_mischief]

If the things are to actually be thought of as currency, then they should be considered fungible. If they are fungible then any price paid for a large quantity of them should impact the value of the market in them and at the same time be informed by the market in them.

blockchain secrecy

[surd1618]

I have not followed this topic very closely, but I think this is a sufficiently specific question with a sufficiently complicated answer to be worth asking: because people have to make large purchases I'm sure there's names involved, so will these transactions de-anonymize Bitcoin to a great extent? I understand agencies can already track specific blockchains if they really feel the need, but I wonder if this will make it much easier.

Theif

[Technician]

What is it called when someone's property is taken by force?

What do you call the one who takes what does not rightfully belong to them?

Now the stolen goods are up for sale. Are there laws against receiving stolen property?

Can we blacklist these coins?

[Anonymous Coward]

One of the things things the helped in the Nevada ranch stand off is that no dealers would buy the cows because no rancher would ever sell them a cow again. If a few major exchanges say that anything tracing back to the Gov wallet can not be accepted, then what the Gov seizes will loose its value.

Re:Can we blacklist these coins?

[OrangeTide]

I'm accepting gov seized coins at 50% value.
If someone wants to accept at a higher percentage, then I guess the free market will decide how much they are worth.

Re:Can we blacklist these coins?

[James McGuigan]

Now assuming such a system where to be widely implemented in software, a more likely scenario would be for the government to impose this address history blacklisted on government registered financial institutions. The government would no longer need to seize the Silk Road bitcoins, but simply discover their anonymous bitcoin address and freeze the the entire forward chain of the proceeds of "illicit crime" (this would be done mostly likely before a trial). Should the bitcoins themselves be recovered, the government can simply remove the address from the blacklist and then auction them back to the market.

There would still be an underground economy that didn't care for the blacklist designation, but if there was a significant amount of blacklisted coins and sufficent market demand for whitelisted coins (ie I can't pay my taxes or my mortgage with blacklisted coins, maybe the major exchanges would become legally obligated to implement the blacklists), then there would effectively become a market rate at bitcoin laundries selling blacklisted coins for whitelisted ones.

Oi! im innocent and thats my property!

[Anonymous Coward]

I'm not familiar with the laws of the USA. What about the customers who were buying legal goods from the site? Legal goods you say? Yes. Can anyone give me a list of legal things that were bought and sold there? It was the only way to sell things globally to a global audience without PayPal and verification - hassle for everyone and a barrier to the majority of the world.

I have seen the site and I'm pretty sure I had bought something from there. I'm sure I would have had some balance left there.

Don't get me wrong, this is probably a drop in the ocean compared to the seller accounts.

But there's just no attempt to address any of this.

And why does the us Marshall benefit? Who is the us Marshall?

One thing for sure is that other law enforcement agencies will be looking at this and be looking to beat you to it next time.

Question:

[Anonymous Coward]

Would a wheat based currency system be as you say "fake and worthless"?

Re:Question:

[Karl Cocknozzle]

Would a wheat based currency system be as you say "fake and worthless"?

Maybe not, but the fact that wheat is useful as a foodstuff makes it extremely unlikely to be chosen as currency, or to "back currency."

Why?

[Anonymous Coward]

Why are we allowing this to happen? Can't we all get together and refuse to accept the coins? I would hope that this would drive the value of the coins down. It would be nice to have money that was impossible to confiscate.

Why don't they just convert them?

[jonwil]

If the US government seized Euros or Yen or Pesos or whatever, they would just convert them to USD through foreign exchange. Why aren't they simply converting these Bitcoins through a Bitcoin exchange into USD and getting their money that way?

Re:Why don't they just convert them?

[James McGuigan]

US Regulations prohibit selling assets through a foreign owned exchange (are there any major US bitcoin exchanges?). There may also be bureaucratic rules for seized assets to be offered at public auction. There may also be the worry that dumping a large quantities of bitcoin onto the open market may crash the price, and someone would have to be responsible for agreeing a selling strategy (which will be criticized with the benefit of hindsight).

The US government also wishes to keep these coins out of the underground economy (ie the digital pirates). They can't verify the identities or force a conditions of resale agreement on joe public at a bitcoin exchange.

Procedes of crime

[Anonymous Coward]

These coins should be destroyed or permanently frozen. The government making money off this is a crime.

Govermental approval of bitcoins ?

[Rrraou]

Doesn't this mean that the goverment officially approves of bitcoins ? I mean, if this was a drug bust they'd destroy the drugs. By selling them they're pretty much guaranteeing that if they ever move to make them illegal or undermine them in the US, this sale will come up as a precedent of Bitcoins being legally legit.