US Marshals auction 50,000 more bitcoins seized from Silk Road
Here we go again. The US Marshals Service (USMS) has begun proceedings to auction off 50,000 bitcoins (BTC) seized from Ross Ulbricht, the San Francisco man accused of operating the Silk Road dark web drug marketplace. In July, the government previously auctioned off 30,000 BTC seized from Ulbricht, with venture capitalist Tim Draper submitting the top bid in all rounds.
This latest auction began today, with bidding opening at 9am EST and will close in two weeks on Monday, December 1st, with the winner to be announced on December 5th. The auction has been structured into two rounds, with the first consisting of 10 blocks of 2,000 BTC and the second of 10 blocks of 3,000 BTC. Those wishing to participate are required to pre-register with the USMS and submit initial deposits of $100,000 or $150,000 for the respective rounds.
Registered bidders for the previous USMS bitcoin auction, the identities of which we know only due to an email BCC error, included representatives of SecondMarket, Coinbase Yelp, BNP Paribas, Bitcoin Shop, Matrix Capital, Wrangley Capital, DRW Trading Group, DigitalBTC, BitcoinS Reserve, and others.
The USMS is in the midst of a case aiming to prove that Ulbricht is in fact the Silk Road kingpin known online as “Dread Pirate Roberts” (DPR). To whit, the USMarshals.gov domain pointing to the official announcement of this second round interview includes the phrase “DPR-bitcoins.” That statement reads, in part:
This sealed bid auction is for a portion of the bitcoins contained in wallet files that resided on certain computer hardware belonging to Ross William Ulbricht, that were seized on or about October 24, 2013.The USMS later adds, in its FAQ section,
1) How did the USMS get the authority to sell these bitcoins?
On January 27, 2014, the United States District Court for the District of New York entered a Stipulation and Order for Interlocutory Sale of Bitcoins. In this order, both the United States and Ross William Ulbricht agreed that “the United States, in its sole discretion, may sell any portion or all of these bitcoins, on a date or dates and in a manner to be determined by the Government. And, also:
The USMS does not make any representations or warranties regarding Bitcoin.
The USMS will not answer any questions regarding (a) the associated criminal or civil cases that resulted in the seizure of the bitcoins being auctioned, or (b) Bitcoin characteristics, uses or value.
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. At today’s market prices of roughly $390, per the CoinDesk Bitcoin Price Index, the total lot being auctioned is worth approximately $19.5 million, while the 2,000 and 3,000 BTC tranches are each worth $780,000 and $1.17 million respectively. While the winning bids for the July auctions were never disclosed, there’s reason to believe that a bulk purchase of this nature would result in a discount to market prices. On the other hand, it’s rare that institutional investors have the opportunity to acquire large sums of bitcoin over-the-counter, meaning that those who believe that bitcoin will increase in price over time may be willing to pay above exchange rates.
The price of bitcoin has returned to its volatile ways, bouncing between a floor of $300 and a ceiling of $650 for much of the summer, with the current trend being toward the bottom half of that range. If the prior USMS auction is any indication, this sale will have little impact on the broader bitcoin market prices, however the ultimate identity of the winning bidder(s) could be used to draw new conclusions about the institutional appetite for bitcoin assets.