The US Marshals Are Auctioning Off the Seized Silk Road Bitcoins

As of press time, that's worth $17.7 million USD.

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It’s been a big, crazy week for Bitcoin. Not only has Expedia gone forward with a rollout to accept the cryptocurrency for hotel bookings, Yahoo, Google, and Apple’s default stock and finance apps now list the USD price of one bitcoin right alongside the rest of the securities they track. 

But perhaps the most peculiar news in the world of Bitcoin this week was announced quietly by the US Marshals, who are auctioning off nearly 30,000 BTC that was seized in the Silk Road raid. As of press time, that's worth $17.7 million USD.

Reddit started to murmur about the Silk Road coins on Thursday afternoon after a diligent cryptocurrency lurker noticed that the FBI’s coins had moved from one Bitcoin wallet to another. The sum, which is precisely 29,658.80613651 bitcoins, has been monitored closely by the cryptocurrency community thanks to the Blockchain—the public ledger of each and every transaction that keeps the Bitcoin network alive.

If any incredibly rich people are reading this and want to get in on the Silk Road Bitcoin auction, the US Marshals are asking that any potential bidder wire them $200,000 USD from an American bank account to prove that they’re really about that cryptocurrency-auction life.

On the US Marshals’ bidder registration form, they also request that potential bidders outline any relationship they may have with Ross Ulbricht, aka Dread Pirate Roberts, the suspected ringleader of Silk Road: “Please describe any contact, communication or other relationships between the Bidder and/or any Control Person with Ross William Ulbricht or the Silk Road, or anyone whom you know to be acting on behalf of Ross William Ulbricht or the Silk Road."

The rules and regulations of the auction also clearly state: “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."

Once the US Marshals have approved and verified their bidders, the coins will be auctioned off in nine blocks of 3,000 BTC a piece. Each block is worth roughly $1.8 million USD at current market pricing. There will be a final block of 2,657 coins auctioned off as well.

This nearly 30,000 BTC haul represents only a portion of the US government’s total Bitcoin holdings, all earned from the Silk Road raid. The US Marshals are now sitting on two Bitcoin wallets. One is holding the bitcoins that are primed for auction, and the other is holding approximately 144,342 coins—nearly $87 million US dollars—which makes the 30,000 BTC auction bounty look somewhat tiny in comparison.

I emailed Brett Stapper, co-founder of Falcon Global Capital, “The World’s First Bitcoin Investment Fund with Insured Protection,” because way back in February, Brett publicly stated that he was interested in taking the FBI’s bitcoins off their hands. He told me that his firm fully intends to take part in the auction, but wouldn’t comment further on the US Marshals’ decision to get rid of the coins at auction.

It will be fascinating to see whether or not the US government’s bitcoin firesale provides any kind of bargain to the type of speculator who will be flocking to the auction. The actual auction will be taking place on June 27th, but the lucky winners won’t be notified until June 30th. That kind of delay could be financially painful for bidders. In the past three days alone, the value of bitcoin has gone from $657 USD to $590 USD. That kind of fluctuation, with millions of dollars on the table, could end up burning a potential bidder.

While the risk of actually losing money on this virtual commodity auction is very real, there is also value in being able to purchase such a large volume of bitcoins from a single seller. There aren’t many places online where a wealthy investor could sweep up thousand of bitcoins in such a short time (this is to say nothing of the cool factor involved in purchasing bitcoins that were acquired in a criminal investigation) so maybe the risk isn’t so high, for the type of character looking to buy millions of dollars worth of bitcoins.

Either way, if you’re looking for a fun and wildly expensive way to get into the bitcoin market, or if you just want to go head to head with the Winklevoss Twins who will presumably be participating, it sounds like the US government has your number!