US Marshals to Auction off 30,000 Bitcoins Seized From Silk Road now, Potentially 144,00+ Later

The Bitcoin world has been waiting for more than six months to see where the millions in cryptocash seized from the Silk Road black market for drugs would end up. Now that fortune is about to be sold off, like so many mafiosos’ cars or drug dealers’ bling, to the highest bidder.

On Thursday the U.S. Marshals’ office announced that it will be selling nearly 30,000 in bitcoins that were taken from a Silk Road server after the drug-selling site’s seizure last October, worth about $17.5 million at current exchange rates. But instead of liquidating the coins through an exchange, they’re going to be sold in ten blocks of about 3,000 bitcoins each via an email-based auction held on the Marshals’ service website. The coins officially go on the block in two weeks, and buyers will have 12 hours to put in their bids.

In fact, the 29,656.5 coins up for sale are a small fraction of the total seized bitcoin hoard from the Silk Road case. It also has another 144,342 coins whose fate is still in limbo. That larger fortune, currently worth over $83.6 million, was seized from Ross Ulbricht, the 30-year-old alleged to have run the Silk Road under the handle the Dread Pirate Roberts. In a court motion last December, Ulbricht confirmed that the coins were his but contested the government’s seizure of them, demanding their return.

The government’s bitcoin bake sale could potentially play havoc with the cryptocurrency’s economy. The current auction represents around only a quarter of a percent of the total number of bitcoins in circulation. But the still-contested 144,000 coins represent close to 1.1 percent. If that larger pot of coins is sold off in the same auction style, it could potentially flood the market with cheap coins and lower their price. In the hour following the Marshals’ news, the price of bitcoin fell about 2 percent.

But Gavin Andresen, the chief scientist of the Bitcoin Foundation, argues that the sale could be good for bitcoin: As he sees it, even the Department of Justice now participates in the bitcoin economy. “The fact that they’re going to liquidate them instead of destroy them gives bitcoin some legitimacy,” he said in an interview about the potential sale of the coins last year. “They see them as something of value.”

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