How to buy government seized bitcoins: What the U S. government does with its secret bitcoin stockpile

ZHONG pled guilty on Friday, November 4, 2022, before United States District Judge Paul G. Gardephe. The U.S. General Services Administration, an agency that typically auctions surplus federal assets, such as tractors, added confiscated cryptocurrencies to the auction block earlier this year. The sale is part of the case against James Zhong, who was accused of committing wire fraud in September 2012 for illegally obtaining over 50,000 bitcoin from the Silk Road internet marketplace. Zhong pled guilty in November 2022 and is set to be sentenced next month. Proceeds from a crime are acquired by the criminal as compensation for engaging in the crime.

In a criminal forfeiture action, the defendant stands accused of criminal activity that involved a certain piece of property or a specific asset. Bitcoin is not entirely fungible and the law treats bitcoin as property, so it is subject to forfeiture in addition to seizure. Most often, defendants in a forfeiture action are already in custody and disclose the private key as part of a plea deal.

Following some deliberation, the USMS stepped up and sold the 30,000 Bitcoin at auction for about 19 million USD to shrewd investor Tim Draper. Indeed, US agencies are increasingly auctioning off cryptocurrency acquired in the course of law enforcement. This litecoin, for example, was acquired during a tax non-compliance case. You are not eligible to submit a bid or otherwise participate in this auction unless you have submitted all required documents and have received confirmation from the U.S.

The Bitcoin transfer process will begin immediately following receipt of purchase funds, or at a time chosen by the winning bidder. The winning bidder will be given private instructions related to the transferring of the Bitcoin. However, the Marshals Service has modernized its approaches to seized bitcoin since its first cases surrounding cryptocurrency from Silk Road, which closed in 2013. “Now, things are much more fluid in terms of How we sell,” said Case. In addition to auctions, bitcoin can be sold through government-approved exchanges, where its often purchased by people unaware of its origins, he said. In August 2017, in a hard fork coin split, Bitcoin split into two cryptocurrencies, traditional Bitcoin and Bitcoin Cash (“BCH”).

Learn more about How crypto came into US authorities hands, and How you could participate in the next Bitcoin government auction. Marshals Service encounters difficulty (e.g., the wire cannot be rejected) then you will be required to complete and submit a Vendor Request Form. The Vendor Request Form will give you the option to receive your return (i.e., payment) electronically or by check.

The U.S. Government Is Holding More Than $3 Billion Worth of Seized Bitcoin. What Should It Do With It?

A Department of Justice spokesperson told CNBC he’s “pretty sure” there’s no central database of cryptocurrency seizures. Tracking where all the money goes isn’t a straightforward process, according to Alex Lakatos, a partner with Washington, D.C. “Agencies can put in requests to gain access to some of that money for funding of operations,” said Koopman. “We’re able to put in a request and say, ‘We’re looking for additional licenses or additional gear,’ and then that’s reviewed by the Executive Office of Treasury.” After it’s placed into one of these two funds, the liquidated crypto can then be put toward a variety of line items. Congress, for example, can rescind the money and give the cash to other projects.

When this split occurred, any Bitcoin address that had a Bitcoin balance (as ZHONG’s addresses did) now had the exact same balance on both the Bitcoin blockchain and on the Bitcoin Cash blockchain. As of August 2017, ZHONG thus possessed 50,000 BCH in addition to the 50,000 Bitcoin that ZHONG unlawfully obtained from Silk Road. ZHONG thereafter exchanged through an overseas cryptocurrency exchange all of the BCH Crime Proceeds for additional Bitcoin, amounting to approximately 3,500 Bitcoin of additional crime proceeds. Collectively, by the last quarter of 2017, ZHONG thus possessed approximately 53,500 Bitcoin of total crime proceeds (the “Crime Proceeds”).

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Payments to a foreign financial institution (i.e., an overseas account) will require additional time to process and confirm. All deposit and purchase funds must be received from a U.S. bank. Only eligible registered bidders who have received an official Bid Form from the U.S. At the beginning of April, Japan announced bitcoin was a legal payment method in the country. Additionally, Ulmart, Russia’s largest online retailer, earlier this month said it would begin accepting bitcoin even though Russia said it wouldn’t explore the cryptocurrency until 2018.

They are now selling it—and they still have 41,490 Bitcoins ($1.1 billion) to get rid of, the filing said. According to court documents filed today, the Feds sold the crypto earlier this month—making over $215 million. The Bitcoin was originally stolen from the darknet marketplace by hacker James Zhong, according to U.S. prosecutors. The old saying goes that one man’s loss is another man’s gain. It indicates a way to close an interaction, or dismiss a notification. Making sure that victims of federal crimes are treated with compassion, fairness and respect.

“The underlying investigative agency determines which fund the money goes to,” Levin said. The process of auctioning off crypto, in blocks, at fair market value, likely won’t change, according to Koopman. As cybercrime picks up — and the haul of digital tokens along with it — government crypto coffers are expected to swell even further.

GSA first began auctioning cryptocurrency on behalf of the U.S. government in early 2021. To date, users of the GSAAuctions.gov platform have successfully bid for more than 32 bitcoin and 150 litecoin over six auctions, garnering $1.5M. Bitcoin wallets store and protect the public and private keys, allowing you to send, receive, and store bitcoin.

The USMS will only sell and transfer the bitcoins in a single block to a single bitcoin address. In order to quality for remission, which is when forfeited assets are returned to victims of the crime, victims generally have to prove the seized assets previously belonged to them. For example, in this case, people would have to prove they previously owned bitcoin in Silk Road which was stolen by Zhong. Koopman said the crypto traced and seized by his team accounts for roughly 60% to 70% of the Treasury Forfeiture Fund, making it the largest individual contributor. During the seizure itself, multiple agents are involved to ensure proper oversight.

What Happens to the Money Earned in these Auctions?

In fact, on June 18, 2021 the General Services Administration announced the sale of 11 lots of cryptocurrency — including 8.93 Bitcoins and 150.2 litecoins. This sale was notable as the first auction to sell Litecoin, but is one of several crypto auctions to have taken place this year. The U.S. Marshals Service will initiate the return of losing bid deposits within business days following the transfer of bitcoins to the winning bidder. Here’s a rundown of four major bitcoin auctions since the Silk Road bust and the profits made by each winning bidder, assuming they haven’t sold out of their positions. All numbers were calculated using Wednesday’s intraday high of $2,398 a coin.

Where is all This Crypto Coming From?

Bids that are contingent on financing terms of any kind will not be considered. The U.S. Marshals Service accepts EFTs via Automated Clearing House Credit or Fedwire. Please contact your financial institution to determine which method is most appropriate. Please follow the EFT instructions below to submit a bid to the U.S.

Bitcoin seizure is the process by which the government attempts to legally dispossesses a citizen of bitcoin. However, bitcoin is a uniquely seizure-resistant type of property. There is no amount of physical force or legal coercion that can transfer bitcoin from one party to another without the corresponding private keys. However, if authorities can ascertain the real-world identity of an individual and their bitcoin addresses, they can coerce that individual to divulge the private keys required to move the bitcoin. Bitcoin may be seizure-resistant, but humans are still vulnerable to physical threats, blackmail, and other forms of coercion. Marshals Service has confirmed receipt of all purchase funds.