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The US government has seized more than $ 1 billion worth of bitcoins linked to the closed Silk Road darknet market and is suing for formal confiscation of the funds.
The case is the largest cryptocurrency seizure in history and explains why bitcoin changed hands this week. Analysts had noticed the transfer to the public blockchain and speculated that it was due to an unknown Silk Road co-conspirator attempting to cash out, or because the funds were stolen by hackers.
In fact, the Justice Department claims to have tracked down the real holder of the funds, a person it calls “Individual X”, through his attempts to liquidate a small portion of the money in 2015. “Approximately April 23, 2015, [the bitcoin account] sent 101 bitcoins (about $ 23,700) to BTC-e, a company that provided bitcoin-related services and operated as an unlicensed cryptocurrency exchange, “the criminal complaint says.
“Silk Road was the most famous online crime market of its time,” said US lawyer David Anderson. “The success of the trial against the founder of Silk Road in 2015 left a billion dollar question open. Where did the money go? Today’s revocation report answers at least in part this open question. 1 billion dollars of these criminal proceeds are now in the possession of the United States. “
Individual X, “whose identity is known to the government,” did not work with Silk Road, the complaint claims. Instead, “Individual X was able to hack Silk Road and gain unauthorized and illegal access to Silk Road and then steal the illicit cryptocurrency from Silk Road and transfer it to the wallets that Individual X controlled.
“According to the investigations, [Ross Ulbricht, the now jailed founder of the site] learned of Individual X’s online identity and threatened Individual X to return the cryptocurrency to Ulbricht. Individual X did not return the cryptocurrency, but kept it and did not spend it, “the complaint states.
The lawsuit, officially titled in part “United States of America vs. Approximately 69,370 Bitcoin,” requires the DoJ to prove in court that the seized cryptocurrency is subject to confiscation, meaning it is the proceeds of a criminal act.
IRS Special Agent in Charge of Criminal Investigations (CI) Kelly R. Jackson said, “Criminal proceeds should not remain in the hands of thieves. Thanks to CI’s experience in tracking money, we were able to track down illicit funds. The Washington DC Cybercrime Unit specializes solely in tracking virtual currency transactions and we will continue to hone our skills to combat illegal activities. “
Chainalysis, a blockchain analytics firm that aided the government in its investigation, said: “Earlier this year, IRS-CI agents used Chainalysis to analyze the bitcoin transactions performed by Silk Road and identified 54 previously undetected bitcoin transactions representing the proceeds of illegal activities They also found that a hacker, known as Individual X, stole those funds from Silk Road.
“According to data from Chainalysis, Silk Road accounted for nearly 20% of total bitcoin economic activity at its peak in 2013. Silk Road economic activity reached a total of $ 435 million (calculated based on the price of bitcoin at the time), peaking just under $ 40 million in monthly volume in September 2013. “
The $ 1 billion seizure value is equivalent to the total value of all cash and cash equivalents seized by the federal government in 2015, the most recent year for which records are available.
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