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Bitcoin official forfeiture goes to the U.S. Dept. of Justice

U.S. prosecutors in Manhattan have received through an official forfeiture by Bitcoin 29,655 units of the digital currency-worth $27 million, reports The Guardian late Saturday.

The bitcoins had belonged to Silk Road; an anonymous online black market that authorities say, was a conduit for purchases of drugs, Internet hacking and murder for hire services. It was shut down after an FBI raid in September, when agents took control of its server and arrested the man, Ross Ulbricht, they say was its founder in San Francisco.

Ulbricht was arrested 1 October in a San Francisco public library and charged by prosecutors in New York with one count each of money laundering, computer hacking and drug trafficking. He is being held at a federal detention center in New York without bail. He has not entered a formal plea but has maintained his innocence through statements by his lawyer.

No one stepped forward to claim these bitcoins, which were found in electronic 'wallets' used to store the digital currency. An additional 144,336 bitcoins, worth more than $128m today, were also discovered, but the government's claim on them is being disputed by Ross William Ulbricht.

A spokeswoman for Preet Bharara, the US attorney for New York's southern district, said on Friday that the government is still trying to decide what to do with the forfeited bitcoins.

Most goods seized by US authorities end up in the hands of the US Marshals, where they are auctioned or, at times, repurposed for government use. But the Marshals are not just experienced in unloading bitcoins; they do deal with complex financial instruments, foreign companies and other kinds of obscure assets forfeited by criminals.

Barry Silbert, the founder of one of the first investment funds that lets retail investors gain exposure to Bitcoin, declined to offer an opinion on what the government should do with its stash or how a sale would affect the market. Marco Santori, a lobbyist for the Bitcoin Foundation, which is Bitcoin's official trade group, said the group did not have an official position on the matter.

The bitcoin seized was valued at $27 million based upon a market high close last week but disposal value is another matter. ‘While Bitcoin is a somewhat new form of asset, it's not unusual for them to have to find out how to liquidate a new asset,’ said Jeffrey Alberts, a partner at Pryor Cashman and a former federal prosecutor in Manhattan. ‘This won't be difficult for them, whether they do it through an exchange or find a buyer who wants to buy it directly from them.’

Prosecutors last week asked a judge to grant them a default judgment in the civil forfeiture case they filed after the raid on Silk Road and Ulbricht's arrest claiming Silk Road's assets. US district Judge J Paul Oetken signed an order to that effect on Wednesday, giving the government control of the 29,655 bitcoins from Silk Road's server but not of the bitcoins, the larger sum discovered on Ulbricht's laptop seized at the time of his F.B.I. arrest in the San Francisco library. Those are still in dispute.

How do proceeds get distributed after a sale? The proceeds from any sale would be turned over to an asset forfeiture fund from which the US Justice Department can draw for law enforcement activities. If any money were to come back to prosecutors' budgets, it would be distributed evenly among US attorneys' offices, a policy meant to prevent individual offices from unduly seizing assets to enlarge their budgets.

To read about the digital currency, Bitcoin, please, view articles listed below in Author’s suggestions and view the video atop this article.

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