Feds Miss Out Half a Billion Dollars from Silk Road Bitcoin Auction

On September 29, the acting Manhattan US Attorney announced that Ross Ulbricht forfeited the $48 million proceeds from the sale of bitcoin seized from the computers and devices of the Silk Road operator.

While the auction of 144,336 bitcoin (worth $608.5 million at the time of writing) was conducted in 2014, the US Justice Department were not able to seize the funds from the auction due to the challenge Ulbricht had made on the legality of the forfeiture. But, last week, Ulbricht dropped the claim against the government, allowing the US Justice Department to process the forfeiture and the funds gathered from the sale of the ‘Silk Road bitcoin.’

The stipulation and order document filed on September 29 read:

“It is hereby stipulated and agreed, by and between the United States of America, through its attorney Joon. H. Kim, United States Attorney for the Southern District of New York, Christine I. Magdo, Assistant United States Attorney, of counsel, and Ross William Ulbricht, by and through his counsel, Paul Grant, Esq., that Ulbricht hereby withdraws his Verified Claim to the defendant in rem Bitcoins filed on December 12, 2013, and the Verified Claim is hereby dismissed with prejudice. All right, title and interest in the Defendant Funds are hereby forfeited to the United States, and shall be disposed of according to law.”

For the US government, the decision to essentially pre-sell seized bitcoin funds from the Silk Road case in 2014 has been poor, as the price of bitcoin has increased by over 13-fold in the past three years. If the US government had sold bitcoin from the Silk Road case in 2017, after Ulbricht dropped his claim, it would have obtained an additional $500 million (or thereabouts) on top of the $48 million it had secured from the initial auction.

One of the investors that purchased a batch of 30,000 BTC from the US Department of Justice auction was billionaire technology investor and venture capitalist Tim Draper. In March, during an interview with Fox Business, Draper revealed that he had invested $19 million in bitcoin, including his purchase of 30,000 bitcoins from the US government. At the time, he told Fox:

“[I’m] very excited about bitcoin and what it can do for the world. Bitcoin is as big a transformation to the finance and commerce industry as the internet was for information and communications. If bitcoin were here in 2008, it would be a stability source for our world economy. Everybody should go out there and buy a bitcoin.”

Since then, Draper has continued to operate as a key investor within the bitcoin and cryptocurrency sector, funding regional bitcoin startups and exchanges. In 2014, Draper was one of the few investors that provided necessary capital and resources to South Korean bitcoin exchanges Korbit and Coinplug, leading a $3 million Series A funding round for Korbit with Softbank and Pantera Capital. In September 2017, Korbit was acquired by Nexon at a valuation of $150 million.

NXC, the parent company of the $10 billion gaming company Nexon, announced:

“NXC has been reviewing and investing in startups with digital idea and technology and this investment was made with our positive view on the growth cryptocurrency industry.”