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U.S. Feds Seized Nearly $1B in Bitcoin from Wallet Linked to Silk Road
- wmf 6y agoDiscussion from yesterday: https://news.ycombinator.com/item?id=24990233 https://news.ycombinator.com/item?id=24990233 (This is not a dupe since the Bloomberg story has new information.) Has anyone found any official information from the DOJ about this?
- prepend 6y agoSo the unknown wallet was actually the DoJ taking control? I was wondering what they wanted the courts to do. I’m not sure after reading the article. Are they just planning on destroying the wallet key, kind of like if they just burned a billion in seized cash? It’s interesting to think about how to do this. It must be hard to keep an agent from recording the key, and using it 50 years later or something. Theoretically as long as Bitcoin is around anyone who knows the private key can use those coins right? Is there a way to delete coins like a /dev/null address or something?
- yupyup54133 6y ago> I’m not sure after reading the article. Are they just planning on destroying the wallet key, kind of like if they just burned a billion in seized cash? If you wanted to burn the coins you would send them to the zero address as coins in the zero address are guaranteed to never be spendable.
- zadler 6y agoThe simple way to do it is to send the btc to an address for which the private key is unknown, thereby making it impossible to spend. Watch them not do this.
- prepend 6y agoHow would you verify that the private key is unknown? I guess an auditable process in a black box to confirm the key is ever stored. But with $1B at stake, there’s some serious incentive to measure electrical output or something to snoop the key. I guess you could send to a random address, but there’s an infinitesimal chance that someone in the future generates a key with that address, right?
- Drip33 6y agoThis address has no known private key https://www.blockchain.com/btc/address/1BitcoinEaterAddressDontSendf59kuE https://www.blockchain.com/btc/address/1BitcoinEaterAddressD... Sure someone could randomly guess it but not likely. You don't need to have or know a private key to generate a valid checksum bitcoin address that can be sent to.
- Scoundreller 6y agoI just created several trillion “disposal” sounding addresses and started sharing the one that I guessed a private key for. There’ll be some real surprises in 2025!
- Drip33 6y agoIf you can generate the private key to a 27 character or longer English readable Bitcoin address then you can use the same magical technology you possess to earn far more than $1 billion USD.
- laurent92 6y agoSame question: Ok we may not be able to brute-force it today for less than $1bn, but tomorrow, may a vulnerability in the algorithm make it possible to regenerate the private key?
- monokh 6y agoIf there is ever such a vulnerability in bitcoin that allows you to either - Generate private keys at a rate in which you will be able to produce it in a reasonable time or - Outright reverse engineer the private key from the public key or other metadata Then Bitcoin is broken and that 1bn is worth next to nothing.
- Tuna-Fish 6y ago> Are they just planning on destroying the wallet key, kind of like if they just burned a billion in seized cash? Why on earth would they do that? Under US law, law enforcement agencies can keep a portion of the proceeds from the sale of any goods they legally seize. This is a massive windfall for them.
- gojomo 6y agoOddly enough, in the case of other "Anonymity-Enhanced Cryptocurrencies" ("AECs"), the DoJ has taken the position that they'd rather not recirculate them. See <https://twitter.com/jerrybrito/status/1314254265251225600 https://twitter.com/jerrybrito/status/1314254265251225600>, where it's reported: > In most cases, the Department [of Justice] does not liquidate seized or forfeited AECs, as doing so allows them to re-enter the stream of commerce for potential future criminal use. So note: if the DoJ auctions these off, it's "good for Bitcoin", as it provides further confirmation they consider them a normal form of property whose legal uses outweight any illegal uses. On the other hand, if they refuse to auction them off, it's also "good for Bitcoin", as it permanently reduces the circulating supply, making all other units incrementally more dear.
- gregrata 6y agoI'm sorry - but - HUH? > re-enter the stream of commerce for potential future criminal use. Because of course if CASH re-enters the steam of commerce is somehow different?
- gojomo 6y agoI agree it's batty reasoning! For example, what if we assume for a moment that this makes sense from a crime-fighting perspective. That is, the marginal value of future-crime prevented by withholding the cryptocurrency is greater than the value of the crime-fighting that could be financed if it were auctioned off. If true, it would also follow that the DoJ should be buying cryptocurrency on the open market to keep it idle, at least until its price rises such that an equilibrium is reached, where "withhold-from-stream-of-commerce-value" and "spend-on-crime-fighting-value" become roughly equal.
- monokh 6y agoIn the past they have put it up for auction. [1] You can send a transaction with a value and an output script of OP_RETURN (a bitcoin script instruction). These outputs are unspendable. [2] [1] https://www.usmarshals.gov/assets/2020/febbitcoinauction/ https://www.usmarshals.gov/assets/2020/febbitcoinauction/ [2] https://en.bitcoin.it/wiki/OP_RETURN https://en.bitcoin.it/wiki/OP_RETURN
- Pick-A-Hill2019 6y agoFrom the link I dug out in the above comment "According to an investigation conducted by the Criminal Investigation Division of the Internal Revenue Service and the U.S. Attorney’s Office for the Northern District of California, Individual X was the individual who moved the cryptocurrency from Silk Road. According to the investigation, Individual X was able to hack into Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal the illicit cryptocurrency from Silk Road and move it into wallets that Individual X controlled. According to the investigation, Ulbricht became aware of Individual X’s online identity and threatened Individual X for return of the cryptocurrency to Ulbricht. Individual X did not return the cryptocurrency but kept it and did not spend it. On November 3, 2020, Individual X signed a Consent and Agreement to Forfeiture with the U.S. Attorney’s Office, Northern District of California. In that agreement, Individual X, consented to the forfeiture of the Defendant Property to the United States government. On November 3, 2020, the United States took custody of the Defendant Property from 1HQ3."
- Scoundreller 6y agoSounds like they bought their way out of a prison sentence? I wonder if any of the forfeiture got rebated back to them.
- fedreserved 6y agoMaybe, the statute of limitations were up on the hacking and theft lf the bitcoins themselves, but they gave up the coins due to civil asset seizure
- gojomo 6y agoI wonder: could 'Individual X' be DEA agent Carl Force (previously sentenced to prison), Secret Service agent Shaun Bridges (previously sentenced to prison), or some other government agent or informant who had tried to enrich themselves via the investigation? More about Force & Bridges: https://freeross.org/corruption/ https://freeross.org/corruption/
- TinyRick 6y ago
- Pick-A-Hill2019 6y agoNothing so far on https://www.justice.gov/news https://www.justice.gov/news but a bit of google-fu turned up this link https://www.courtlistener.com/recap/gov.uscourts.cand.368440/gov.uscourts.cand.368440.1.0.pdf https://www.courtlistener.com/recap/gov.uscourts.cand.368440... (via https://www.courtlistener.com/docket/18607888/united-states-v-approximately-69370-bitcoin-btc-bitcoin-gold-btg/ https://www.courtlistener.com/docket/18607888/united-states-... )
- Scoundreller 6y ago> Claimants of the above-described property which is the subject of this action shall file their claims with [blah] [blah] [blah] I wonder if claims like this ever go anywhere. At least a couple blokes sent token amounts, as they state: > Individuals will often send minimal amounts of Bitcoin to these addresses for unknown reasons. For example, on November 3, 2020, 1HQ3 received 0.00010999 bitcoin (approximately $1.51) from an unknown individual. I think some people who lost money when Payza/Alertpay got seized were given a very nicely worded letter saying who to contact for their seized funds, but those calls/emails/etc never went anywhere. Almost made it sound like you could get your money back. Here's that claim notice page: https://www.justice.gov/usao-dc/victim-witness-assistance/obopay-payza https://www.justice.gov/usao-dc/victim-witness-assistance/ob... and one case of a guy trying to get his money back for years: https://www.reddit.com/r/legaladvice/comments/7p6v3w/funds_seized_by_government_pending_a_criminal/ https://www.reddit.com/r/legaladvice/comments/7p6v3w/funds_s... > I have called, & emailed everyone multiple times, and get a response back once every 4 months from people who don't understand whats going on.
- deleted 6y ago[deleted]
- dang 6y agoThe Bloomberg story is https://www.bloomberg.com/news/articles/2020-11-05/u-s-seeks-forfeiture-of-bitcoin-valued-at-over-1-billion?sref=w3vFo7gi https://www.bloomberg.com/news/articles/2020-11-05/u-s-seeks.... (This comment was merged from https://news.ycombinator.com/item?id=24999794 https://news.ycombinator.com/item?id=24999794.)
- Scoundreller 6y agoWow, so its movement on election night happened to be a coincidence? (Dunno why DoJ would want to hide this from the public). If anything, every coiner was on their computer and more likely to be seeing something like this.
- zaroth 6y agoTFA says the suit seeks to seize the $1B in coins after an unknown hacker gained access to the funds. Forfeiture doesn’t mean destroying the coins. If the Fed can gain access to the coins they will auction them off. But if I understand correctly, this is the Fed basically laying a legal claim to and flagging coins that it doesn’t control therefore making them much more difficult to redeem, after seeing that they moved, which implies a hacker did manage to crack a wallet. This story is the perfect example for how little privacy is actually afforded by the Bitcoin blockchain. It’s unlikely the Fed has access to the coins, and that’s why the Bitcoin price just went up 7% because whoever cracked the wallet certainly isn’t going to hand over the coins. Either those coins will never be spent, or the hacker will have to find a country willing to launder them and somehow keep the Fed at bay (doubt it), or if you’re the Fed maybe you arrange a settlement with the hacker to split the coins.
- Aissen 6y agoThe settlement would be an excellent idea. Big companies often make deals with governments over large amounts of tax they owe. If the hacker can walk with $50M clean and legal (and let the government have the rest), it's a pretty sweet deal.
- Scoundreller 6y agoThe Silk Road may not have been their only hack either. The $1b may not be that big of a deal for them. Dunno what kind of immunity they would have received, but individual X must be happy that the US Gov got put their biggest enemy away for life.
- kim0 6y agoBitcoin really missed the mark with respect to privacy and fungibility. I bet this guy wishes they were holding something like Monero now!
- gamblor956 6y agoTFA says that the coins were already seized by the U.S. government, not that they intend to do so. With respect to the lawsuit, note that this is how civil forfeiture works: the "defendant" is the property seized. In almost all U.S. jurisdictions, a civil forfeiture lawsuit can't be filed until the prosecuting agency is actual in custodial possession of the property. The point of the lawsuit is to give the lawful owners of the property the opportunity to challenge the seizure and get their property back.
- shiado 6y agoSo what is the actual story here? Some dormant coins that were associated with the Silk Road for which no ownership was established and nobody was prosecuted for has moved to a new address and the feds are laying claim to the coins? And what actual information is there to suggest they were hacked?
- deleted 6y ago[deleted]
- smaps 6y agoSeems like HN might be blocked as referrer here... clicked on the link and got a 404. If I go to the link directly it loads.
- martinko 6y agoWorks for me
- Darmody 6y agoUnlucky, probably, because it works for me.
- loa_in_ 6y agoWhoops. Ditch it and nuke the drives. Works for me.
- pushrax 6y agoDownvotes on this comment are probably missing the point (as I see it), which is that redirect/browser/other HTTP hijacking malware is pretty common and could cause something weird like this.
- wolco2 6y agoChange your gateway from 1.1.1.1 to 8.8.8.8 and see if it makes a difference
- Denvercoder9 6y agoFirst, 1.1.1.1 and 8.8.8.8 are DNS servers, not gateways. Second, changing DNS server doesn't really work against a 404.
- loa_in_ 6y agoIt might, because it might be not the entity you expect that gives you 404. Even if not for wrong DNS resolution, it might be the load balancer that points you to server who doesn't have the resource somehow.
- deleted 6y ago[deleted]
- TheHypnotist 6y agoI'm not the most saavy BTC person, but isn't part of the allure of bitcoin the ability to evade this type of seizure?
- Rebelgecko 6y agoYour BTC is only as secure as your wallet.dat file
- thdc 6y agoSeems like they somehow coerced the owner to transfer the bitcoins instead of targeting the wallet itself.
- ponker 6y agoThat’s certainly an aspect of its marketing, we can see that the reality is quite different. Individual X “agreed” to forfeit the wallet: https://xkcd.com/538/ https://xkcd.com/538/
- okareaman 6y agoThe Feds seized it from "Individual X" who hacked the account, they didn't hack and seize the account directly
- TedDoesntTalk 6y agoYou're assuming there actually is an Individual X. It is possible he was fabricated in order to hide that the Feds indeed did gain the password for the wallet.
- nullc 6y agoIf they did, they lied to the court. "On November 3, 2020, Individual X signed a Consent and Agreement to Forfeiture with the U.S. Attorney’s Office, Northern District of California. In that agreement, Individual X, consented to the forfeiture of the Defendant Property to the United States government."
- toomuchtodo 6y agohttps://archive.is/r8OPF https://archive.is/r8OPF
- londons_explore 6y agoThis gives the US government a lot of power over bitcoin... That both gives the government an incentive to let bitcoin thrive (to protect it's holdings), but also an opportunity to substantially manipulate bitcoins market price, possibly down to nearly zero. Or the keys to these bitcoin will sit idly in a filing cabinet forever...
- modeless 6y agoThey will auction it off as soon as possible like they did several times before. I'm not sure why the bitcoin price has gone up in response to this news, because it means more supply is coming to the market soonish. These coins might have been presumed lost before. Certainly they would not have been able to be sold on any legitimate exchange. Now they will be washed clean and enter the markets. On the other hand, a billion dollar bitcoin auction from the US government will generate some publicity, and publicity definitely drives the Bitcoin price up. We'll see which effect dominates. There's another billion+ hoard of bitcoins which has the potential to be released to the markets in the next year or two, which is the MtGox reserves. Crazy story: MtGox went bankrupt after losing a bunch of bitcoins in hacks, but during the years-long bankruptcy proceedings the bitcoins they have left have been frozen, and their value has gone up so much that they could exit bankruptcy and pay all their debts many times over. But it's unclear what the bankruptcy court will ultimately allow them to do. If the MtGox bitcoins are released to their many thousands of creditors (MtGox customers who had balances at the time of collapse), I expect a crash in the bitcoin price as many will choose to sell at the same time. This is different from the government bitcoin auctions, where there are only a few winners who probably don't plan to sell right away.
- ineedasername 6y agoMtGox might be able to pay people the dollar value of their investment at the time, but still not the actual # of bitcoins.
- modeless 6y agoTrue, but by essentially forcing creditors to hold their bitcoins instead of allowing them to sell, it's likely that MtGox has actually done most of their creditors a perverse favor, and they will end up with more money than if they had received their full bitcoin balance in 2014 and sold some of it since then. Assuming they are actually allowed to distribute the full value to creditors in the end, either as bitcoin or yen (the bankruptcy is in Japan).
- dirtnugget 6y agoSo what happens to bitcoins which were seized by the US government?
- Forbo 6y agoThey typically get auctioned off, much like other property seized in asset forfeiture proceedings.
- lastofthemojito 6y agoThat's an interesting angle in the "is Bitcoin really a currency or is it just property?" argument. What would happen if the US government seized a billion dollars worth of foreign cash? Would that get auctioned off too? Seems like a weird auction, selling money.
- tantalor 6y agoWhy go through the trouble? Count it as "revenue" and destroy it. If the govt wants 1B in cash there are easier ways to get it.
- gitweb 6y agoBarr gives them to Trump to help pay off some of his debts before he flees the country
- deleted 6y ago[deleted]
- shiado 6y agoWhat's fascinating is that it is the view of the state that the creation of a hard fork, which is the creation of new and previously non-existing coins according to how Bitcoin is taxed by the IRS, is considered to be the proceeds of crime. It is philosophically notable that a piece of property can come into existence and immediately be considered the proceeds of crime in this way.
- gamblor956 6y agoThe Bitcoin Cash coins were received solely as a result of owning coins that were the proceeds of a crime, therefore, the BC coins were themselves also deemed the proceeds of a crime.
- shiado 6y agoUnder US forfeiture laws proceeds is defined as the following: (A) In cases involving illegal goods, illegal services, unlawful activities, and telemarketing and health care fraud schemes, the term “proceeds” means property of any kind obtained directly or indirectly, as the result of the commission of the offense giving rise to forfeiture, and any property traceable thereto, and is not limited to the net gain or profit realized from the offense. I suppose the BTC itself would be covered under "property of any kind obtained directly or indirectly, as the result of the commission of the offense giving rise to forfeiture" And the BCH split coins would fall under "and any property traceable thereto, and is not limited to the net gain or profit realized from the offense." It would appear that such a seizure is legit as 'traceable' is infinitely flexible. But I'm not a lawyer so don't take my word for it.
- gamblor956 6y agoYes, that's generally how the tracing works. In one extreme case (at the state level), prosecutor successfully seized the house of the parent of a defendant, where the defendant had made one gift mortgage payment on behalf of their parents, who had timely paid the mortgage for several years and were not at any risk of being unable to pay their mortgage.
- aazaa 6y agoI find it extremely amusing that the US government has over the last several years become one of the world's largest traders in bitcoin. It's not quite the path many were predicting back in the early 2010s, but Bitcoin has been full of surprises. If history is any guide, the bitcoin will be auctioned off sooner rather than later.
- flattone 6y agou just learned that the us is even a trader of bitcoin at all. you say this not referring to a seizure, right?
- flattone 6y agoOk HN what the f is happening. Why are people minusing a question? like.. can i just know what is even wrong here?
- pc86 6y agoPoor formatting/spelling/punctuation/readability. "u just learned that the us is even a trader of bitcoin at all" - how do you know what aazaa knew or didn't know prior to commenting? In general just an incredibly low effort/value comment.
- mellosouls 6y agoI don't know why you have been down-voted but candidate possibilities include the first sentence being read as snarky (even if it wasn't the intention) and using "u" for "you" in a forum where a more mature* form of expression is the norm. * I don't intend snark either but I'm not sure how to put it politely...
- deleted 6y ago[deleted]
- themodelplumber 6y agoJohn McAfee has been on a bit of an unfortunate downswing, so it's great to see a big name bringing in institutional support during a crisis like this. ;-)
- baobabKoodaa 6y agoI find it implausible that someone went through the trouble of stealing $1B from an online marketplace for drugs, then sat on it for 8 years without spending any of it, and then forfeited it to the U.S. government.
- compiler-guy 6y agoPrison makes doing a lot of things extremely inconvenient, and greatly increases your preference to do things that your jailers would like you do.
- simias 6y agoAs always in situations like this you shouldn't focus on the face value but the potential value post-laundering of what he could potentially end up with. It's not like he had $1B in the bank he could spend as soon as he got out of jail. Moving even a small fraction of this amount to buy something significant is bound to have people asking questions you don't want to answer.
- aqme28 6y agoVery curious how they convinced this anonymous hacker to give up $1B to the federal government. The filing makes it sound like it was voluntary, but I doubt it really was.
- RIMR 6y agoWhat do you even do with that much bitcoin realistically? It's dirty, so any attempt to turn it into fiat puts you at risk of being found. Whoever had it refused to touch it for 7 years, likely because they knew it was a fast-track to getting arrested. Giving that money straight to the feds in exchange for immunity might be more attractive than trying to hide the reason you became a billionaire.
- xyst 6y agowhoever had it didn't have a "Marty Byrd" type person to launder the money. such a shame, could have done so much with that money in terms of humanitarian aspects.
- jaggirs 6y agoPretty crazy to think about. Its a billion dollars. For that much money, it might almost be worth it to go to jail for it and let your kids try to launder it 50 years later. There are bound to arise opportunities to launder at least part of it right? Even without considering that the bitcoins might become even more valuable, you could set up a dynasty with this money.
- Nemo_bis 6y agoOr you can just ask the feds to keep you in a witness protection program which treats you and your family like royalty for 50 years. I don't know if it exists, but it might. The USA government can easily launder 1 G$ in bitcoin and give you part of the profits; it's not clear who else could. The only alternative I can imagine is some giant money laundering scheme with some authoritarian state, probably involving the smuggling of oil, diamonds and/or weapons.
- 6y ago
- canada_dry 6y agoTL;DR: The wallet held the proceeds of "Silk Road" drug trafficking, a hacker stole the wallet. Feds tracked down the hacker and just made a deal with him to give them keys to the $1B wallet. Hacker prob got a nice pen and stayed out of Federal prison.
- nullc 6y ago> and stayed out of Federal prison. I'm a little confused there, because both the hacking and money laundering should have been beyond the statute of limitations.
- hemloc_io 6y agoIf I had to guess it's probably because those transactions originally come from the Silk Road. So while the hacking and money laundering aren't criminally liable, the coins themselves are proceeds from a criminal enterprise, and if you stand in the way of the government trying to get them you could be hit with obstruction(?). Realistically regardless of the technical level of criminality I doubt that the FBI would let a billionaire be minted with DNM money.
- nullc 6y agoRight, but if they had nothing else on Person X, I'm a little surprised that they were able to get these coins from them-- to forfeit the assets they'd have to get possession of them. Because all they could have traded (assuming there were no other viable criminal charges) would be keeping their identity secret.
- gamblor956 6y agoGenerally, the statute for civil forfeiture is five years. Because the Bitcoin was illegally acquired (through hacking) in 2015, the statute would have expired this year, even though the underlying crime (hacking) only has a 2 year SOL. According to the filing, the last transaction involved in the hack was in November 2015, so the statute probably would have expired this month.
- ChuckMcM 6y agoWell at least they have a reserve of bitcoin to pay off ransomware demands for a while :-) Less sarcastically, I feel for "Individual X", I mean here you've gone and managed to gain control over a billion dollars, and you have no way to 'spend' it without revealing that you have it.
- dzhiurgis 6y agoWhy would anyone hold such large sum in large wallet and wouldn't rotate it. Seems careless.
- driverdan 6y agoThere's no value in rotating them. Wallet keys are essentially random. Keeping it in one wallet doesn't increase the chance of the key being discovered.
- dzhiurgis 6y agoThat's a lot of assumptions about your vault security, random number generator and whether it wasn't leaked somewhere before.
- macinjosh 6y agoWhat happens if the feds memory hole the keys for this wallet effectively destroying the bitcoin? Its just gone forever right? This seems like the best route for the state to supress and destabilize cryptocurrencies. Heck, if the federal gov't were motivated enough they could 'print' money at the Fed, use it to buy bitcoin, and then destroy it! No skin of their backs.
- vaccinator 6y agoThat'd probably make the price of bitcoin to go up but if they would do that they probably could get sued?
- leoplct 6y agoWhat is usually the practice for seized money? Donated to charity? Invested in government bonds? New uniforms?
- ExcavateGrandMa 6y agoWEREN't That FBI guy who brought cocaïne soap to silk road's webmaster who stole bitcoin but got caugh... :Ð Was those bitcoins the one they stole and then put back in the wallet to respect their own law?... :D Gov took his money and sentenced the guy to double life sentence... an awful story...
- littup 6y agoThis is bad
- sjg007 6y agoHow does the government seize Bitcoin?
- dannyw 6y agoMany bitcoin wallets have passwords. In situations where ownership is unclear (eg wallet in sharehouse with access by anyone living there; but protected by password), being forced to divulge your password could have 5A issues.
- mleonhard 6y agoAlternative story: NSA cracked the wallet's password and FBI invented Individual X as a cover story.
- jmakov 6y agoThose supercomputers must be good for something...
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