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FBI struggles to seize 600,000 Bitcoins from alleged Silk Road founder

197 points by spindritf 13y ago

yason 13y ago
This is interesting as a more generic case: before criminals had to stash their money in a hide in case they got caught and into prison. Now they can convert the money into bitcoins and simply arrange that they can't unlock the wallet. Things that help: - you can make indefinite copies of your locked wallet so TLA basically can't confiscate it - you can protect your wallet with a secret (passphrase and/or a key) so that they can't unlock it - you can distribute the secret among several people using one of the secret sharing protocols - or hide it steganographically in an ordinary file while the TLA in question still can't prove it's there
- amalag 13y ago
  Just imagine Breaking Bad with Bitcoins
- fab13n 13y ago
  A noteworthy side-effects is that it dramatically increases the incentive to reform the 5th amendment (or reinterpret it, which is the usual cowardly way to achieve the same result). From a strictly technical PoV, the concept of having several copies of the wallet, all equivalent, where whichever is spent first cancels the others, is very interesting and novel. It has a funny quantum physics vibe, too.
  - debacle 13y ago
    The government can't even pass a budget. Good luck passing an amendment.
    - xux 13y ago
      You don't need Congress to re-interpret the 5th. The Supreme Court does.
    - Coffeewine 13y ago
      Seizing the assets of alleged criminals is something for which there is broad bipartisan support and consensus. I do however agree that an actual amendment is unlikely.
  - anologwintermut 13y ago
    If they really wanted the money, they might be able to offer him limited immunity against any evidence revealed while transferring the coins to their wallet. I.e they won't use his doing it as evidence in court that the Bitcoins were his or similar things. This removes the 5th amendment problem and since the goal was to confiscate his funds, not collect evidence, the government looses little.
    - fab13n 13y ago
      I was looking at it from a more general viewpoint: there are more and more valuable things you can effectively protect against seizure with a password. This was not foreseen in the constitution, which thought of seizure as a physical process. I was looking at it from a more general PoV than simply DPR's fate: the practical need for the judicial power to be able to seize stuff is threatened by the 5th. There must be many people in the system who badly want to carve password rendition out of the 5th's no-self-incrimination protections. Coming back to DPR's case, given the political importance of the case (it's about sovereign states' ability to police Internet on their own turf), I don't think the central problem is to recover the BTC600K as actual dollars. And I don't even know whether they could easily and legally sell them off, would they get the keys. The problem is as follows: if there are copies of those wallets, if they're spent from one of those copies, feds will look like fools powerless to confiscate millions of dollars from an imprisoned and convicted guy. The journalist said "don't worry, feds have seized the wallets, they won't be spent". That's almost comically false, but that's telling as (conservative) wishful thinking: if only this was true, then no major social/legal adjustments would be necessary to cope with the emergence of crypto-currencies.
- praptak 13y ago
  "interesting"? I'd say it is a game changer when it comes to stashing illegal profits.
  - betterunix 13y ago
    Not at all. The judge demands that you transfer the money to the government, you refuse, the judge puts you in jail for contempt of court. Nothing novel about it.
    - yason 13y ago
      If you're already going to jail for a potentially longer period of time, what does it matter?
whyleyc 13y ago
It's surely only a matter of time in this situation before the FBI start using rubber-hose cryptanalysis [1] [1] Obligatory XKCD http://xkcd.com/538/ http://xkcd.com/538/
- sp332 13y ago
  That's actually illegal.
  - oleganza 13y ago
    Killing citizens without court order is also illegal. And waterboarding in gitmo. And starting wars based on lies. And lying to congress by NSA. So many things are illegal, but those who are in charge of enforcing justice are doing them anyway.
    - misnome 13y ago
      Not if you then make them legal retroactively!
    - smoyer 13y ago
      I hope that killing citizens WITH a court order is also illegal. A death-sentence requires a conviction, then a sentencing.
      - Cthulhu_ 13y ago
        Not if you just brand them the label 'Enemy combatants' - laws no longer apply then, apparently. I'm still waiting for someone to accuse and convict the US of war crimes and the violations of the rights of prisoners of war.
  - harvestmoon 13y ago
    It may be, but who knows if we'll ever find out about it?
  - whyleyc 13y ago
TausAmmer 13y ago
Biggest thieves of the block, what else can be said.
27182818284 13y ago
I've had a question that I"m curious to hear the community's reaction on: Doesn't the FBI wanting to seize the bitcoins do more to legitimize the currency than anything thus far? Isn't it tantamount to saying "Yes, this is like dollars, francs, or another legitimate currency that we need to seize." I'm wondering if that conversation has come up among management at FBI and what the outcome has been.
- aroman 13y ago
  That's what I thought as well. In fact, wouldn't their "cashing out" the Bitcoins be tantamount to an endorsement of Bitcoin? They're injecting money into the ecosystem and directly helping to circulate it. That they are even trying to exchange the Bitcoins for USD is, at least in my mind, U.S. governmental approval of Bitcoins.
- mseebach 13y ago
  It's like any other asset with a market value. Collectible baseball cards have no inherent value to me (I'm not a baseball fan), they're just (mildly aesthetically attractive) pieces of paper. In that sense, they are similar to Bitcoin. That some people will pay several million dollars for them does not change that fact. If a drug dealer settled all his transaction in baseball cards, the FBI would of course confiscate them.
- racbart 13y ago
  If he had a $1m car and the FBI wanted to seize it, would it legitimize cars as a currency?
  - Cthulhu_ 13y ago
    It definitely wouldn't if it was $80 m in cocaine; the FBI would confiscate it and have to hand it over to the DEA to have it destroyed. Whether or not the FBI wants to seize it and spend it in some way, or just to seize it so it can't be spent by DPR or anyone anymore is up for debate. I'm not actually sure what the laws are regarding money or possessions seized from criminals over there.
300bps 13y ago
If Ross Ulbricht is really the guy who ran this site, why in the world was he doing his work from San Francisco? His alleged job was the pinnacle of "work anywhere". He took so many precautions to keep his identity secret that he must've known that his activities would at some point gather focused attention from the authorities. Living in San Francisco allowed the feds to pick them up on their lunch hour. Even just hopping the border to Mexico would've required them to get international cooperation and extradite him. He'd likely be a free man if he were in Croatia or Kazakhstan.
- jpwagner 13y ago
  so many precautions read up on some of the police work the feds did. this guy was careless.
  - 300bps 13y ago
    I read the entire thing and I think what you said is the easy but not necessarily accurate conclusion. The site was in business since February of 2011. The operator of the site was careful enough that they successfully ran the world's largest black market website for over 2.5 years. Doesn't really align with a characterization of "careless". Sure, he re-used a few login names but I don't know how many people could've successfully gone without doing that over a 2.5 year period. I think it's more accurate to say he "wasn't perfectly careful" than it is to say he was careless.
    - gpcz 13y ago
      OPSEC for Hackers ( http://www.youtube.com/watch?v=9XaYdCdwiWU http://www.youtube.com/watch?v=9XaYdCdwiWU ) uses a quote from The Wire to reference what you're talking about: “The thing is, you only got to fuck up once. Be a little slow, be a little late, just once. And how you ain’t never gonna be slow, never be late? You can’t plan for no shit like this, man. It’s life.” The Grugq addresses this issue by recommending that one set up an entire fake persona before doing anything, and then doing all the activities "in character" as that persona. If you stay in character, then even making the types of mistakes DPR made would only lead the authorities to the persona rather than yourself. Granted, this video didn't exist when DPR made Silk Road...
rayiner 13y ago
The asset seizure issue with regards to bitcoin is interesting, but not unprecedented. A lot of the same issues that come up here come up in the more traditional context of seizing assets stashed in Bermuda, etc. You have Bermudan banks that won't allow access to assets without consent from the owner, and the question is whether giving that the owner can be forced to sign the consent form or whatever.
- hippich 13y ago
  AFAIK, if money stored in USD in the Bermuda bank account, when you wire these, it goes through US bank anyway and can be stopped there. And leaving country with $80 mil in cash would be hard.
bsullivan01 13y ago
after shuffling Ross from horrible prison to horrible prison and making his prison life miserable on purpose... So Ross, how about you tell us the password and instead of 14 life sentences you get only 20 years?
- mpyne 13y ago
  Yes, poor Ross, the guy only had twice as many people killed as Hans Reiser did...
  - stcredzero 13y ago
    Mr. Reiser was a bit more hands-on in his approach. Does it make sense for someone who has been fooled into thinking he's had people killed to be as guilty as someone who actually kills the people? It seems so, but I'm not sure what US law says about that.
Synaesthesia 13y ago
Good encryption is still uncrackable, unless you induce the owner to give up his passphrase.
- nachteilig 13y ago
  How much leverage does giving up $80 million in BTC give one in a plea deal?
  - sejje 13y ago
    Depends how certain your guilt is, and how stiff the sentencing is.
  - bdcravens 13y ago
    How much leverage does 1 or 2 counts of murder-for-hire give the government in a plea deal?
  - betterunix 13y ago
    None at all. You'll be held in prison until you release the money, or else they will just ignore the money and convict you anyway.
kybernetyk 13y ago
> Even if the FBI is not able to transfer the money, merely having possession of the wallet file itself is enough to prevent the coins being spent. Yes ... if no backups exist.
- ikken 13y ago
  .. and if it was not some kind of brain-wallet (supported by Electrum, etc.). If it was, then the wallet can be regenerated from memorized hash.
- gambiting 13y ago
  And as soon as someone spends any amount of bitcoins from one of these backups the copy held by FBI becomes invalid.
  - VMG 13y ago
    To be precise, transactions must explicitly state all output addresses, and the default behavior of the client is to transfer the "change" back to a new address owned by the party doing the transaction to increase anonymity. It is however possible to redirect the change back to the original address.
  - colkassad 13y ago
    The thought exercises are fascinating. Say he has a completely trustworthy friend somewhere that the FBI is unaware of. Could he have that person spend a little, back up that copy again, and effectively keep that FBI from ever getting that money? Also, surely a backup exists. What is an effective way to backup the wallet so that it can survive decades of prison time? Particularly if a trustworthy friend does not exist?
    - VMG 13y ago
      > Also, surely a backup exists. What is an effective way to backup the wallet so that it can survive decades of prison time? A piece of paper: http://bitcoinpaperwallet.com/ http://bitcoinpaperwallet.com/ You should only print it from a secure system though.
appleflaxen 13y ago
Right after the DPR bust there was a lot of discussion about how it was a death knell for bitcoin, but this is exactly why it's such a revolutionary type of technology: if DPR had any currency in a paper wallet, he could simply print it out, put it in a safe deposit box, and pick it up once he is out of prison. For a currency to be so secure that a state cannot seize it from a citizen is unprecedented. It will be fascinating to see how this plays out.
- CompelTechnic 13y ago
  If he uses a brain wallet, it would be even more secure. The ONLY possible way to seize the bitcoins would require him to comply. Another interesting bit is the fact that this might make him a billionaire by the time he's released from prison- just from the appreciation of bitcoin's value. I have another curiosity about the FBI's intent to seize his bitcoins- is it fair to seize all of them? If half of these bitcoins were earned while bitcoins were only worth 1/10 of current value, should only 10% of that half be seized? This might be arguable in court.
  - Osmium 13y ago
    > I have another curiosity about the FBI's intent to seize his bitcoins- is it fair to seize all of them? If half of these bitcoins were earned while bitcoins were only worth 1/10 of current value, should only 10% of that half be seized? This might be arguable in court. I'm fairly sure there must be precedent for this. It's not like Bitcoin is the only currency that undergoes inflation...
    - eksith 13y ago
      "It's not like Bitcoin is the only currency that undergoes inflation..." You mean "deflation"? ;) The nice thing about BTCs (aside from anonymity) is that you can always subdivide to tiny increments.
      - csomar 13y ago
        Inflation is when the price of something increase. So, yes, Bitcoin undergoes inflation and not deflation.
eterm 13y ago
"At current exchange rates, that represents slightly more than 5% of all bitcoins in circulation" Why would exchange rate affect what percentage of bitcoins 600k are! This is terribly confused thought from the journalist: 600k bitcoins, that's "almost $80m". $80m! But at current exchange rates that's "just over 5%!". When sitting there are the actual numbers of bitcoins in his wallet and bitcoins in circulation...
- salmonellaeater 13y ago
  > An FBI spokesperson said to Hill that the “$80m worth” The FBI gave the number denominated in USD, so the journalist had to estimate the true number of BTC. The 600k is almost certainly calculated from that $80m number.
  - cle 13y ago
    I believe the $80mil estimate is from the criminal complaint, which derived that estimate from the data they collected from the seized server. The complaint specified that from Feb 6, 2011 to July 23, 2013, Ulbricht collected 614,305 Bitcoins in commission, which is $84,159,785 at today's exchange rate on Mt. Gox. So I'm pretty certain that the $80mil estimate is derived from the actual number of Bitcoins in commission that was logged on SR's server.
    - donpdonp 13y ago
      Calculating (volume x last price) can be misleading when the number of coins traded is large enough to move the market. Using the freenode/#bitcoin 'gribble' irc bot for some calculations, there are only 45,000 bitcoins or $5Million for sale over $100USD. donpdonp> bids 100 gribble> There are currently 45669.225 bitcoins demanded at or over 100.0 USD, worth 5307618.93329 USD in total. Selling the remaining 550,000-odd coins would wipe out the market and net only $6million more. donpdonp> market sell 600000 gribble> A market order to sell 600000 bitcoins right now would net 11853320.3682 USD and would take the last price down to 0.0100 USD, resulting in an average price of 19.7555 USD/BTC.
nwh 13y ago
I can't imagine they would let a password get in the way of this. Even with an encrypted wallet, the balances of the content addresses are available for viewing for convenience sake. The reference client (I's not mentioned which wallet software) uses hundreds of thousands of rounds of key stretching, enough that on a GPU you're only getting a few attempts at the key. Might irritate them enough to crack out a good sized farm.
- chiph 13y ago
  Passwords are protected under his 5th amendment rights. The government would have to come up with a much stronger reason to force the password from him other than "we want it" The interesting part is if he does have a backup, and if he does access the funds in there for his legal defense. Would his attorney consider that money to be tainted, and thus refuse to accept it?
  - Nate75Sanders 13y ago
    Problems in finance, like computer science, can often be solved through a layer of indirection.
  - rayiner 13y ago
    It's not settled that passwords are protected under the 5th amendment. The 11th circuit has so ruled (http://www.zdnet.com/blog/identity/landmark-decision-allows-child-porn-suspect-to-plead-fifth-in-password-case/291 http://www.zdnet.com/blog/identity/landmark-decision-allows-...) but it's still up in the air everywhere else.
  - njharman 13y ago
    The 5th Amendment is mostly moot since we've allowed prosecutors to extort plea-bargains via ridiculously over-charging.
  - IgorPartola 13y ago
    Passwords are controversial under the 5th, but from the cases I followed, they are typically interpreted as a key to a safe, not as admission of guilt. As in, if your password is"YesITotallyDidIt", that is not an admission and is there fore not protected. The only things the 5th protects seem to be things you can say that can be directly used to convict you. Not giving the authorities with a warrant in hand your password seem to land you in jail indefinitely for contempt of court, which is likely as bad as what you will get if convicted. Edit: I am not a lawyer.
llamataboot 13y ago
What's overwhelmingly clear from this article is that either the feds, or at least the people they are sending to talk to the media, have really no idea how bitcoin works. Saying "The Bureau is in a position equivalent to having seized a safe belonging to a suspect with no idea of the combination – and no hope of forcing it open any other way." is completely incorrect.
- drcode 13y ago
  I'm not sure who said it first but the old dictum still holds: "It's easier to turn lead into gold than to steal a properly configured bitcoin wallet."
- stcredzero 13y ago
  > What's overwhelmingly clear from this article is that either the feds, or at least the people they are sending to talk to the media, have really no idea how bitcoin works. Not so much. Everyone might have a clue, but their words could be mangled and/or placed in entirely the wrong context by clueless editors.
SeanDav 13y ago
I don't understand why possession of the wallet file means the FBI have seized his bitcoins (even if they can't access them yet)? Surely you can make copies of your wallet and keep them in various secure locations?
- fab13n 13y ago
  You understood; the journalist didn't. It's scary to see how clueless mainstream journalists are, as soon as they touch a subject we're mildly knowledgeable about. Imagine the amount of BS they spread when talking about complex stuff such as macro-economics...
- stormbrew 13y ago
  Practically speaking I'm not sure it really matters. If he's unable to do anything with the backups himself until they can 'convince' him to give them the password, they will still probably eventually get the money. If someone else starts spending from that wallet address they'll probably be tracked down and charged with conspiracy or obstruction of some sort. Basically as long as the money can't be spent for whatever reason it is effectively seized.
danielweber 13y ago
Even if the FBI is not able to transfer the money, merely having possession of the wallet file itself is enough to prevent the coins being spent. Ugh, no. Having the file means you can transfer out the bitcoins. Anyone having the file can transfer out the bitcoins, so the FBI securing that wallet doesn't lock down those bitcoins. The FBI cannot properly "seize" the bitcoins unless they use the wallet to transfer the coins to a fresh address they make and control. And I'm not sure that traditional seizure laws allow that, because AFAIK we've never had this scenario before.
noarchy 13y ago
If the FBI cannot manage to successfully steal these Bitcoins, then it might be quite the advertisement for the overall security of Bitcoins, no?
rdl 13y ago
Big question is whether turning over the passphrase would be "testimonial". I could see it being argued that it's a forgone conclusion he owns these bitcoins -- enough evidence to tie him to silk road, and evidence in the block chain showing those coins came from silk road. (This is relevant due to the fifth amendment to the constitution. In many cases, turning over a password or combination is considered self incrimination and thus cannot be compelled by the state.)
lettergram 13y ago
The author doesn't really seem to understand what a Bitcoin Wallet is. First, I HIGHLY doubt that 600,000 Bitcoins would be in one Wallet. More likely, the bit coins would be spread between several thousand wallets. Second, even if the FBI was in possession of "the wallet" couldn't Ulbricht just access his backups else where?
- alphydan 13y ago
  As far as I can tell the seized address has 27k BTC about $4m USD at the moment (see https://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX https://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5G... )
  - querulous 13y ago
    those are apparently user funds that were in escrow or otherwise stored with silk road at the time of the seizure. his personal commissions are the funds being discussed here
gedrap 13y ago
What's is rather shocking is the kinds of mistakes he made. Not some subtle but plain simple. Like using personal email to register on forums and promote SR and recruit people. Using stackoverflow with personal email, again... Yes they are not some solid evidences, but made the FBIs life, to get the guy, much easier. You might say that it's easy for me to point out those mistakes but they are so basic and it's not that he was running some Nigerian type of scam, he must have been way more careful. Or keep messages about the 'murder-for-hire'. Yeah it's rather obvious that no one got hired but good luck explaining this negotiation tactics to the judge. Plus he mentions $80k for other 'murder-for-hire'. I'm really curious how the thing with this 'murder' will end up. I mean he could have just simply deleted them just in case. It's not FB that it would stay forever...
- powertower 13y ago
  I really don't think he predicted just how popular this service would become. At that time it was probably nothing more than a side-project destinded to die off in 6 months.
- drcode 13y ago
  Ross was a San Fran "startup" guy. Hey created an MVP product with the usual "fake it till you make it" attitude that is part of this culture. PG himself will happily tell you not to worry about lawyers and other distractions until your MVP is out the door. This may work for a typical startup, but Ross was foolish enough to apply this advice to a criminal enterprise.
  - triplepoint217 13y ago
    Amusing anecdote: I was at a pg talk last week, and afterwards someone in the audience came up and asked if SR being gone meant there was a market niche for a new startup. pg's answer was that it was in no way worth the risk, there are lots of other things you can try without the large risk of ending up in jail.
- mpyne 13y ago
  Unluckily for Ross, the "other murder-for-hire" was transacted with an undercover cop, which corroborates his later inducement for a second murder.
azsromej 13y ago
a walk on the lighter side: the bitcoin is inside the computer http://www.youtube.com/watch?v=zQGX3J6DAGw http://www.youtube.com/watch?v=zQGX3J6DAGw
cphoton 13y ago
Can't they just use an old version of bitcoin and use the timing attack to find the passphrase? EDIT: I mean exploting this bug: https://github.com/bitcoin/bitcoin/issues/2838 https://github.com/bitcoin/bitcoin/issues/2838
- dlgeek 13y ago
  I'm not a bit coin user, but that appears to be an attack on a "remote management" password for the client (it's about "RPC" or "remote procedure call" authentication), not for the wallet. Wallets use a cryptographic key derivation function, this is against a plain text and configurable password. This would only be an issue if the wallet was loaded into the old version of the software at the time they attacked.
Ellipsis753 13y ago
"Even if the FBI is not able to transfer the money, merely having possession of the wallet file itself is enough to prevent the coins being spent." Isn't this totally false? He could have easily made backups of the wallet and even given copies of it to others. I'd expect there's a whole bunch of ways that these bitcoins could still get spent?
- joshstrange 13y ago
  Yes, it is wrong as many commenters on the site also point out. He could have multiple backups of his wallet file and spending the bitcoins out of one of his backups would invalidate the coins in the wallet the FBI has.
  - anton000 13y ago
    He doesnt even need a copy of the wallet file. If he stored the bitcoins in a single address, and he has the private key stashed somewhere, then even if the wallet file is deleted, it can be retrieved. This is how bitcoin works, if you have the ECDSA private key of a bitcoin address, you can spend those bitcoins without having the need for a wallet :)
    - joshstrange 13y ago
      My knowledge of bitcoin, while probably better than your average guy on the street, is certainly not infallible. Thank you for correcting my mistake.
    - TwoFactor 13y ago
      Since the wallet file is a set of private keys... they're basically the same thing. You're recreating the wallet if you're restoring the private keys from a stored copy.
- drcode 13y ago
  The beauty is that NOT spending the 600K BTC is economically equivalent to giving a 600K gift to all other bitcoin owners. If the news ever came out that these coins are lost for all times, the exchange price for BTCs would most likely increase 600K/11M or about 5.5% in an instant. (Of course, there's no way this could happen since we don't know what private keys are stored in Ross' head. Also this is based on the efficient market hypothesis and real world results have other complecting factors.)
rarw 13y ago
The more interesting question regarding this seizure is whether the FBI can compell the creators of BitCoin to assist in decrypting what they have just seized. For example, there are a number of statutes that require those operating communications networks maintain the ability for the governemnt to access them regardless of the encryption or other security features being used. I don't know the corresponding baking law as well but it would not surprise me if the same laws that require banks to comply with seizing fund, blocking wire transfers, and tracking where money goes in the course of a criminal investigation could kick in here. Certainly something like this would have a big effect on the BitCoin market. I'm interested to see what happens in the future.
scottcanoni 13y ago
Here are the bitcoins they were able to seize: http://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX http://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GN...
seniorsassycat 13y ago
This article makes it sound like all of DPR's bitcoins are in one wallet. If 5% of all bitcoins were being funneled into one bitcoin wallet couldn't people have discovered that wallet by analyzing all BTC transactions?
the_watcher 13y ago
How can the FBI "seize" his wallet as if it were a safe? Isn't the point of Bitcoin that it is digital, hence he would be able to access it if he could get to a computer? Or is there a way to physically control the wallet so that it can't be accessed elsewhere?
- debacle 13y ago
  They seized a copy of his wallet that they don't have the key for. If he has a copy and they can't get the keys, this seizure is meaningless. If he doesn't have a copy, or they can get the keys, the story changes.
joshdance 13y ago
Will having 5% of Bitcoin out of circulation cause any economic problems with the currency?
- adventured 13y ago
  No, it'll make all other bitcoins more valuable, so long as the market believes said bitcoins are permanently out of circulation (not likely though, as the Feds will auction / sell them off as they do with other seized assets).
ahi 13y ago
Does it matter? What would the FBI do with them?
- ketralnis 13y ago
  What do they do with seized foreign currencies? Presumably find some way to convert them to dollars
ChuckMcM 13y ago
Well if they are unable to seize them, then bitcoin will become more valuable to the black market. If they are, then some of its patina as a 'safe' stash will be lost. Of course even if they don't get them, they will be able to see if they are ever used right?
- Swannie 13y ago
  Yea. That's what I'm thinking too. If you receive bitcoins from those address you're effectively doing the same as if you were collecting cash from watched boxes in a bank vault, and the cash was radio-actively tagged. (And therefore easily tracked.) Anyone handling a large quantity of those coins is suspect But if someone got their hands on them and performed a huge laundry so that everyone has tainted coin history, then you might be ok.
whage 13y ago
Only I think that all this 'leaving a name here' / 'leaving a stupid trail there' seems just way too stupid for someone maintaining such a business for so long? I think there is a decent chance that all of this was staged and Mr. Ulbricht is just another puppet. All of it just sounds so hilarious.
thoughtsimple 13y ago
Why would anyone trust bitcoin values? If the US government wanted to crash the bitcoin market couldn't they just generate a few million bitcoins themselves and then dump them? I don't think the NSA is going to care about spending a few 10's of millions of dollars on custom bitcoin hashing hardware. Unless people don't think the NSA can outdo some fly-by-night ASIC developers. If the US government is truly concerned about bitcoin, it won't survive long.
- gigq 13y ago
  There are only 3600 BTC per day being generated. They can't just generate a few million bitcoins. At best they could do a 51% attack and double spend bitcoin, which would cause problems but it's been done in other digital currencies and the currencies have still survived. If they did amass a large volume of bitcoins and dumped them on the market the market would drop but like every other drop it would probably be temporary as people love buying cheap BTC when the market crashes (look at the crash after DPR was arrested, bounced back in hours).
  - ars 13y ago
    > There are only 3600 BTC per day being generated. They can't just generate a few million bitcoins. They actually can. Generation speed is not adjusted real time, but only every few days. If you generate a mass very fast you can go over it. (And in fact historically it's always been over the expected number.)
    - Dylan16807 13y ago
      No, they can't. Generation speed is adjusted every 2016 blocks, up to 4x change. Let's say the NSA outcompetes the entire network by a factor of 400000%. This gets them about 8 weeks of bitcoins in a few days, before things are slowed back down to normal rates. Not nearly enough bitcoins to cause problems with. That much power will let them mess around with what transactions get accepted, but that's an entirely separate issue. 51% attack is child's play at this point. What do you do against an adversary that publishes 500 different block chains designed to be easily confused with the 'correct' chain?
stcredzero 13y ago
So, one additional way to secure your bitcoins would be to have a "deadman's switch" machine with a copy of your wallet. If you don't enter a passphrase into the machine by a certain date, then it will transfer your wallet's contents to another "bugout" wallet. This invalidates the seized copy of your wallet. Companies that offer this service should also offer a feature that causes "anonymous donations" to appear in your legal defense fund.
- flopunctro 13y ago
  > Companies that offer this service You can't possibly trust any company with this kind of service. This is something you need to [learn how to] build yourself. The concept of "deadman's switch" has an implicit component of "trust no one", IMHO.
  - stcredzero 13y ago
    > You can't possibly trust any company with this kind of service. That's a good point. However, the Swiss made a lot of money offering comparable services for many years. (Numbered bank accounts.) Also, there's a big difference between simply building such a service and having such a service that is well tested and reliably and securely hosted. It's also a relatively simple matter to test such a service with a small amount of money. Such services seem highly valuable, but may require practical homomorphic encryption/computation schemes to be themselves practical.
javiercr 13y ago
It's funny that both DPR and Walter White made the same amount of money ($80M [1]). [1] https://medium.com/p/fed0d03ab4c0 https://medium.com/p/fed0d03ab4c0
balls187 13y ago
Sounds like a job for the NSA.
FiloSottile 13y ago
> A few high-security ways of storing bitcoins, such as a "brainwallet", a way of converting a bitcoin address into an easy-to-remember phrase, could still bypass their authority, but there is no indication at present that Ulbricht has used them. A simple encrypted wallet would have the same level of security...
avty 13y ago
They'll just drug him with truth serums.
tomflack 13y ago
Partially related: Is it technically possible to "blacklist" the bitcoins that the FBI seized given a great enough consensus, to make their value effectively worthless?

197 points by spindritf 13y ago

yason 13y ago

This is interesting as a more generic case: before criminals had to stash their money in a hide in case they got caught and into prison. Now they can convert the money into bitcoins and simply arrange that they can't unlock the wallet. Things that help: - you can make indefinite copies of your locked wallet so TLA basically can't confiscate it - you can protect your wallet with a secret (passphrase and/or a key) so that they can't unlock it - you can distribute the secret among several people using one of the secret sharing protocols - or hide it steganographically in an ordinary file while the TLA in question still can't prove it's there

amalag 13y ago
Just imagine Breaking Bad with Bitcoins
fab13n 13y ago
A noteworthy side-effects is that it dramatically increases the incentive to reform the 5th amendment (or reinterpret it, which is the usual cowardly way to achieve the same result). From a strictly technical PoV, the concept of having several copies of the wallet, all equivalent, where whichever is spent first cancels the others, is very interesting and novel. It has a funny quantum physics vibe, too.
- debacle 13y ago
  The government can't even pass a budget. Good luck passing an amendment.
  - xux 13y ago
    You don't need Congress to re-interpret the 5th. The Supreme Court does.
  - Coffeewine 13y ago
    Seizing the assets of alleged criminals is something for which there is broad bipartisan support and consensus. I do however agree that an actual amendment is unlikely.
- anologwintermut 13y ago
  If they really wanted the money, they might be able to offer him limited immunity against any evidence revealed while transferring the coins to their wallet. I.e they won't use his doing it as evidence in court that the Bitcoins were his or similar things. This removes the 5th amendment problem and since the goal was to confiscate his funds, not collect evidence, the government looses little.
  - fab13n 13y ago
    I was looking at it from a more general viewpoint: there are more and more valuable things you can effectively protect against seizure with a password. This was not foreseen in the constitution, which thought of seizure as a physical process. I was looking at it from a more general PoV than simply DPR's fate: the practical need for the judicial power to be able to seize stuff is threatened by the 5th. There must be many people in the system who badly want to carve password rendition out of the 5th's no-self-incrimination protections. Coming back to DPR's case, given the political importance of the case (it's about sovereign states' ability to police Internet on their own turf), I don't think the central problem is to recover the BTC600K as actual dollars. And I don't even know whether they could easily and legally sell them off, would they get the keys. The problem is as follows: if there are copies of those wallets, if they're spent from one of those copies, feds will look like fools powerless to confiscate millions of dollars from an imprisoned and convicted guy. The journalist said "don't worry, feds have seized the wallets, they won't be spent". That's almost comically false, but that's telling as (conservative) wishful thinking: if only this was true, then no major social/legal adjustments would be necessary to cope with the emergence of crypto-currencies.
praptak 13y ago
"interesting"? I'd say it is a game changer when it comes to stashing illegal profits.
- betterunix 13y ago
  Not at all. The judge demands that you transfer the money to the government, you refuse, the judge puts you in jail for contempt of court. Nothing novel about it.
  - yason 13y ago
    If you're already going to jail for a potentially longer period of time, what does it matter?

whyleyc 13y ago

It's surely only a matter of time in this situation before the FBI start using rubber-hose cryptanalysis [1] [1] Obligatory XKCD http://xkcd.com/538/ http://xkcd.com/538/

sp332 13y ago
That's actually illegal.
- oleganza 13y ago
  Killing citizens without court order is also illegal. And waterboarding in gitmo. And starting wars based on lies. And lying to congress by NSA. So many things are illegal, but those who are in charge of enforcing justice are doing them anyway.
  - misnome 13y ago
    Not if you then make them legal retroactively!
  - smoyer 13y ago
    I hope that killing citizens WITH a court order is also illegal. A death-sentence requires a conviction, then a sentencing.
    - Cthulhu_ 13y ago
      Not if you just brand them the label 'Enemy combatants' - laws no longer apply then, apparently. I'm still waiting for someone to accuse and convict the US of war crimes and the violations of the rights of prisoners of war.
- harvestmoon 13y ago
  It may be, but who knows if we'll ever find out about it?
- whyleyc 13y ago

TausAmmer 13y ago

Biggest thieves of the block, what else can be said.

27182818284 13y ago

I've had a question that I"m curious to hear the community's reaction on: Doesn't the FBI wanting to seize the bitcoins do more to legitimize the currency than anything thus far? Isn't it tantamount to saying "Yes, this is like dollars, francs, or another legitimate currency that we need to seize." I'm wondering if that conversation has come up among management at FBI and what the outcome has been.

aroman 13y ago
That's what I thought as well. In fact, wouldn't their "cashing out" the Bitcoins be tantamount to an endorsement of Bitcoin? They're injecting money into the ecosystem and directly helping to circulate it. That they are even trying to exchange the Bitcoins for USD is, at least in my mind, U.S. governmental approval of Bitcoins.
mseebach 13y ago
It's like any other asset with a market value. Collectible baseball cards have no inherent value to me (I'm not a baseball fan), they're just (mildly aesthetically attractive) pieces of paper. In that sense, they are similar to Bitcoin. That some people will pay several million dollars for them does not change that fact. If a drug dealer settled all his transaction in baseball cards, the FBI would of course confiscate them.
racbart 13y ago
If he had a $1m car and the FBI wanted to seize it, would it legitimize cars as a currency?
- Cthulhu_ 13y ago
  It definitely wouldn't if it was $80 m in cocaine; the FBI would confiscate it and have to hand it over to the DEA to have it destroyed. Whether or not the FBI wants to seize it and spend it in some way, or just to seize it so it can't be spent by DPR or anyone anymore is up for debate. I'm not actually sure what the laws are regarding money or possessions seized from criminals over there.

300bps 13y ago

If Ross Ulbricht is really the guy who ran this site, why in the world was he doing his work from San Francisco? His alleged job was the pinnacle of "work anywhere". He took so many precautions to keep his identity secret that he must've known that his activities would at some point gather focused attention from the authorities. Living in San Francisco allowed the feds to pick them up on their lunch hour. Even just hopping the border to Mexico would've required them to get international cooperation and extradite him. He'd likely be a free man if he were in Croatia or Kazakhstan.

jpwagner 13y ago
so many precautions read up on some of the police work the feds did. this guy was careless.
- 300bps 13y ago
  I read the entire thing and I think what you said is the easy but not necessarily accurate conclusion. The site was in business since February of 2011. The operator of the site was careful enough that they successfully ran the world's largest black market website for over 2.5 years. Doesn't really align with a characterization of "careless". Sure, he re-used a few login names but I don't know how many people could've successfully gone without doing that over a 2.5 year period. I think it's more accurate to say he "wasn't perfectly careful" than it is to say he was careless.
  - gpcz 13y ago
    OPSEC for Hackers ( http://www.youtube.com/watch?v=9XaYdCdwiWU http://www.youtube.com/watch?v=9XaYdCdwiWU ) uses a quote from The Wire to reference what you're talking about: “The thing is, you only got to fuck up once. Be a little slow, be a little late, just once. And how you ain’t never gonna be slow, never be late? You can’t plan for no shit like this, man. It’s life.” The Grugq addresses this issue by recommending that one set up an entire fake persona before doing anything, and then doing all the activities "in character" as that persona. If you stay in character, then even making the types of mistakes DPR made would only lead the authorities to the persona rather than yourself. Granted, this video didn't exist when DPR made Silk Road...

rayiner 13y ago

The asset seizure issue with regards to bitcoin is interesting, but not unprecedented. A lot of the same issues that come up here come up in the more traditional context of seizing assets stashed in Bermuda, etc. You have Bermudan banks that won't allow access to assets without consent from the owner, and the question is whether giving that the owner can be forced to sign the consent form or whatever.

hippich 13y ago
AFAIK, if money stored in USD in the Bermuda bank account, when you wire these, it goes through US bank anyway and can be stopped there. And leaving country with $80 mil in cash would be hard.

bsullivan01 13y ago

after shuffling Ross from horrible prison to horrible prison and making his prison life miserable on purpose... So Ross, how about you tell us the password and instead of 14 life sentences you get only 20 years?

mpyne 13y ago
Yes, poor Ross, the guy only had twice as many people killed as Hans Reiser did...
- stcredzero 13y ago
  Mr. Reiser was a bit more hands-on in his approach. Does it make sense for someone who has been fooled into thinking he's had people killed to be as guilty as someone who actually kills the people? It seems so, but I'm not sure what US law says about that.

Synaesthesia 13y ago

Good encryption is still uncrackable, unless you induce the owner to give up his passphrase.

nachteilig 13y ago
How much leverage does giving up $80 million in BTC give one in a plea deal?
- sejje 13y ago
  Depends how certain your guilt is, and how stiff the sentencing is.
- bdcravens 13y ago
  How much leverage does 1 or 2 counts of murder-for-hire give the government in a plea deal?
- betterunix 13y ago
  None at all. You'll be held in prison until you release the money, or else they will just ignore the money and convict you anyway.

kybernetyk 13y ago

> Even if the FBI is not able to transfer the money, merely having possession of the wallet file itself is enough to prevent the coins being spent. Yes ... if no backups exist.

ikken 13y ago
.. and if it was not some kind of brain-wallet (supported by Electrum, etc.). If it was, then the wallet can be regenerated from memorized hash.
gambiting 13y ago
And as soon as someone spends any amount of bitcoins from one of these backups the copy held by FBI becomes invalid.
- VMG 13y ago
  To be precise, transactions must explicitly state all output addresses, and the default behavior of the client is to transfer the "change" back to a new address owned by the party doing the transaction to increase anonymity. It is however possible to redirect the change back to the original address.
- colkassad 13y ago
  The thought exercises are fascinating. Say he has a completely trustworthy friend somewhere that the FBI is unaware of. Could he have that person spend a little, back up that copy again, and effectively keep that FBI from ever getting that money? Also, surely a backup exists. What is an effective way to backup the wallet so that it can survive decades of prison time? Particularly if a trustworthy friend does not exist?
  - VMG 13y ago
    > Also, surely a backup exists. What is an effective way to backup the wallet so that it can survive decades of prison time? A piece of paper: http://bitcoinpaperwallet.com/ http://bitcoinpaperwallet.com/ You should only print it from a secure system though.

appleflaxen 13y ago

Right after the DPR bust there was a lot of discussion about how it was a death knell for bitcoin, but this is exactly why it's such a revolutionary type of technology: if DPR had any currency in a paper wallet, he could simply print it out, put it in a safe deposit box, and pick it up once he is out of prison. For a currency to be so secure that a state cannot seize it from a citizen is unprecedented. It will be fascinating to see how this plays out.

CompelTechnic 13y ago
If he uses a brain wallet, it would be even more secure. The ONLY possible way to seize the bitcoins would require him to comply. Another interesting bit is the fact that this might make him a billionaire by the time he's released from prison- just from the appreciation of bitcoin's value. I have another curiosity about the FBI's intent to seize his bitcoins- is it fair to seize all of them? If half of these bitcoins were earned while bitcoins were only worth 1/10 of current value, should only 10% of that half be seized? This might be arguable in court.
- Osmium 13y ago
  > I have another curiosity about the FBI's intent to seize his bitcoins- is it fair to seize all of them? If half of these bitcoins were earned while bitcoins were only worth 1/10 of current value, should only 10% of that half be seized? This might be arguable in court. I'm fairly sure there must be precedent for this. It's not like Bitcoin is the only currency that undergoes inflation...
  - eksith 13y ago
    "It's not like Bitcoin is the only currency that undergoes inflation..." You mean "deflation"? ;) The nice thing about BTCs (aside from anonymity) is that you can always subdivide to tiny increments.
    - csomar 13y ago
      Inflation is when the price of something increase. So, yes, Bitcoin undergoes inflation and not deflation.

eterm 13y ago

"At current exchange rates, that represents slightly more than 5% of all bitcoins in circulation" Why would exchange rate affect what percentage of bitcoins 600k are! This is terribly confused thought from the journalist: 600k bitcoins, that's "almost $80m". $80m! But at current exchange rates that's "just over 5%!". When sitting there are the actual numbers of bitcoins in his wallet and bitcoins in circulation...

salmonellaeater 13y ago
> An FBI spokesperson said to Hill that the “$80m worth” The FBI gave the number denominated in USD, so the journalist had to estimate the true number of BTC. The 600k is almost certainly calculated from that $80m number.
- cle 13y ago
  I believe the $80mil estimate is from the criminal complaint, which derived that estimate from the data they collected from the seized server. The complaint specified that from Feb 6, 2011 to July 23, 2013, Ulbricht collected 614,305 Bitcoins in commission, which is $84,159,785 at today's exchange rate on Mt. Gox. So I'm pretty certain that the $80mil estimate is derived from the actual number of Bitcoins in commission that was logged on SR's server.
  - donpdonp 13y ago
    Calculating (volume x last price) can be misleading when the number of coins traded is large enough to move the market. Using the freenode/#bitcoin 'gribble' irc bot for some calculations, there are only 45,000 bitcoins or $5Million for sale over $100USD. donpdonp> bids 100 gribble> There are currently 45669.225 bitcoins demanded at or over 100.0 USD, worth 5307618.93329 USD in total. Selling the remaining 550,000-odd coins would wipe out the market and net only $6million more. donpdonp> market sell 600000 gribble> A market order to sell 600000 bitcoins right now would net 11853320.3682 USD and would take the last price down to 0.0100 USD, resulting in an average price of 19.7555 USD/BTC.

nwh 13y ago

I can't imagine they would let a password get in the way of this. Even with an encrypted wallet, the balances of the content addresses are available for viewing for convenience sake. The reference client (I's not mentioned which wallet software) uses hundreds of thousands of rounds of key stretching, enough that on a GPU you're only getting a few attempts at the key. Might irritate them enough to crack out a good sized farm.

chiph 13y ago
Passwords are protected under his 5th amendment rights. The government would have to come up with a much stronger reason to force the password from him other than "we want it" The interesting part is if he does have a backup, and if he does access the funds in there for his legal defense. Would his attorney consider that money to be tainted, and thus refuse to accept it?
- Nate75Sanders 13y ago
  Problems in finance, like computer science, can often be solved through a layer of indirection.
- rayiner 13y ago
  It's not settled that passwords are protected under the 5th amendment. The 11th circuit has so ruled (http://www.zdnet.com/blog/identity/landmark-decision-allows-child-porn-suspect-to-plead-fifth-in-password-case/291 http://www.zdnet.com/blog/identity/landmark-decision-allows-...) but it's still up in the air everywhere else.
- njharman 13y ago
  The 5th Amendment is mostly moot since we've allowed prosecutors to extort plea-bargains via ridiculously over-charging.
- IgorPartola 13y ago
  Passwords are controversial under the 5th, but from the cases I followed, they are typically interpreted as a key to a safe, not as admission of guilt. As in, if your password is"YesITotallyDidIt", that is not an admission and is there fore not protected. The only things the 5th protects seem to be things you can say that can be directly used to convict you. Not giving the authorities with a warrant in hand your password seem to land you in jail indefinitely for contempt of court, which is likely as bad as what you will get if convicted. Edit: I am not a lawyer.

llamataboot 13y ago

What's overwhelmingly clear from this article is that either the feds, or at least the people they are sending to talk to the media, have really no idea how bitcoin works. Saying "The Bureau is in a position equivalent to having seized a safe belonging to a suspect with no idea of the combination – and no hope of forcing it open any other way." is completely incorrect.

drcode 13y ago
I'm not sure who said it first but the old dictum still holds: "It's easier to turn lead into gold than to steal a properly configured bitcoin wallet."
stcredzero 13y ago
> What's overwhelmingly clear from this article is that either the feds, or at least the people they are sending to talk to the media, have really no idea how bitcoin works. Not so much. Everyone might have a clue, but their words could be mangled and/or placed in entirely the wrong context by clueless editors.

SeanDav 13y ago

I don't understand why possession of the wallet file means the FBI have seized his bitcoins (even if they can't access them yet)? Surely you can make copies of your wallet and keep them in various secure locations?

fab13n 13y ago
You understood; the journalist didn't. It's scary to see how clueless mainstream journalists are, as soon as they touch a subject we're mildly knowledgeable about. Imagine the amount of BS they spread when talking about complex stuff such as macro-economics...
stormbrew 13y ago
Practically speaking I'm not sure it really matters. If he's unable to do anything with the backups himself until they can 'convince' him to give them the password, they will still probably eventually get the money. If someone else starts spending from that wallet address they'll probably be tracked down and charged with conspiracy or obstruction of some sort. Basically as long as the money can't be spent for whatever reason it is effectively seized.

danielweber 13y ago

Even if the FBI is not able to transfer the money, merely having possession of the wallet file itself is enough to prevent the coins being spent. Ugh, no. Having the file means you can transfer out the bitcoins. Anyone having the file can transfer out the bitcoins, so the FBI securing that wallet doesn't lock down those bitcoins. The FBI cannot properly "seize" the bitcoins unless they use the wallet to transfer the coins to a fresh address they make and control. And I'm not sure that traditional seizure laws allow that, because AFAIK we've never had this scenario before.

noarchy 13y ago

If the FBI cannot manage to successfully steal these Bitcoins, then it might be quite the advertisement for the overall security of Bitcoins, no?

rdl 13y ago

Big question is whether turning over the passphrase would be "testimonial". I could see it being argued that it's a forgone conclusion he owns these bitcoins -- enough evidence to tie him to silk road, and evidence in the block chain showing those coins came from silk road. (This is relevant due to the fifth amendment to the constitution. In many cases, turning over a password or combination is considered self incrimination and thus cannot be compelled by the state.)

lettergram 13y ago

The author doesn't really seem to understand what a Bitcoin Wallet is. First, I HIGHLY doubt that 600,000 Bitcoins would be in one Wallet. More likely, the bit coins would be spread between several thousand wallets. Second, even if the FBI was in possession of "the wallet" couldn't Ulbricht just access his backups else where?

alphydan 13y ago
As far as I can tell the seized address has 27k BTC about $4m USD at the moment (see https://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX https://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5G... )
- querulous 13y ago
  those are apparently user funds that were in escrow or otherwise stored with silk road at the time of the seizure. his personal commissions are the funds being discussed here

gedrap 13y ago

What's is rather shocking is the kinds of mistakes he made. Not some subtle but plain simple. Like using personal email to register on forums and promote SR and recruit people. Using stackoverflow with personal email, again... Yes they are not some solid evidences, but made the FBIs life, to get the guy, much easier. You might say that it's easy for me to point out those mistakes but they are so basic and it's not that he was running some Nigerian type of scam, he must have been way more careful. Or keep messages about the 'murder-for-hire'. Yeah it's rather obvious that no one got hired but good luck explaining this negotiation tactics to the judge. Plus he mentions $80k for other 'murder-for-hire'. I'm really curious how the thing with this 'murder' will end up. I mean he could have just simply deleted them just in case. It's not FB that it would stay forever...

powertower 13y ago
I really don't think he predicted just how popular this service would become. At that time it was probably nothing more than a side-project destinded to die off in 6 months.
drcode 13y ago
Ross was a San Fran "startup" guy. Hey created an MVP product with the usual "fake it till you make it" attitude that is part of this culture. PG himself will happily tell you not to worry about lawyers and other distractions until your MVP is out the door. This may work for a typical startup, but Ross was foolish enough to apply this advice to a criminal enterprise.
- triplepoint217 13y ago
  Amusing anecdote: I was at a pg talk last week, and afterwards someone in the audience came up and asked if SR being gone meant there was a market niche for a new startup. pg's answer was that it was in no way worth the risk, there are lots of other things you can try without the large risk of ending up in jail.
mpyne 13y ago
Unluckily for Ross, the "other murder-for-hire" was transacted with an undercover cop, which corroborates his later inducement for a second murder.

azsromej 13y ago

a walk on the lighter side: the bitcoin is inside the computer http://www.youtube.com/watch?v=zQGX3J6DAGw http://www.youtube.com/watch?v=zQGX3J6DAGw

cphoton 13y ago

Can't they just use an old version of bitcoin and use the timing attack to find the passphrase? EDIT: I mean exploting this bug: https://github.com/bitcoin/bitcoin/issues/2838 https://github.com/bitcoin/bitcoin/issues/2838

dlgeek 13y ago
I'm not a bit coin user, but that appears to be an attack on a "remote management" password for the client (it's about "RPC" or "remote procedure call" authentication), not for the wallet. Wallets use a cryptographic key derivation function, this is against a plain text and configurable password. This would only be an issue if the wallet was loaded into the old version of the software at the time they attacked.

Ellipsis753 13y ago

"Even if the FBI is not able to transfer the money, merely having possession of the wallet file itself is enough to prevent the coins being spent." Isn't this totally false? He could have easily made backups of the wallet and even given copies of it to others. I'd expect there's a whole bunch of ways that these bitcoins could still get spent?

joshstrange 13y ago
Yes, it is wrong as many commenters on the site also point out. He could have multiple backups of his wallet file and spending the bitcoins out of one of his backups would invalidate the coins in the wallet the FBI has.
- anton000 13y ago
  He doesnt even need a copy of the wallet file. If he stored the bitcoins in a single address, and he has the private key stashed somewhere, then even if the wallet file is deleted, it can be retrieved. This is how bitcoin works, if you have the ECDSA private key of a bitcoin address, you can spend those bitcoins without having the need for a wallet :)
  - joshstrange 13y ago
    My knowledge of bitcoin, while probably better than your average guy on the street, is certainly not infallible. Thank you for correcting my mistake.
  - TwoFactor 13y ago
    Since the wallet file is a set of private keys... they're basically the same thing. You're recreating the wallet if you're restoring the private keys from a stored copy.
drcode 13y ago
The beauty is that NOT spending the 600K BTC is economically equivalent to giving a 600K gift to all other bitcoin owners. If the news ever came out that these coins are lost for all times, the exchange price for BTCs would most likely increase 600K/11M or about 5.5% in an instant. (Of course, there's no way this could happen since we don't know what private keys are stored in Ross' head. Also this is based on the efficient market hypothesis and real world results have other complecting factors.)

rarw 13y ago

The more interesting question regarding this seizure is whether the FBI can compell the creators of BitCoin to assist in decrypting what they have just seized. For example, there are a number of statutes that require those operating communications networks maintain the ability for the governemnt to access them regardless of the encryption or other security features being used. I don't know the corresponding baking law as well but it would not surprise me if the same laws that require banks to comply with seizing fund, blocking wire transfers, and tracking where money goes in the course of a criminal investigation could kick in here. Certainly something like this would have a big effect on the BitCoin market. I'm interested to see what happens in the future.

scottcanoni 13y ago

Here are the bitcoins they were able to seize: http://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX http://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GN...

seniorsassycat 13y ago

This article makes it sound like all of DPR's bitcoins are in one wallet. If 5% of all bitcoins were being funneled into one bitcoin wallet couldn't people have discovered that wallet by analyzing all BTC transactions?

the_watcher 13y ago

How can the FBI "seize" his wallet as if it were a safe? Isn't the point of Bitcoin that it is digital, hence he would be able to access it if he could get to a computer? Or is there a way to physically control the wallet so that it can't be accessed elsewhere?

debacle 13y ago
They seized a copy of his wallet that they don't have the key for. If he has a copy and they can't get the keys, this seizure is meaningless. If he doesn't have a copy, or they can get the keys, the story changes.

joshdance 13y ago

Will having 5% of Bitcoin out of circulation cause any economic problems with the currency?

adventured 13y ago
No, it'll make all other bitcoins more valuable, so long as the market believes said bitcoins are permanently out of circulation (not likely though, as the Feds will auction / sell them off as they do with other seized assets).

ahi 13y ago

Does it matter? What would the FBI do with them?

ketralnis 13y ago
What do they do with seized foreign currencies? Presumably find some way to convert them to dollars

ChuckMcM 13y ago

Well if they are unable to seize them, then bitcoin will become more valuable to the black market. If they are, then some of its patina as a 'safe' stash will be lost. Of course even if they don't get them, they will be able to see if they are ever used right?

Swannie 13y ago
Yea. That's what I'm thinking too. If you receive bitcoins from those address you're effectively doing the same as if you were collecting cash from watched boxes in a bank vault, and the cash was radio-actively tagged. (And therefore easily tracked.) Anyone handling a large quantity of those coins is suspect But if someone got their hands on them and performed a huge laundry so that everyone has tainted coin history, then you might be ok.

whage 13y ago

Only I think that all this 'leaving a name here' / 'leaving a stupid trail there' seems just way too stupid for someone maintaining such a business for so long? I think there is a decent chance that all of this was staged and Mr. Ulbricht is just another puppet. All of it just sounds so hilarious.

thoughtsimple 13y ago

Why would anyone trust bitcoin values? If the US government wanted to crash the bitcoin market couldn't they just generate a few million bitcoins themselves and then dump them? I don't think the NSA is going to care about spending a few 10's of millions of dollars on custom bitcoin hashing hardware. Unless people don't think the NSA can outdo some fly-by-night ASIC developers. If the US government is truly concerned about bitcoin, it won't survive long.

gigq 13y ago
There are only 3600 BTC per day being generated. They can't just generate a few million bitcoins. At best they could do a 51% attack and double spend bitcoin, which would cause problems but it's been done in other digital currencies and the currencies have still survived. If they did amass a large volume of bitcoins and dumped them on the market the market would drop but like every other drop it would probably be temporary as people love buying cheap BTC when the market crashes (look at the crash after DPR was arrested, bounced back in hours).
- ars 13y ago
  > There are only 3600 BTC per day being generated. They can't just generate a few million bitcoins. They actually can. Generation speed is not adjusted real time, but only every few days. If you generate a mass very fast you can go over it. (And in fact historically it's always been over the expected number.)
  - Dylan16807 13y ago
    No, they can't. Generation speed is adjusted every 2016 blocks, up to 4x change. Let's say the NSA outcompetes the entire network by a factor of 400000%. This gets them about 8 weeks of bitcoins in a few days, before things are slowed back down to normal rates. Not nearly enough bitcoins to cause problems with. That much power will let them mess around with what transactions get accepted, but that's an entirely separate issue. 51% attack is child's play at this point. What do you do against an adversary that publishes 500 different block chains designed to be easily confused with the 'correct' chain?

stcredzero 13y ago

So, one additional way to secure your bitcoins would be to have a "deadman's switch" machine with a copy of your wallet. If you don't enter a passphrase into the machine by a certain date, then it will transfer your wallet's contents to another "bugout" wallet. This invalidates the seized copy of your wallet. Companies that offer this service should also offer a feature that causes "anonymous donations" to appear in your legal defense fund.

flopunctro 13y ago
> Companies that offer this service You can't possibly trust any company with this kind of service. This is something you need to [learn how to] build yourself. The concept of "deadman's switch" has an implicit component of "trust no one", IMHO.
- stcredzero 13y ago
  > You can't possibly trust any company with this kind of service. That's a good point. However, the Swiss made a lot of money offering comparable services for many years. (Numbered bank accounts.) Also, there's a big difference between simply building such a service and having such a service that is well tested and reliably and securely hosted. It's also a relatively simple matter to test such a service with a small amount of money. Such services seem highly valuable, but may require practical homomorphic encryption/computation schemes to be themselves practical.

javiercr 13y ago

It's funny that both DPR and Walter White made the same amount of money ($80M [1]). [1] https://medium.com/p/fed0d03ab4c0 https://medium.com/p/fed0d03ab4c0

balls187 13y ago

Sounds like a job for the NSA.

FiloSottile 13y ago

> A few high-security ways of storing bitcoins, such as a "brainwallet", a way of converting a bitcoin address into an easy-to-remember phrase, could still bypass their authority, but there is no indication at present that Ulbricht has used them. A simple encrypted wallet would have the same level of security...

avty 13y ago

They'll just drug him with truth serums.

tomflack 13y ago

Partially related: Is it technically possible to "blacklist" the bitcoins that the FBI seized given a great enough consensus, to make their value effectively worthless?