The U.S. Justice Department has seized and is now seeking the forfeiture of thousands of bitcoins tied to the now-defunct Silk Road dark web market, with the holdings valued in excess of $1 billion.
The Justice Department said in a statement that "[t]he seizure represents the largest seizure of cryptocurrency in the history of the Department of Justice." The news was first reported by Bloomberg.
According to the statement, investigators used software tools to identify " 54 previously undetected bitcoin transactions executed by Silk Road, all of which appear to represent bitcoin, which was the proceeds of unlawful activity, that was stolen from Silk Road in or about 2012 and 2013." The release said that Chainalysis assisted in its investigation.
Per the Justice Department:
"The complaint alleges that these funds were traced to a bitcoin address. Further investigation of that bitcoin address by the United States Attorney’s Office and IRS CI agents revealed that the funds were connected to Individual X. It was further determined that Individual X had hacked the funds from Silk Road. Pursuant to that investigation of the hack, law enforcement seized several thousand Bitcoins on November 3, 2020. On November 4, 2020, the seized Bitcoin had a value of over $1 billion."
According to court documents (embedded) below, Silk Road founder Ross 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."
The court document says that the government knows the identity of Individual X. "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. 24. On November 3, 2020, the United States took custody of the Defendant Property from 1HQ3."
The Justice Department did not immediately respond to a request for comment.
The news comes days after 69,369 bitcoins were moved out of a wallet address — the first such activity for the collected holdings since 2015, as The Block previously reported. According to the civil forfeiture complaint, the funds seized on November 3 were from this address. In addition to bitcoin, officials also seized holdings of Bitcoin Cash, Bitcoin Gold and Bitcoin SV (all of which are forks of the primary Bitcoin network).
In a statement, U.S. Attorney David Anderson said that "[t]he successful prosecution of Silk Road’s founder in 2015 left open a billion-dollar question. Where did the money go?"
"Today’s forfeiture complaint answers this open question at least in part," Anderson continued. "$1 billion of these criminal proceeds are now in the United States’ possession.”
Editor's Note: This report has been updated with information from the Justice Department statement and the civil court filing.
The civil court filing can be found below:
Gov.uscourts.cand.368440.1.0 by MichaelPatrickMcSweeney on Scribd