Following a sale of approximately 9,800 BTC earlier this month, the United States government intends to sell a further 41,490 BTC related to the Silk Road case in four batches throughout 2023.
On-chain data revealed that the government transferred 9,826 Bitcoin on March 8, 2023, worth roughly $217 million, to Coinbase, and 39,175 Bitcoin to two other addresses. Also, data from analytics firm CryptoQuant suggested that the sales caused the price of Bitcoin to fall.
The Bitcoin comes from assets seized by the U.S. government in connection with an inter-agency crackdown on Silk Road, a darknet marketplace started by Ross Ulbricht. However, according to a court filing, authorities seized roughly 51,351 BTC related to the case.
The planned method of dispensing seized Bitcoin was revealed in a court filing surrounding the sentencing of James Zhong, who pleaded guilty in Nov. 2022 to stealing about 50,000 BTC from the darknet marketplace, Silk Road.
According to the filing, the government sold 9,861 Bitcoin for $215 million on March 14, 2023. Furthermore, during this calendar year, it will sell the remaining 41,490 Bitcoin in four batches.
One commentator suggested that the sale of 9,800 Bitcoin caused its price to fall 10% before retracing a few days later.
On-chain data on March 8, 2023, revealed that the government transferred 9,826 BTC to Coinbase and 39,175 BTC to two other addresses.
The Bitcoin sold comes from assets seized by the U.S. government in connection with an inter-agency crackdown on Silk Road. Silk Road was a darknet marketplace started by Ross Ulbricht. Silk Road offered illicit items for Bitcoin between 2011 and 2013. A jury convicted Ulbricht in prison in 2015. Which he was later sentenced to life in prison.
Silk Road would hold funds destined for purchase in escrow before transferring them to a vendor’s address. The vendor could then instruct Silk Road to move funds off the marketplaces into an alternative Bitcoin address. Which could be converted into fiat or another cryptocurrency.
According to the U.S. Department of Justice, Zhong created 140 transactions that resulted in 50,000 BTC being deposited in the nine accounts he opened on Silk Road. Later, authorities seized roughly 51,351 BTC from Zhong, worth approximately $1.5 billion as of March 30, 2023.
IRS Official Says Spreading Out Liquidations is Standard Procedure
According to Jarod Koopman of the Internal Revenue Service, U.S. agencies involved in the seizure and liquidation of cryptocurrencies do not play the market. Koopman worked on tracing fund flows related to the Silk Road investigation.
“You basically get in line to auction it off. We don’t ever want to flood the market with a tremendous amount, which then could have an effect on the pricing component,” Koopman told CNBC.
Seized funds are moved to hardware wallets set up by agents involved in enforcement action.
After crypto assets are seized, they are liquidated. The U.S. Marshals Service and the U.S. General Services Administration are jointly responsible for liquidating the confiscated assets. Koopman said sales are usually spaced out, as in the Silk Road case, so as not to cause volatility.
Following liquidation, a decision is made on where the proceeds go. Generally either to The Treasury Forfeiture Fund or the Department of Justice Assets Forfeiture Fund. From there, they are used to buy new equipment for law enforcement or to make restitution to victims.
For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.
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