Author: Octopus Brother｜Zhangyuge.eth Source: X, @ZhangLabs
The US government has seized/temporarily held a large number of bitcoins in law enforcement actions over the years, some of which have been auctioned and sold. This article will list the main sources of the remaining 210,000 bitcoins for you, and review the government's historical handling of these bitcoins.
There is a case flow to help new users understand, and if you want to save trouble, you can read the conclusion at the end.
The cause of the incident: On August 2, 2016, 119,754 Bitcoins were stolen from Bitfinex. After the theft, Bitfinex issued a debt token BFX, promising users that when Bitfinex recovered some funds from the hacker attack, these funds would be used to exchange for RRT tokens to compensate affected users. The exchange rate was 1bfx=1usd
Some BFX token holders chose to convert BFX tokens into iFinex (bitfinex's company) shares. Bitfinex has paid off all the remaining debts within 8 months, and all bfx tokens have been redeemed.
Because users who choose to exchange for equity have helped Bitfinex ease cash flow, in order to thank these shareholders, Bitfinex also gave away a portion of RRT token rewards. The value of the RRT token depends on how many bitcoins can be recovered in the end, and the maximum can be 1RRT=1USD.
According to the latest announcement, the total amount of RRT tokens is 30199822.40 RRT
https://www.bitfinex.com/legal/token-terms/rrt/
On February 8, 2022, the U.S. Department of Justice issued an announcement
https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency
The FBI arrested the hacker couple who stole from Bitfinex, Ilya Lichtenstein and his wife Heather Morgan, and recovered 94,000 bitcoins from them. The money is currently in the custody of law enforcement agencies.
Bitfinex said it is communicating with the Department of Justice to get back the stolen bitcoins.
Because the money owed by Bitfinex to users has been settled through BFX and RRT.
So Bitfinex is likely to obtain ownership of this batch of bitcoins
If this part of the bitcoins is withdrawn, the remaining RRT tokens will be redeemed at a price of 1RRT: 1USD
The remaining 80% of the bitcoins will be used to repurchase the Bitfinex leo tokens issued by it
As mentioned earlier, the RRT part is only more than 30 million US dollars, and for the use of the remaining part, we have to mention Bitfinex's other token LEO. The Bitfinex announcement stated that 80% of the bitcoins will be used to repurchase the leo tokens it issued
The link to the official Bitfinex announcement is as follows:
https://www.bitfinex.com/posts/766
The full name of the LEO token is UNUS SED LEO. Here we need to add a background. The parent company behind USDT Tether and Bitfinex is iFinex. In 2019, Bitfinex entrusted assets worth US$850 million to a trust company called Crypto Capital for asset custody.
Later, the funds of this trust company were frozen by other governments, which made Bitfinex face the problem of not having enough liquidity to provide users with withdrawals. It embezzled about $700 million from Tether to solve the liquidity problem, and Bitfinex's parent company iFinex was investigated by US law enforcement agencies.
In order to raise funds to solve this problem, Bitfinex issued the Leo token. The white paper clearly stated that if Bitfinex recovered the stolen Bitcoin in 2016, Bitfinex would use an amount equivalent to 80% of the net funds recovered within 18 months from the date of recovery of the Bitcoin to repurchase and destroy the outstanding UNUS SED LEO tokens. These token repurchases can be completed through open market transactions or through over-the-counter transactions to obtain UNUS SED LEO, including directly exchanging Bitcoin for UNUS SED LEO
Many friends say this means you can buy Leo immediately? No, don't worry, read it first.
Bitcoin seizure time: February 2022
Trial time: Not yet started
Bitcoin start selling time: Not yet started
Although Ilya Lichtenstein and Heather Morgan have been arrested, their cases are still ongoing and the final sentencing trial has not yet been completed.
Assets confiscated by the government need to go through certain legal procedures and approval processes before they can be auctioned or returned.
The specific time of this process depends on various factors, such as the complexity of the case, the progress of the legal process, etc.
So, according to the process of US law enforcement agencies, how long will this process take? We may be able to use other cases as a reference.
On October 1, 2013, Ross Ulbricht, the founder of the notorious dark web Silk Road, was arrested by the FBI. In the first announcement, the judicial authorities stated that 26,000 bitcoins were seized. Later, as the investigation deepened, more bitcoins related to the Silk Road were discovered and confiscated.
Silk Road is a case involving a wide range of people. In addition to the bitcoins in the hands of the founder, the website has been stolen many times, and the whereabouts of other huge amounts of missing bitcoins are also being tracked and investigated. Therefore, many people involved in the case have been arrested in recent years.
Law enforcement agencies auctioned the bitcoins involved in the case that were initially seized in the years after Ross was arrested.
First auction: June 27, 2014, about 29,656 bitcoins
Second auction: December 4, 2014, about 50,000 bitcoins
Third auction: March 5, 2015, about 50,000 bitcoins
Fourth auction: November 5, 2015, about 44,000 bitcoins
Bitcoin seizure time: October 2013
Trial time: February 2015
Bitcoin started to be sold in June 2014
In 2020, the U.S. Department of Justice announced that it had seized more than 69,370 bitcoins from a hacker codenamed "Individual X". The FBI found out that the hacker stole these bitcoins from Silk Road between 2012 and 2013.
https://www.justice.gov/usao-ndca/pr/united-states-files-civil-action-forfeit-cryptocurrency-valued-over-one-billion-us
On April 23, 2022, Ross Ulbricht, the founder of Silk Road, gave up ownership of 69,370 bitcoins (about US$2.74 billion) stolen by hackers, and agreed to hand over the above property to the US government for disposal in accordance with the law.
August 2023 According to the ruling announced by the U.S. Court of Appeals for the Ninth Circuit, the final ruling was to formally confiscate the batch of bitcoins
https://storage.courtlistener.com/recap/gov.uscourts.cand.368440/gov.uscourts.cand.368440.147.0.pdf
Bitcoin seizure time: November 2020
Trial time: August 2023
Bitcoin start selling time: Not yet started
On April 14, 2023, the US Department of Justice announced that law enforcement agencies seized about 50,676.17851897 bitcoins related to Silk Road in November 2021. The value was more than $3.36 billion at the time.
The hacker was named James Zhong, who stole this batch of bitcoins from Silk Road in September 2012. In April 2023, James Zhong was convicted of wire fraud and all the bitcoins were confiscated.
Department of Justice announcement:
https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction
According to the court document: Case 1:22-cr-00606-PGG Document, page 26, this portion of bitcoin has been sold in four installments in 2023.
Arrest time: November 2021
Bitcoin seizure time: November 2021
Trial time: Plead guilty on November 4, 2022
Bitcoin sales start time: March 14, 2023
1. In a notice submitted by US officials on January 8, 2024, the US government stated that it plans to dispose of the 2021 acquired from Ryan “in the manner directed by the US Attorney General” Nearly 2,875 bitcoins seized from Farace and Sean Bridges and 59 in the second batch.
Bitcoin seized on February 10, 2021
Bitcoin started to be sold: sold in January 2024.
2. On June 27, 2024, data from Arkham Intelligence showed that the US government transferred 3,940.28 bitcoins worth $241.22 million to Coinbase Prime Deposit on Wednesday.
These bitcoins were originally seized from drug dealer Banmeet Singh and were confiscated during the trial in January 2024.
Bitcoin selling time: June 2024
From several large-scale cases in history, the total time from the arrest of the suspects, the confiscation of the funds involved, to the start of the processing of Bitcoin generally does not exceed 3 years.
Half of the cases will start to process the Bitcoin involved soon after the verdict takes effect and the guilty plea.
There are two large cases worth paying attention to at present:
1. 94,000 bitcoins seized by the bitfinex hacker
The seizure time is February 2022
The hacker may be convicted at the end of this year
For this part, bitfinex said that after taking back this batch of coins, it will be divided into 18 months to buy back Leo
2. More than 69,370 bitcoins seized by the Individual X hacker
The trial time of the bitcoin involved is: August 2023
The processing time may start at the end of this year or early next year
The start time of processing is only an estimate, and historically, the US government will sell in batches to face market liquidity. Rather than selling all at once.
And both new presidential candidates said that after the new round of elections, in order to gain public opinion, part of the currency awarded to the government by the court may be used as government reserves and will not be sold.
After announcing the acceptance of crypto donations, Donald Trump continues to reaffirm his love for crypto while throwing shade at Joe Biden and declaring he would commute Silk Road’s founder’s life sentence. But advocates warn of politicians’ pro-crypto u-turn; is it all just a ploy to gain votes?
CatherineTrump, cryptocurrency, US President, United States, Trump: If re-elected, Silk Road founder will be released Golden Finance, Silk Road founder Ross Ulbrich has served 11 years in prison.
JinseFinanceUS Department of Justice moves $2 billion worth of Bitcoin from seized Silk Road wallet to Coinbase. Transfer involves test transaction followed by 2,000 BTC sent to Coinbase Prime. Majority of funds remain unspent. Bitcoiners monitor large holder movements closely, anticipating potential market impact.
Huang BoU.S. government's $118 million Bitcoin sale from Silk Road stirs discussion. Experts downplay impact, citing small size compared to recent Grayscale sales. Represents 1.5% of government holdings and less than 1% of Bitcoin's circulating supply. Trend shifts towards direct exchange sales.
Huang BoU.S. court finalizes forfeiture of Silk Road-linked bitcoin, marking a significant moment in digital asset jurisprudence.
EdmundSotheby’s digital art division revealed plans to auction pieces from the BitcoinShrooms collection, a project crafted by artist Shroomtoshi. The collection, minted on-chain in October, is hailed as the "first-ever Ordinals collection," according to both the BitcoinShroom website and its associated account.
JoyAside from Ulbricht's case, he has also promised to grant amnesty to Edward Snowden and Julian Assange
ClementThe Department of Justice (DOJ) appears to be continuing its 50,000 BTC sale that began earlier this year.
cryptopotatoYuga Labs’ buzzy and controversial auction of its debut Bitcoin NFT collection concluded Monday, with 288 successful bidders nabbing as many pieces in the limited series.
decryptThe Association of Certified Anti-Money Laundering Specialists' crypto and illicit finance expert says the industry needs to be more than "reluctant good citizens." This article is part of CoinDesk’s Sin Week.
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