U.S. seizing $1B in Bitcoin from Silk Road hacker

The U.S. government is about to get $1 billion richer. 

In a Nov. 5 filing, the U.S. Department of Justice revealed that it is seizing nearly 70,000 bitcoins and several other cryptocurrencies that were stolen from the infamous Silk Road darknet market.

In the filing, U.S. Attorney David Anderson of the Northern District of California revealed that the government was behind the transfer of 69,370 BTC from a wallet address known to contain bitcoins hacked from Ross Ulbricht.

The Nov. 3 transfer gained a lot of attention in the cryptocurrency community, with blockchain intelligence firm CipherTrace speculating that either the wallet’s owner was moving the bitcoins to a more up-to-date wallet address, or that another hacker had cracked the wallet.

In fact, the IRS Criminal Investigation Division had helped Anderson’s office identify a hacker referred to as Individual X, who had stolen the bitcoins from Ulbricht in April 2013—six months before Ulbricht’s arrest shut down Silk Road. That’s probably good news for Individual X, as Ulbricht was charged with having hired hitmen to kill six people.

“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,” the filing said. “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.”

As the cryptocurrency hacked from Ulbricht were largely the proceeds of crimes ranging from the sale of narcotics to illegal firearms and stolen credit cards, according to the filing, they are subject to forfeiture to the government. And any bitcoin not the proceeds of crime we’re used in mixers to illegally hide the proceeds of crime, according to the government.

“To the extent the Defendant Property includes funds that did not originate as proceeds from the illegal activities discussed herein, those funds were ‘involved in’ money laundering in violation of 18 U.S.C. § 1956 because they were comingled with and used to conceal and disguise the nature, location, source, ownership or control of the criminal proceeds, or were involved in a conspiracy to launder such proceeds,” Anderson’s filing argued. 

The 69,370 BTC were worth $1.03 billion at press time. Beyond that, the government also seized the proceeds of several hard forks of the Bitcoin blockchain. As a result, the U.S. Attorney’s office is also seizing 69,370 Bitcoin Cash (BCH) worth $17 million; 69,370 Bitcoin SV worth nearly $11 million; and 69,370 Bitcoin Gold (BTG) worth around $508,000.