Silk Road: U.S. Government Claims $1B Bitcoin Stash From Shut Down Black Market

A years-long legal battle over nearly 70,000 bitcoins has concluded with a U.S. appeals court finalizing the forfeiture of the crypto assets to the federal government.

The bitcoins and other cryptocurrencies were originally obtained from the now-defunct online black market Silk Road, which was shut down by law enforcement in 2013.

Keypoints

• A U.S. appeals court finalized the forfeiture of 69,370 bitcoins and other cryptocurrencies connected to the now-defunct Silk Road dark web marketplace.
• The crypto assets were initially seized by the U.S. government in 2020 when they were valued at over $1 billion.
• The assets were transferred to the government by an individual who hacked Silk Road and gained control of its bitcoin funds.
• Silk Road founder Ross Ulbricht, who is serving a life sentence, relinquished claim to the 69,470 bitcoins as part of a deal in 2022.
• The U.S. government’s large holdings of bitcoin from Silk Road are closely watched by crypto market participants for potential price impact.

Silk Road had been run by Ross Ulbricht from 2011 until its closure and was notorious as a marketplace for illegal drugs and other contraband. Ulbricht was arrested in late 2013 and sentenced to life in prison for his involvement with the site. The stash of bitcoins forfeited to the U.S. government were connected to Silk Road’s operations.

The bitcoins and additional cryptocurrency assets including Bitcoin Cash, Bitcoin SV and Bitcoin Gold were not seized initially by law enforcement during Silk Road’s takedown. Instead, they were transferred to government control in 2020 by an outside individual known as “Individual X.” This person had hacked the Silk Road marketplace in the past and gained access to administrator accounts and Silk Road’s stored bitcoin funds.

The U.S. Department of Justice moved in 2020 to officially seize the cryptocurrencies, which were valued at over $1 billion at the time. The DOJ asserted its rights to the digital assets through forfeiture laws allowing the government to claim goods and money linked to criminal operations. This helped set up a lengthy legal battle to determine rightful ownership.

Ulbricht himself gave up claim to a portion of the cryptocurrency fortune in 2022. As part of a deal, he relinquished rights to 69,470 bitcoins and agreed to put $3 billion in stolen bitcoin toward satisfying his outstanding debt to the U.S. government stemming from his Silk Road conviction.

The final forfeiture approved this month covers a hoard of 69,370 bitcoins and associated blockchain forks connected to Silk Road’s illicit deals. The new judgment from the U.S. District Court of Appeals for the Ninth Circuit means Ulbricht has no further legal recourse to try and reclaim the digital assets.

The Silk Road bitcoin trove has attracted intense interest from cryptocurrency watchers and investors over the years. That’s because the U.S. government’s massive holdings have the potential to impact the bitcoin market if large portions are liquidated at once. Any selling pressure from the feds could drive down overall prices. So far, government bitcoin transactions linked to Silk Road have been limited and closely tracked. But the final forfeiture opens the possibility of larger future sales.