Supreme Court Greenlights Sale of $4.38b of Silk Road Bitcoin

The Supreme Court announced on Monday it had denied a certiorari petition — a Supreme Court appeal — in a case closely watched by the crypto community that is set to determine the fate of 69k Bitcoin seized by law enforcement in November 2020. 

In the rejected appeal, the company named Battle Born Investments claimed it had purchased rights to this seized Bitcoin through a bankruptcy estate tied to a person named Raymond Ngan, presenting itself as “an innocent owner of all of the Defendant Property”. The company argued that Ngan was “Individual X,” the unnamed hacker who stole the Bitcoin from the Silk Road and then surrendered the wallet to law enforcement. 

However, both the federal court in California and later a federal appeals court rejected Battle Born’s claim, stating that they were not convinced that Ngan was the real identity behind “Individual X.” Since Battle Born’s claim was based on Ngan’s supposed ownership of the funds, the courts ruled that the company had no valid right to the Bitcoin.

Now that the Supreme Court has declined to hear the case, the lower courts’ ruling will likely prevail, meaning that few obstacles remain in the way of liquidating the $4.38 billion stash of BTC. While it will certainly take a string of bureaucratic formalities for the US Marshals Service to start the auction, a portion of Bitcoin worth some $2.6 billion has already been transferred to the Coinbase Prime deposit wallet, which may indicate that the sale may start soon. On the other hand, it’s known that the exchange has a custody deal with the regulator, so it might as well just hold the assets on behalf of the Marshals Service. 

The origins of the largest Bitcoin seizure to date

Ross Ulbricht, aka “Dread Pirate Roberts,” created and ran the dark web marketplace Silk Road from 2011 to 2013. Before the platform was closed after his arrest in late 2013, it was known as the most sophisticated and extensive criminal marketplace on the Internet, with thousands of listings for goods and services such as drugs, hacking tools, hitmen for hire, and weapons. 

Silk Road operated anonymously through the Tor network and used Bitcoin as its primary currency. To make tracing each individual Bitcoin impossible, the platform used a built-in crypto mixer. According to the IRS, at the time it was taken down in 2013, Silk Road had over 100,000 buyers, generated sales revenue totaling over 9.5 million Bitcoins, and commissions from these sales totaling over 600,000 Bitcoins. 

Ross Ulbricht was eventually arrested by the FBI in October 2013 and later sentenced to life in prison without the possibility of parole for charges including money laundering, conspiracy to traffic narcotics, and computer hacking. 

In 2020, the IRS used a third-party Bitcoin attribution company to analyze Bitcoin transactions executed by Silk Road and identified 54 previously undetected transactions that were executed by a hacker who stole Bitcoin from the platform between 2012 and 2013. The investigation of the hack linked it to the “Individual X,” the hacker themselves. 

Worth just over $1 billion at the time of the investigation, the value of Bitcoin has since more than quadrupled, making it the biggest such seizure of crypto assets to date. 

Donald Trump on Bitcoin and Ross Ulbricht’s fate

Although realistically it seems that the seized Bitcoin will eventually be liquidated at the market price, former President Donald Trump who’s also a Republican presidential nominee in the upcoming election has suggested that the stash of BTC can be used to build a US strategic Bitcoin reserve. 

“As the final part of my plan today, I am announcing that if I am elected, it will be the policy of my administration, the United States of America, to keep 100% of all the Bitcoin the U.S. government currently holds or acquires into the future,” Trump said at Bitcoin 2024 conference that took place in July. 

On at least two separate occasions, Trump also made a promise to pardon Ross Ulbricht, a move seen by many as an attempt to score libertarian votes as crypto seems to be finally gaining bipartisan support. In September, Democratic presidential nominee Kamala Harris expressed her support for the industry, positioning herself as more open to it than President Joe Biden.