
The Feds Are Ready To Sell $25 Million of Bitcoin Seized From The Silk Road - matthewsimon
http://www.forbes.com/sites/kashmirhill/2014/01/16/the-feds-are-ready-to-sell-the-silk-road-bitcoin-kind-of/
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justincormack
Hold on they haven't found anyone guilty in a court yet have they?

~~~
bradleyjg
Civil forfiture doesn't require a criminal conviction. In fact there's hardly
any process at all. Just one more twisted doctrine justified by the War on
Drugs.

~~~
Crito
To expand on this, from wikipedia:

 _" In civil forfeiture cases, the US Government sues the item of property,
not the person; the owner is effectively a third party claimant. The burden is
on the Government to establish that the property is subject to forfeiture by a
"preponderance of the evidence." If it is successful, the owner may yet
prevail by establishing an "innocent owner" defense.

In civil cases, the owner need not be judged guilty of any crime; it is
possible for the Government to prevail by proving that someone other than the
owner used the property to commit a crime. In contrast, criminal forfeiture is
usually carried out in a sentence following a conviction and is a punitive act
against the offender.

The United States Marshals Service is responsible for managing and disposing
of properties seized and forfeited by Department of Justice agencies. It
currently manages around $2.4 billion worth of property. The United States
Treasury Department is responsible for managing and disposing of properties
seized by Treasury agencies. The goal of both programs is to maximize the net
return from seized property by selling at auctions and to the private sector
and then using the property and proceeds for law enforcement purposes."_

[http://en.wikipedia.org/wiki/Asset_forfeiture#United_States](http://en.wikipedia.org/wiki/Asset_forfeiture#United_States)

Since the Government _sues the property itself_ , and since property itself
has few if any rights, you can understand how the entire process becomes
rather... one sided.

~~~
jrockway
You have to admit, whoever came up with that law was being pretty clever. If
only they would use some of that cleverness to just send me a bill for my
taxes.

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sebastienros
Based on the current price it makes roughly 25K bitcoins, and using the
current BUY backlog on MtGox, selling them would push the price back to $550.
However such a volume will certainly create a panic wave and it could go below
that.

If they are clever, they won't put everything on the market like this.

~~~
icey
Why would the feds care about crashing BTC? If anything, it seems like it
might be a desirable outcome for them.

~~~
Crito
Because they want the money. Same reason they auction off the cars of
suspected drug dealers, instead of just handing them out at random.

~~~
mmanfrin
You mean those police auctions that advertise how cheap you can get cars?

Selling at the immediate price they can get in a very volatile vehicle is not
'handing them out at random'.

~~~
Crito
Cars at auctions are typically pretty damn cheap. That happens because there
is risk for the buyer when buying a car at auction.

If cars at police auctions were _unnaturally_ cheap, everyone would be making
a killing with arbitrage. _(To be clear, many people do, but as more people
get in on that, prices at police auctions go up... the balance that is struck
gets you relatively close to the legitimate value of a car at a police
auction)._

Trust me, they love that money. They use it to buy fun new toys for
themselves. That's when the property itself isn't their new toy:
[http://www.clumsycrooks.com/media/files18/pictures/drug_deal...](http://www.clumsycrooks.com/media/files18/pictures/drug_dealers_car.jpg)

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ck2
So that will depress the price right? Time for some cheap BTC

~~~
jrockway
I honestly don't think the Bitcoin market is sophisticated enough to react to
events like this. Certainly, if the feds really want to sell and someone puts
$0.01 on the order books for that size of a trade, and nobody else is around,
it could be filled, but I don't see that happening.

~~~
BlackDeath3
It wouldn't be unprecedented. I believe that mass sells have caused price
crashes numerous times in the past.

Perhaps I misunderstood you?

~~~
jrockway
Sort of. To me, it looks indistinguishable from randomness with /r/bitcoin
trying to explain the randomness with news stories. But maybe I'm wrong.

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slg
The article speculates these Bitcoin will be auctioned off. I wonder if that
would be the entire wallet as one lot. Not too many people have the resources
and willingness to throw $25 million into Bitcoin outside of the Winklevoss
twins and hedge funds. Odds are they might get a good discount, but that might
be preferable to the Bitcoin economy than the government selling the coins in
smaller lots. 30k coins suddenly flooding the market at once would cause a
pretty dramatic drop in price.

~~~
dclusin
Only if they try to sell them in a trading venue. Anyone with the bankroll to
buy that many probably understands how markets work.

~~~
slg
Rereading my prior post, it was a little unclear. Let me expand on my prior
point. The Bitcoin market is neither liquid or large enough to absorb 30k new
coins and remain stable. That means the US government isn't going to get $850
per coin. The effects on the market will likely depend on how the coins are
sold.

 _Scenario 1:_

There is a single large buyer. Assuming the buyer and US goverment are smart,
they will recognize the liquidity risk of Bitcoin. The buyer will then get a
discount for this and be able to purchase the coins at a below market rate.
Assuming their plan is to hold onto the coins for the long term (or at least
not short term), I wouldn't expect a large movement in the general Bitcoin
markets.

 _Scenario 2:_

There are many small buyers. Each sale would slightly effect the price of
Bitcoin as each sale would slowly satisfy demand. The US government might
receive $850 per coin for the first sale, but certainly wouldn't for the last
sale. This would cause the biggest harm to the market as the price would drop
more than in scenario 1.

 _TL;DR_ \- The US government either needs to accept a lower price for the
sake of liquidity or accept that their sales will quickly lower the market
rate for Bitcoin.

~~~
dclusin
You are absolutely correct on the price they get for them being dependent on
how they are sold. The industry jargon for this is how you execute the buy or
sell. One option is they could sell the bitcoins using a VWAP algorithm.

[http://en.wikipedia.org/wiki/Volume-
weighted_average_price](http://en.wikipedia.org/wiki/Volume-
weighted_average_price)

For all other asset classes VWAP execution is a thing and a common one at
that. Basic idea is split your large order up into slices and sell small
amounts during a given interval. Bitstamp & BTCE have 24 hour volume of ~18k
bitcoins. As a fun aside, if you don't randomize your time slice someone like
me will see what you're doing and move the market to screw you :).

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losvedir
It's not clear to me whether this drives the price up or down. Sure, naively,
it's more supply therefore lower prices. However, it does lend an air of
legitimacy to Bitcoin and will likely raise awareness as it gets played out on
mainstream media.

In other words, it will likely affect both the supply of and demand for
Bitcoin.

~~~
true_religion
Well the government considers bitcoin to be a commodity and not a currency. So
they're selling the commodity they seized, no different than selling a fleet
of ferraris and armani suits seized in another drug raid.

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loceng
I somewhat would think they'd actually want to maintain ownership - but create
the illusion they no longer do, so then they can make transactions. It'd be
smart to track how those Bitcoin move and all accounts it touches.

~~~
bequanna
What could they hope to learn from trading with others that they can't figure
out now?

It is already pretty transparent:
[http://blockchain.info/](http://blockchain.info/)

~~~
loceng
To try to make purchases of illegal items, get shipping addresses, etc..

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viraptor
> approximately $25 million worth of Bitcoin will be auctioned off soon

At least they won't sell it via usual exchanges in one go. That would make
quite a mess... (bringing price down to ~0 for a while before everything
rebalances)

~~~
alexcroox
Maybe that's exactly what they want to do to this rogue currency...

~~~
rjbwork
They might want to, but I think it is illegal to. They have to auction it just
like all other siezed assets.

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pyre
Does that mean if they seized foreign currency, it would also need to be
auctioned off?

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watcherfeds
This service is wathing Feds coffers:
[http://www.bitcoinburn.com/](http://www.bitcoinburn.com/) (if green then all
ok, and they not spending bitcoins)

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ksrm
He could have kept an encrypted copy of the wallet with a trusted friend, and
given them the password when he was caught. The FBI would be powerless.

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LanceH
Counterpoint:

The feds selling the bitcoin would be an endorsement of it and the market they
used to sell as being legal. This could push the price up.

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Alex3917
Great, so this will basically be a giant free handout to wall st because no
one else will have enough money to bid on a block.

~~~
yelnatz
So the feds are gonna give the bitcoin to people who owe them money so they
can pay the feds back?

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philip1209
Based on bitcoin architecture, is it possible to short Bitcoin directly?

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TrainedMonkey
It is not possible to short anything directly. Only direct actions are to buy
and sell.

Options are derivative products that other people offer. They looks at
statistical volatility and price their options, such that they make some $ on
average. This means you can short bitcoin, just like anything else - you need
to find someone offering the service.

~~~
baddox
When you think about it, even "buying and selling" don't exist as far as the
Bitcoin protocol is concerned. There is only creation of new Bitcoin (via
mining) and transferring them around. Granted, there is a lot of potential
complex functionality based on Script, but as far as I know not much is
supported by widely-used Bitcoin clients.

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lowglow
Is it legal to buy/sell bitcoin as a person or as an exchange?

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sandieman
Is this an opportunity for financial firms?

~~~
samstave
I am sure the Winklevii are salivating over this....

I wouldn't doubt they are trying to use their network to get hold of these...

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samstave
What was the price at time of seizure?

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tg3
> When the FBI first seized the coins in October, they were worth about $6
> million

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tomphoolery
I feel like they should just hold onto it so it will increase in value. ;)

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eudox
But thanks to the public ledger that is the blockchain, we know which coins
came from the Feds, and as such, which not to accept!

Don't let them get away with it, folks.

~~~
GigabyteCoin
First they came for the Feds coins, and I did not speak out--Because I was not
a Fed.

~~~
FireBeyond
So, if convicted, should he be able to keep the estimated $100MM of bit coin,
the proceeds of a criminal enterprise (regardless of your thoughts on
legalization, it remains that trafficking or facilitating/conspiracy to abett
trafficking -is- a criminal offense)?

Or is your argument based solely on the lack of conviction - which is more
worthy of discussion?

