The feds have seized its largest stash ever of Bitcoin, originating from the notorious Silk Road underground marketplace. The federal coffers are now $1 billion richer.
Silk Road was known for the place to go to broker illegal drugs, murder-for-hire, child pornography and malware – such as password stealers, keyloggers and remote access tools. In 2013 the FBI shuttered it, arresting founder Ross William Ulbricht (a.k.a. Dread Pirate Roberts). Ulbricht was convicted in 2015 for a range of crimes including computer hacking, and was sentenced to a double life sentence plus 40 years, without the possibility of parole.
However, there was a question about missing funds.
The site used Tor for anonymity and Bitcoin as its currency. In 2014, the FBI auctioned off 30,000 Bitcoins that the government seized in the initial takedown, which were housed in wallet files stored on Silk Road servers. However, the proceeds of 54 different transactions were allegedly stolen from the site via a hack before the takedown, according to a civil complaint filed this week by the U.S. government. That meant that the proceeds of illegal activity were still floating around out there, which sparked an investigation by the Internal Revenue Service Criminal Investigation (IRS-CI) division.
“Silk Road was the most notorious online criminal marketplace of its day,” said U.S. Attorney David Anderson, in a media statement, “The successful prosecution of Silk Road’s founder in 2015 left open a billion-dollar question. Where did the money go? Today’s forfeiture complaint answers this open question at least in part. $1 billion of these criminal proceeds are now in the United States’ possession.”
Silk Road had well over 100,000 buyers, and was able launder hundreds of millions of dollars derived from unlawful transactions, according to the complaint. At the time of its takedown, Silk Road had nearly 13,000 listings for controlled substances and “many more listings offering illegal services, such as computer hacking and murder for hire,” which translated into sales of 9.5 million Bitcoin; and commissions of 600,000 Bitcoin.
Although Silk Road used blockchain to obscure the money trail and discourage tracking, the IRS-CI used a third-party Bitcoin attribution company and was ultimately able to trace the allegedly stolen funds to a Bitcoin address owned by “Individual X.”
“It was further determined that Individual X had hacked the funds from Silk Road,” according to the complaint. “Pursuant to that investigation of the hack, law enforcement seized several thousand Bitcoins on November 3, 2020. On November 4, 2020, the seized Bitcoin had a value of over $1 billion.”
The civil complaint alleges that the Bitcoin is subject to forfeiture, which a court will determine.
“Criminal proceeds should not remain in the hands of the thieves. Through CI’s expertise in following the money, we were able to track down the illicit funds,” said IRS-CI Special Agent in Charge Kelly Jackson, in a statement. “The Washington D.C. Cyber Crimes Unit is uniquely specialized in tracing virtual currency transactions and we will continue to hone our skills to combat illegal activity.”
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