U.S. to sell $10M in seized bitcoin
- By Matt Leonard
- Dec 20, 2017
When Aaron Michael Shamo was arrested earlier this year in Utah for helping run an international drug smuggling operation, federal authorities seized his property, including bitcoin and bitcoin cash.
In December, a U.S. district judge approved the sale of Shamo’s 513.1490393 in bitcoin and the 512.9274588 in bitcoin cash – which was worth less than $500,000 when he was arrested. Now the U.S. Attorney’s Office in Utah is working to sell the currency, worth nearly $10 million at current prices.
Andrea O'Sullivan, the program manager for the Technology Policy Program at George Mason University’s Mercatus Center, told GCN the volatility of the market is an important consideration when selling the cryptocurrency and something that separates bitcoin from the vehicles more commonly seized by law enforcement.
“It’s a deflationary currency by design, so there’s a question of timing,” O'Sullivan said. There is the option of waiting to see what happens in the market or selling now.
The funds were seized by the U.S. Attorney General for Utah, but the auctioning of the cryptocurrency will be handled by the U.S. Marshals Service, which sold off 30,000 bitcoins seized in 2014 the Silk Road bust. A spokesperson for the U.S. Marshals said it doesn’t use exchanges when transferring auctioned currency, but instead deposits it directly into another wallet. This is likely for security reasons, O'Sullivan suggested, adding that “a lot of the savier bitcoin users” do direct transfers.
“Any time that you are not in control of the private key you essentially aren’t in control of your bitcoin,” she said. “This means an exchange can be hacked.”
One practice that some people are beginning to take part in is called “cold storage,” which keeps cryptocurrency offline once it has been exchanged, she said.
The government also said it plans to transfer the cryptocurrency in increments of less than or equal to 50 coins “to guard against loss due to fraud or error.” This would protect the currency against mistakes like entering the wrong wallet. The sale proceeds will be deposited into the Treasury Forfeiture Fund Suspense account, according to a report on CoinDesk.
But as the government is taking bitcoin away from criminals and selling it, Missouri Republican Senate candidate Austin Petersen has already accepted political donations in bitcoin, and he’s not the only politician to do so, according to St. Louis Post-Dispatch.
“I am a big fan of the digital currency community because of what it represents, which is ultimately decentralization,” he said, according to the paper.
Using bitcoin for campaign donations could increase transparency because there is a record of every transaction made on the blockchain, O'Sullivan said, but there are also the positive optics of accepting bitcoin for donations.
“On the very basic level it looks very cutting edge,” she said. “As a politician you can kind of signal your technological savvy by doing that.”
Editor's note: This article's headline was changed Dec. 22 to correct the value of the bitcoin being sold.
Matt Leonard is a former reporter for GCN.