What Will Happen to Bitcoins Seized from Silk Road and Ross Ulbricht?
Since its quiet inception in 2011, the “hidden” website known as Silk Road kept a low profile on the so-called Deep Web. The site’s preference for stealth over visibility, while unusual, makes sense when you consider the Silk Road business model: it was only an illegal drug trafficking marketplace, after all. Now, after 2+ years of operating under the radar, the site has been closed by the FBI, and Silk Road’s creator — 29-year-old Ross Ulbricht of San Francisco — has been placed under arrest.
The Silk Road: a (Formerly) Booming Business
If you’re imagining a disgruntled teenager paving the digital path for a few small-time drug sales from a computer in his mother’s basement, you have entirely the wrong idea. Silk Road was not the obscure side-project of somebody who happened to fiddle with computers in his spare time. It was a thoroughly encrypted, densely populated international ecosystem, sustained by its own abstract currency, the bitcoin. And to say “sustained,” perhaps, is putting it lightly: it might be more accurate to say the Silk Road was positively flourishing.
During the site’s brief run, between its approximately one million users — collectively contributing up to 60,000 hits per day — the Silk Road took in 9.5 million bitcoins, plus a hefty commission of 600,000 bitcoins for its progenitor. Bitcoin monetary value has a tendency to fluctuate dramatically, which has resulted in a likewise dramatic range of dollar-conversion estimates. But to put Silk Road’s massive bitcoin harvest in more familiar terms, the site ultimately generated profits estimated between 60 million — at the “low” end — and over a billion dollars; not to mention a cool 80 million for himself.
What Will Happen to Ulbricht’s Bitcoins?
Unfortunately for Ulbricht, the days of wine and roses (and heroin… and meth… and cocaine…) seem to be over. At quarter past three in the afternoon on Tuesday, October 1st, the FBI arrested Ulbricht at a San Francisco public library on a hefty triple-charge of computer hacking, money laundering, and narcotics trafficking. The website itself was promptly seized by the Department of Justice, along with 3.5 to 4 million dollars’ worth of bitcoins.
But for the rivers of money flowing around him, Ulbricht is facing his daunting criminal allegations not with an expensive private attorney, but with a federally appointed public defender, Brandon LeBlanc. After all, illegally-made money is hardly a viable payment option during court proceedings. At the same time, bitcoins are not a federally recognized currency — you can’t go to your local 711 and pay for a slushie in bitcoins, you need to fork over dollars.
The FBI itself admits to being thrown slightly off-balance by the lack of a precedent when it comes to the handling Ulbricht’s strange virtual currency. As an FBI spokesperson confessed to Forbes, “This is kind of new to us.” For the time being, the FBI has tentative plans to keep the bitcoins in digital storage, and will “probably just liquidate them” at the conclusion of the trial. Will the bitcoins be written off and forgotten about? Auctioned off? Converted into a more familiar currency? As long as the FBI itself remains uncertain, the public will simply have to wait and find out.
If you or somebody you know is facing criminal charges, contact the offices of Young, Marr & Associates today.