Author: Octopus Brother｜Zhangyuge.eth
The U.S. government has seized/temporarily held a large number of bitcoins in law enforcement operations over the years, some of which have been sold at auction. This article will list the main sources of the remaining 210,000 bitcoins for you, as well as review the government's historical handling of these bitcoins.
There is a case flow to help new users understand. If you want to save trouble, you can look at the conclusion at the end.
1. Bitcoin from the Bitfinex theft (94,000 Bitcoins remaining)
Cause of the incident: On August 2, 2016, 119,754 bitcoins were stolen from Bitfinex. After the theft, Bitfinex issued a debt token BFX, promising users that when Bitfinex recovers some of the funds from the hacker attack, these funds will be used to exchange for RRT tokens to compensate affected users. The exchange rate is 1bfx=1usd
Some BFX token holders chose to convert their BFX tokens into iFinex (the company to which Bitfinex belongs) shares. Bitfinex has repaid all the remaining debts within 8 months, and all BFX tokens have been redeemed.
Because users who choose to exchange for equity helped Bitfinex ease cash flow, in order to thank these shareholders, Bitfinex also gave away a portion of RRT token rewards. The value of the RRT token depends on how many bitcoins can be recovered in the end, and the maximum can be 1RRT=1USD.
According to the latest announcement, the total amount of RRT tokens is 30199822.40 RRT
https://www.bitfinex.com/legal/token-terms/rrt/
Retrieve progress
On February 8, 2022, the U.S. Department of Justice issued a notice
https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency
The FBI arrested the hacker couple who stole Bitfinex, Ilya Lichtenstein and his wife Heather Morgan, and recovered 94,000 bitcoins from them. The money is currently in escrow with the law enforcement agency.
How to handle this money
Bitfinex said it is communicating with the Department of Justice to get the stolen bitcoins back.
The money owed by Bitfinex to users has been settled through BFX and RRT.
Therefore, Bitfinex is likely to obtain ownership of this batch of Bitcoins.
If this part of Bitcoin is withdrawn, the remaining RRT tokens will be redeemed at the price of 1RRT: 1USD
The remaining 80% of the Bitcoin will be used to repurchase the Bitfinex leo tokens issued by it.
As mentioned before, the RRT portion is only over 30 million USD, and the rest of the use, we have to mention Bitfinex's other token LEO. Bitfinex announced that 80% of the bitcoins will be used to repurchase its issued LEO tokens.
The link to the Bitfinex official announcement is as follows:
https://www.bitfinex.com/posts/766
The origin of LEO token
The full name of LEO token is UNUS SED LEO. Here we need to add a background. The parent company behind USDT Tether and Bitfinex is iFinex. In 2019, Bitfinex entrusted assets worth US$850 million to a trust company called Crypto Capital for asset custody.
Later, the funds of this trust company were frozen by the government of another country, which caused Bitfinex to face the problem of not having sufficient liquidity to provide users with withdrawals. About US$700 million of funds were misappropriated from Tether to solve the liquidity problem, causing Bitfinex's parent company iFinex to be investigated by US law enforcement agencies.
In order to raise funds to solve this problem, Bitfinex issued the Leo token. The white paper clearly stated that if Bitfinex recovers the bitcoins stolen in 2016, Bitfinex will use an amount equal to 80% of the net funds recovered within 18 months from the date of recovery of the bitcoins to repurchase and destroy the outstanding UNUS SED LEO tokens. These token repurchases can be completed through open market transactions or through over-the-counter transactions to obtain UNUS SED LEO, including directly exchanging Bitcoin for UNUS SED LEO.
Many friends said that this means you can buy Leo immediately? No, don't worry, you should finish reading it first.
Time period
Bitcoin seized: February 2022
Trial date: Not started yet
When will Bitcoin start selling: Not started yet
Although Ilya Lichtenstein and Heather Morgan have been arrested, their cases are still ongoing and the final sentencing trial has not yet been completed in court.
Assets confiscated by the government must go through certain legal procedures and approval processes before they can be auctioned or returned.
The specific time of this process depends on various factors, such as the complexity of the case, the progress of the legal proceedings, etc.
So, according to the procedures of US law enforcement agencies, how long will this process take? Perhaps we can use other cases as a reference.
2. Silk Road Case
On October 1, 2013, Ross Ulbricht, the founder of the notorious dark web Silk Road, was arrested by the FBI. In the first announcement, the judicial agency stated that 26,000 bitcoins were seized. Later, as the investigation deepened, more bitcoins related to the Silk Road were discovered and confiscated.
Silk Road is a case involving a wide range of issues. In addition to the bitcoins in the hands of the founder, the website has been stolen many times. The whereabouts of other missing huge amounts of bitcoins are also being tracked and investigated. Therefore, many people involved in the case have been arrested in recent years.
Law enforcement agencies auctioned off the bitcoins initially seized in the years following Ross’ arrest.
First auction: June 27, 2014, auction of approximately 29,656 bitcoins
Second auction: December 4, 2014, auction of approximately 50,000 bitcoins
The third auction: March 5, 2015, auctioned about 50,000 bitcoins
Fourth auction: November 5, 2015, auction of approximately 44,000 bitcoins
Bitcoin seized: October 2013
Trial date: February 2015
Bitcoin sales started in June 2014
New Bitcoins Involved
1. Individual X Hacker
In 2020, the U.S. Department of Justice announced that it had seized more than 69,370 bitcoins from a hacker code-named "Individual X". The FBI found out that the hacker stole these bitcoins from Silk Road between 2012 and 2013.
https://www.justice.gov/usao-ndca/pr/united-states-files-civil-action-forfeit-cryptocurrency-valued-over-one-billion-us
On April 23, 2022, Ross Ulbricht, the founder of Silk Road, gave up ownership of 69,370 bitcoins (about US$2.74 billion) stolen by hackers and agreed to hand over the above property to the US government for disposal in accordance with the law.
In August 2023, the U.S. Court of Appeals for the Ninth Circuit issued a ruling to confiscate the Bitcoins.
https://storage.courtlistener.com/recap/gov.uscourts.cand.368440/gov.uscourts.cand.368440.147.0.pdf
Bitcoin seized: November 2020
Trial date: August 2023
When will Bitcoin start selling: Not started yet
2. James Zhong Hacker
On April 14, 2023, the U.S. Department of Justice announced that law enforcement agencies seized approximately 50,676.17851897 Silk Road-related bitcoins in November 2021. At the time, the value was more than $3.36 billion.
The hacker was named James Zhong. He stole the bitcoins from Silk Road in September 2012. In April 2023, James Zhong was convicted of wire fraud and all the bitcoins were confiscated.
Ministry of Justice announcement:
https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction
According to the court document: Case 1:22-cr-00606-PGG Document, page 26, this portion of bitcoin has been sold in four installments in 2023.
Arrested: November 2021
Bitcoin seized: November 2021
Trial date: November 4, 2022 Guilty plea
Bitcoin selling starts on March 14, 2023
Other sales cases
1. In a notice submitted by U.S. officials on January 8, 2024, the U.S. government stated that it plans to dispose of nearly 2,875 bitcoins seized from Ryan Farace and Sean Bridges in 2021 and a second batch of 59 bitcoins "in accordance with the instructions of the U.S. Attorney General."
Bitcoin seized on: February 10, 2021
When will Bitcoin start selling: Sold in January 2024.
2. On June 27, 2024, data from Arkham Intelligence showed that the US government transferred 3,940.28 bitcoins worth US$241.22 million to Coinbase Prime Deposit on Wednesday.
The bitcoins were originally seized from drug dealer Banmeet Singh.
Bitcoin seized: January 2024 Confiscated during trial.
Bitcoin sales start time: June 2024
in conclusion:
Judging from several major cases in history, the total time from the arrest of the suspects, the confiscation of the funds involved, to the start of processing Bitcoin generally does not exceed 3 years.
Half of the bitcoins involved will be processed soon after the verdict takes effect and the defendant pleads guilty.
The two large cases that deserve our attention at present are:
1. 94,000 Bitcoins Seized by Bitfinex Hackers
The seizure time is February 2022
Hacker conviction could be by the end of this year
Bitfinex said that after taking back this batch of coins, it will repurchase Leo in batches over 18 months.
2. More than 69,370 Bitcoins seized from Individual X hackers
Bitcoin trial date: August 2023
The processing time may start at the end of this year or early next year.
Note: The judicial authorities will not disclose too much information. The case circumstances are different and the handling procedures will be different. The specific time is subject to the official announcement. This article does not contain any long or short opinions.
The start time of processing is only an estimate, and historically, the U.S. government will sell in batches to meet market liquidity, rather than selling all at once.
And both new presidential candidates said that after the new round of elections, in order to gain public opinion, part of the currency awarded to the government by the court may be used as government reserves and will no longer be sold.
