The United States filed a civil complaint today to forfeit thousands of Bitcoins, valued at over $1 billion dollars, seized by law enforcement on November 3, 2020, announced United States Attorney David L. Anderson of the Northern District of California and Special Agent in Charge of the Washington DC Field Office, Internal Revenue Service Criminal Investigation (IRS-CI) Kelly R. Jackson. The seizure represents the largest seizure of cryptocurrency in the history of the Department of Justice.
“Silk Road was the most notorious online criminal marketplace of its day,” said U.S. Attorney Anderson. “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.”
“The illicit profits do not stay in the robbers’ possession. We were able to track down the illegal funds through CI ‘s expertise in finding the money, ”said Kelly R. Jackson, IRS-CI Special Agent in Charge. “The Cyber Criminals Unit of Washington DC is uniquely trained in monitoring virtual currency transactions, and we will continue to develop our abilities to counter criminal activity.”
According to the arguments of the civil forfeiture lawsuit, Silk Road was the most advanced and comprehensive illegal marketplace on the Internet from 2011 until October 2013, when it was confiscated by law enforcement. It operated a sprawling black market bazaar where users of the site purchased and sold illegal products and services daily. The complaint charges that while Silk Road was in operation, thousands of drug traffickers and other illicit vendors used it to sell to well over 100,000 customers hundreds of kilograms of illegal narcotics and other illegal products and services, and to launder hundreds of millions of dollars resulting from these unlawful transactions. Silk Road had over 13,000 listings for controlled drugs at the time it was taken down in 2013 and several more listings providing illegal services, such as computer hacking and hire killing, which generated sales revenues totaling over 9.5 million Bitcoins and commissions totaling over 600,000 Bitcoins from these sales. The lawsuit further argues that a so-called “tumbler” was used by Silk Road to process Bitcoin transactions in a way intended to frustrate the monitoring of individual transactions through the Blockchain cryptocurrency.
Following his arrest in San Francisco, Silk Road founder Ross Ulbricht was convicted in 2015 by a New York federal jury on seven criminal charges, including conspiracy to sell drugs and money laundering.
The complaint further charges that IRS CI agents used a third-party bitcoin allocation company in 2020 to examine bitcoin transactions carried out by Silk Road and were able to classify 54 previously undetected bitcoin transactions carried out by Silk Road, all of which appear to represent bitcoin, which was the result of unlawful activity stolen from Silk Road in or about 2012 and 2
The lawsuit alleges that a bitcoin address was traced to these assets. Further analysis by the United States Attorney’s Office and IRS CI agents of that bitcoin address confirmed that the funds were linked to Person X. It was further determined that the Silk Road funds had been compromised by Person X. Following the hack investigation, on November 3, 2020, law enforcement confiscated several thousand Bitcoins. The seized Bitcoin had a value in excess of $ 1 billion on November 4, 2020.
It is merely claimed in the legal complaint that such property is subject to forfeiture. Using a requirement of preponderance of proof, the United States must show that the objects are liable to forfeiture. The court will order all rights of any prospective applicant forfeited if the United States prevails.
With the aid of Carolyn Jusay, Assistant U.S. Attorneys Claudia Quiroz, William Frentzen, David Countryman, and Chris Kaltsas of the Northern District of California are pursuing the forfeiture. The forfeiture action is the product of an IRS-Criminal Investigation Cyber Crimes Unit investigation with assistance from Chainalysis and Excygent.