The U.S. Department of Justice (DOJ) has announced that it confiscated 50,676.17 BTC linked to a dark web marketplace called Silk Road in November last year. Based on the current value of BTC, the seized fund is around $1 billion.
According to the DOJ, a crypto trader named James Zhong obtained the tokens from Silk Road in September 2012. Zhong reportedly exploited a loophole in the marketplace’s withdrawal mechanism. On Friday, November 4, Zhong pleaded guilty to one count of fraudulent transfers.
Previously in November 2020, the DOJ also seized 69,370 BTC units linked to Silk Road from an anonymous user called “Individual X.”
In addition to the two Silk Road cases, the government acquired 94,000 BTC units from Heather “Razzlekhan” Morgan and Ilya Lichtenstein. The DOJ explained that Morgan and Lichtenstein had attempted to launder money obtained from Bitfinex’s massive hack in 2016.
U.S. government one of biggest crypto whales
The U.S. government currently holds 214,046 BTC, worth at least $4.43 billion. Data from BitInfoCharts has revealed that the U.S. government’s wallet is one of the two largest BTC holders with over 200,000 BTC units, making it one of the largest crypto whales. The other one is Binance’s old storage wallet, which holds 252,597 BTC. It is owned by the crypto exchange’s customers.
Commonly, whales keep their assets in separate wallets, causing difficulty in identifying them. For example, Bitcoin’s anonymous founder, Satoshi Nakamoto, allegedly owns a total of 1.1 million BTC tokens spread across 20,000 addresses. Microstrategy founder Michael Saylor also accumulated 130,000 BTC tokens over the last two years and divided the assets into several wallets.
Crypto analysts often argue that paying attention to the movement of crypto whales within the market is important as they influence prices. A whale can cause a market to fluctuate by buying a large number of tokens. It can also cause a steep price drop by doing otherwise. Usually, retail traders follow the actions of crypto whales.
Despite the bearish situation in the crypto market in the past year, analysts said that crypto whales remained profitable. Speedbox founder Kabir Seth explained that it was unlikely for these whales to abandon BTC.
“Most whales have seen multiple market cycles of Bitcoin to have the patience to wait for the next one,” Seth said.
“In the Bitcoin ecosystem now, the faith of whales is reinforced by the macroeconomics of inflation and more recently, the correlation with the stock markets.”
Liquidation of seized BTC
Analysts predicted that the U.S. government would eventually liquidate its BTC reserve through auctions, commonly through the U.S. Marshalls Service. Renowned venture capitalist Tim Draper bought 30,000 BTC from the U.S. government in 2014 at $616 per coin.
Although seized assets were sold at a relatively lower price, the DOJ has made attempts to sell its holdings following the market movement to get the highest pricing possible. In November last year, the DOJ sold BTC assets seized from a BitConnect promoter during the peak of the bull market to make $56 million.
Since BTC’s price has gone down by 69 percent in the past year, the DOJ refrains from selling seized tokens. In the past week, BTC had a hard time breaking through the $21,000 mark, although it remained above the critical point of $20,000 per unit.