The government is now liquidating seized bitcoins before convicting their owners of any crimes
The US government has once again seized large sums of bitcoin from those involved in the online drug trade. Late last week the US Attorney’s office announced that it had seized $3,030,000 million worth of bitcoins from 22-year-old Dutch citizen Cornelis Jan Slomp, aka “SuperTrips,” who is accused of being one of the largest drug dealers on the now-defunct Silk Road marketplace. Slomp has agreed to plead guilty to a federal drug conspiracy charge.
What’s unique in the Slomp case is that, unlike in the past where federal officials held bitcoinpending the outcome of the underlying case before ultimately selling them, in this instance the virtual currency was “exchanged” – with little explanation of where or how – into cash, seemingly immediately.
The mechanics and implications of this currency exchange are fascinating. Surely the government didn’t sell these seized bitcoins on a public exchange, but rather via a private auction. If the coins were sold as a single lot, then it’s reasonable to assume that they were sold at a slight discount to the “retail” market value for a single bitcoin, such as the price quoted on the Coindesk Bitcoin Price Index. If the coins were sold in multiple smaller lots then the auction may have brought in close to this index value.
The issue is, Bitcoin’s price fluctuates, often dramatically, on a daily and even hourly basis. How did the government decide when was the right time to sell and at what price? Are there cryptocurrency experts within the various federal departments involved in making this decision? And what is the government’s duty, both to its citizens and to the still accused but (at the time) not yet convicted owner of those assets to maximize their value?
