In a legal filing Friday, the U.S. government says more than $215 million worth of Bitcoin was sold in March, representing nearly 9,900 BTC. These assets were actually seized from James Zhong, who had exploited a vulnerability on Silk Road, a dark web marketplace.
The U.S. government sells Bitcoin
In early March, we highlighted movements on a Bitcoin (BTC) address associated with the U.S. government, which suggested a massive sale was coming. It turns out that according to a legal document filed Friday in the U.S. District Court for the Southern District of New York, 9,861.17 BTC were indeed sold on March 14.
Once transaction fees are deducted, this transaction netted the U.S. government just over $215.5 million.
For the price action of this sale, it is interesting to note that while it may have been the cause of the wick on the March 14 candle, Bitcoin quickly went back up and is still trading above $28,000 at the time of this writing:
BTC price showing sale by US government
BTC linked to Silk Road
These bitcoins were seized in a case related to the marketplace Silk Road, which operated on the dark web. However, this does not directly relate to the illegal activities that were taking place on this platform.
In fact, this court case relates to James Zhong, who in September 2012 managed to exploit a loophole in the Silk Road deposit and withdrawal system. Through 9 different accounts and over 140 transactions, the individual made deposits only to withdraw much more than that deposit value moments later.
The legal document explains, for example, that on September 19, 2012, James Zhong deposited 500 BTC into one of said accounts, before initiating 5 withdrawals of 500 BTC each, less than 5 seconds later, creating a profit of 2000 BTC. To put this in context, the price of Bitcoin was about $12.5 that day. Approximately 50,000 Bitcoins were stolen in this way.
The memorandum explains that while Silk Road’s activities were illegal, the theft was not justified. Despite several mitigating circumstances, 24 months in prison have been requested against James Zhong, and the sentence is to be pronounced on April 14.
Regarding this case, the US government still has a little less than 41,500 BTC, which are currently worth about 1.18 billion dollars. This balance is expected to be sold in 4 lots throughout this year.
