Huge Silk Road Bitcoin Seizure Solves Wallet Move Mystery

Reading Time: 3 minutes
  • This week’s billion-dollar Silk Road Bitcoin seizure by the U.S. Treasury has helped answer questions about the fate of the site’s Bitcoin intake
  • The Silk Road Bitcoin haul reached over 600,000 at the time of the site’s closure in 2013
  • The recent 69,370 move was the result of the IRS tracking down a Silk Road Bitcoin hacker and seizing the BTC from him

The Inland Revenue Service (IRS) has helped to partially answer one of the great unknown questions in the Bitcoin and cryptocurrency world – what happened to the Silk Road Bitcoin? It has also helped to solve a more recent mystery – who was behind the 69,370 wallet move this week? The answer to both questions were revealed in a petition by the IRS yesterday to claim ownership of said Bitcoin, which had lain dormant for seven years, and which is now worth over one billion dollars.

Silk Road Bitcoin Mystery

When Silk Road founder Ross Ulbricht was arrested at the Glen Park Branch Library in San Francisco on October 1, 2013, investigators were only able to access a fraction of the 600,000+ that the platform has amassed since 2011. The fate of all that Silk Road Bitcoin has remained a mystery ever since – how much was stolen, how much was sold, how much was hidden?

Earlier this week, a Bitcoin wallet containing over 69,370 dating back to 2013 was emptied into a newly created one. The billion-dollar move threw up several theories, with no one quite knowing who was behind it and why, until it was revealed yesterday that in fact the U.S. Treasury had moved the coins, representing the end of a seven-year long investigation.

Ross Ulbricht Identified Hacker in 2013

In announcing the seizure, and simultaneously pressing for forfeiture, the IRS yesterday revealed how the U.S. Treasury had ended up getting their hands on the Silk Road Bitcoin. The wallet owner, which the IRS refers to as Individual X, successfully hacked Silk Road sometime between May 2012 and April 2013, moving the coins to the wallet over 54 transactions.

According to the forfeiture application, Ulbricht was in fact able to identify Individual X at the time and tried threatening him in order to retrieve the stolen funds. Individual X refused, choosing instead to keep the coins and watch as Ulbricht’s future went up in smoke, thinking he was in the clear.

Seized Funds to be Auctioned

The Silk Road Bitcoin lay dormant in the same wallet for over seven years, rebutting repeated hack attempts, until the coins were moved this week. The IRS revealed yesterday that they, with the help of Chainalysis, had spent the intervening years working to identify Individual X. It seems that the FBI’s closure of cryptocurrency exchange BTC-e in 2017 may have been instrumental – the Alexander Vinnik-owned exchange, which is thought to have laundered a portion of the stolen Mt. Gox Bitcoin, likely gave up account information linked to a sale of 101 that came to them from Individual X’s Silk Road Bitcoin wallet in 2015.

This information put the IRS on Individual X’s trail, and three years later his past finally caught up with him. Little information on the methodology used to identify Individual X was given in the filing, but it illustrates that even those who keep their Bitcoin in personal wallets are not safe from the prying eyes of the authorities.

As in past cases, if the IRS is granted ownership of the freshly caught batch of Silk Road Bitcoin it will be auctioned off by U.S. marshals, leaving only some 75% of the Silk Road Bitcoin left to find…