FBI seizes $28 m in Bitcoin. But may not be able to use it

The US government has seized a haul of bitcoins worth $28 million USD from the computer of the man linked to the biggest drugs site on the web.

The FBI found the bitcoin trove on the computer of Ross William Ulbricht, the Silicon Valley entrepreneur arrested on 1st October and charged on several counts relating to activity on the site Silk Road – an illegal marketplace that sold drugs, personal data and other illegal goods and services. It is alleged that Mr Ulbricht, a former physics student, was the mastermind behind the site. Trade on Silk Road took place in bitcoin, a virtual and anonymous currency that is guaranteed by cryptography rather than banks. The anonymous nature of currency made it natural for the marketplace.

The FBI previously took $3.6m bitcoins from Silk Road users after raiding and shutting down the site at the beginning of October, so the new haul brings its total seizures from Silk Road to £33m.

However though the new Bitcoin stash is on a computer that is now in the possession of the FBI, it is unclear what the FBI can do with the bitcoins now it has them, as this piece on Extreme Tech explains.

For starters they will need to break the encryption on Mr Ulbricht’s Bitcoin wallet to actually access the funds, which the FBI is currently unable to do. Though Mr Ulbricht presumably has the key so could be made to hand it over.

And then, the FBI doesn’t recognise bitcoin as a currency, so it is unclear whether the agency would be legally allowed to spend or even convert it once it gets access.

Mr Ulbricht is estimated to have a total personal wealth of $80m in bitcoin, leaving a further $52m USD unaccounted for.

Mr Ulbricht’s £80m bitcoin fortune is believed to be some five per cent of all bitcoins in circulation right now, so what the FBI does next with its seized assets could have an impact on the currency.

Bitcoin’s association with the illegal trade has not derailled its transition into a mainstream asset, with a top hedge fund investor this week declaring it a sound investment, comparable to gold.