The DOJ is suing to forfeit the haul on grounds of computer hacking, narcotics trafficking, and money laundering.

Earlier this week, news broke that a boatload of bitcoin linked to the nefarious Silk Road darknet market had made a move after five years of sitting in a wallet. London-based Elliptic, which specializes in tracking illicit crypto funds, picked up on the transaction. Its value: a whopping $1 billion. Elliptic speculated at the time that Ross Ulbricht, the creator of Silk Road, or a Silk Road vendor may have moved the funds. It was neither of those. (CNBC)

The real deal – the DOJ moved the funds

On Thursday, the U.S. Department of Justice (DOJ) filed to forfeit approximately “69,370.22491543 Bitcoin (BTC), 69,370.10730857 Bitcoin Gold (BTG), 69,370.10710518 Bitcoin SV (BSV), and 69,370.12818037 Bitcoin Cash (BCH), obtained from 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh on or about November 3, 2020.” (“Defendant Property” in the filing)

The DOJ refers to the above bitcoin address 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh as “1HQ3” in its filing.

The DOJ said that the haul was worth approximately $1 billion as of November 4, 2020.

What happened?

According to the filing here is the alleged sequence of events:

• From 2011 until October 2013, when it was seized by law enforcement, Silk Road was the most sophisticated and extensive criminal marketplace on the Internet.
• The only form of payment accepted on this platform was bitcoin.
• In February 2015, a federal jury convicted Silk Road creator Ross Ulbricht on seven counts. These included conspiracy to distribute narcotics and money laundering.
• In 2020, law enforcement officers used a third-party bitcoin attribution company to analyze Bitcoin transactions executed by Silk Road.
• The review found 54 transactions that transferred 70,411.46 bitcoin out of Silk Road and into two bitcoin addresses.
• These 54 transactions were not noted in the site’s database as a vendor withdrawal or a Silk Road employee withdrawal and therefore appear to represent Bitcoin that was stolen from Silk Road.
• On or about April 9, 2013, the above two recipient bitcoin addresses sent 69,471.082201 bitcoin out to 1HQ3.
• After a transfer out of 101 bitcoin in April 2015, the balance of the funds, 69,370.082201 BTC, remained in 1HQ3 until November 2020.
• As of November 3, 2020, 1HQ3 held 69,370.22491543 Bitcoin.

• The DOJ concluded that an unnamed person, (“Individual X” in the filing) was able to hack into Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal the illicit cryptocurrency from Silk Road and move it into wallets that he controlled.

• Ulbricht became aware of Individual X’s online identity and threatened Individual X to return the cryptocurrency to Ulbricht.
• Individual X did not return the cryptocurrency but kept it and did not spend it.
• On November 3, 2020, Individual X signed a Consent and Agreement to Forfeiture with the U.S. Attorney’s Office, Northern District of California.
• In that agreement, Individual X consented to the forfeiture of the Defendant Property to the United States government.
• On November 3, 2020, the United States took custody of the Defendant Property from 1HQ3.

The DOJ now wants to forfeit the seized cryptocurrency because it was the proceeds of (a) computer hacking, (b) it represents property traceable to narcotics trafficking, and (c) the funds were involved in money laundering.

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