In July last year, 25-year-old Alexander Katz died in a Thai prison and left behind the properties of top drug dealers: villas, Lamborghini, Porsche, Liechtenstein and Swiss bank accounts. The official stated that Katz is the largest in the world The drug and weapons black market operator AlphaBay operator. He also left another thing: Electronic wallet with millions of dollars worth of Bitcoin and other virtual currencies.
The U.S. Department of Justice seized Katz’s virtual property in a global raid. They are now owned by the ministry and the Ministry of Justice plans to sell it. Bitcoin prices have soared by more than five times since their capture. The Ministry of Justice will benefit greatly. However, if you want to know who the Bitcoin holder is, or when it is traded, you must have strong network investigation skills and plenty of free time.
The collection and sale of digital currencies was still unknown by people five years ago and is now rapidly becoming an ordinary thing. Bitcoin has long been popular with cybercriminals and is now also increasingly appearing in criminal search cases, which make the United States Become a major player in the cryptocurrency market.
We can't tell the exact numbers, but based on written evidence and interviews with current and former defense lawyers and prosecutors, we can figure out that US law enforcement agencies keep at least $1 billion in digital currency, and the actual amount is likely to be much higher. Here.
Once the digital currency enters the hands of the government, it becomes a mystery. The anonymity of bitcoin makes it popular with liberals, but with the opaque property that these liberals hate forfeiting the law, the public is almost impossible to trace. The flow of digital currency. Federal agencies are playing an increasingly important role in the prosperity of cryptocurrencies. They have made surprising moves for the digital gold in their hands, and even committed mistakes or crimes.
The United States Marshals Service is the oldest law enforcement agency in the United States. Gunner Earp and Gunner Kirk have been members of the US Marshals Service. Recently, television and film works have taught many Americans that How it transports prisoners and tracks dangerous fugitives, but few people know that the court police also sell bitcoins.
According to a law that has a history of several decades, the Judiciary, an agency affiliated with the United States Department of Justice, has a major responsibility to deal with items seized by other federal law enforcement agencies. This is why visiting the Judicial Police Agency website can be seen by the Federal Bureau of Investigation. And illegal collections of vessels, cars, airplanes, watches, etc. collected by other agencies, all of which took part in public auctions. In the 1980s, a resolution of the Congress allowed federal officials to sell drug-crime-related assets more easily, and thereafter seized property procedures. (see sidebar) Become more common and more controversial.
At that time, no one knew that in the future these assets would also include money obtained by mining on computers. This perception had changed in the large-scale investigation of the Silk Road in previous years. Road is an eBay-like global illegal drug sales site.
A young terrorist pirate from Texas, Roberts (real name: Ross Ublich), built a Silk Road website using three new technologies of the time. They are cheap cloud data storage; allowing users An onion browser that hides deep into the darkness of the Internet world; and allows Bitcoins that users pay each other in a secure, semi-anonymous manner without going through the bank.
When the federal government sealed up the Silk Road website in 2013, the criminals were proficient in bitcoin, but the law enforcement agencies did not keep up. A prosecutor involved in the case said: 'There is no professional knowledge of this, it is really too new. "The terror pirates, like most savvy Bitcoin users at the time (and most criminals today), do not rely on intermediaries such as Coinbase to hold digital currencies.
Ubrich uses a private key, a long list of characters that are almost impossible to crack, to control his wallet. The only way law enforcement wants to obtain Bitcoin with a private key is for the suspect to reveal the key. Information. Agents who did not give up came up with ways to seize when the suspect currency was not protected.
In order to get Ubrich’s Bitcoin, they arrested him at the San Francisco Library when his face took away his unlocked laptop. (In Katz’s case, the agents drove into him quickly At his residence in Thailand, he was using the Alfa Bay administrator's account to log in.) When arresting terrorist pirates, the efficiency of the French police station has increased dramatically. They control at least two of their own electronic wallets for the storage of the Silk Road. Currency, receive Bitcoin seized by other departments.
Former Sharon Cohen Levin, currently a director of asset confiscation at the Federal Prosecutor's Office in Southern District, New York, and currently a partner at WilmerHale, said: 'This is a cutting-edge technology. We have never done this. After the seizure of the digital currency, the Judiciary returned to the regular procedure and treated it in the same way as the cocaine smuggler’s speedboat: Auction.
This is a huge task because of the enormous amount of money seized, about 175,000, accounting for 2% of all circulation Bitcoin at the time. According to prosecutors familiar with the case, the Judiciary has adopted a staggered auction approach. In order to prevent Bitcoin's value from plunging. In the four auctions held from June 2014 to November 2015, the Judiciary Bureau sold Bitcoin on the Silk Road at an average price of US$379.
Bitcoin prices have soared in the future. In another auction in January this year, the Judiciary Bureau sold 3,813 BTC, net profit of US$ 45 million, and the value of each Bitcoin was up to approximately US$ 11,800. At this price, the Bailiff The Bureau’s sale of hoarded Silk Road digital currency could have earned $2.1 billion, enough to pay for the annual budget of the Judiciary Bureau, but in 2014 and 2015 it only made a net profit of $66 million.
At the same time, billions worth of venture capitalist Tim Draper bought 30,000 Silk Coin Bitcoins for about $600 each, which may be his best investment in the decade. Draper told Fortune magazine that the auction process was 'very smooth' and that he did not sell one. He added: 'Why should I use the past to exchange for the future?'
Of course, the judicial police cannot anticipate this. Former prosecutor, Clifford Stadt, who currently works for K&L Gates, said that when federal agents sell their assets, they are unlikely to be able to determine market timing. Speaking of the confiscation of securities that he once participated in, Sidder said: 'We have found that the government has no intention of predicting the stock market.'
The low price auction of the Silk Road Bitcoin made the federal government ridiculed by cryptocurrency enthusiasts. Under the tight budget, the pressure to sell the currency at high prices surged. In mid-November last year, the price of Bitcoin reached nearly 20,000 U.S. dollars. The U.S. judicial officials quickly found a federal court in Utah to request permission to auction the 513 bitcoins they seized from counterfeit drug sellers. The judge approved the request, but the judicial police department did not auction until the end of January. Drop to about half of the maximum price.
Local authorities also face similar thorny issues. Brenda Fisher, head of the Manhattan Department’s prosecutor’s office network department, said: “We had a traditional kidnapping and robbery case here. The criminals lured the victim to him and thought it was a Uber step. In the car's car, he pointed a gun at him and asked him to take out the $1.8 million 'digital currency' Ether, eventually forcing him to give a private key. 'The district attorney's office succeeded in recovering funds but met a Conundrum: The robber converted the Ethereum to Bitcoin. The value of the Bitcoin rose sharply after the theft, causing new legal problems: Who should get this part of the surplus?
Forfeiture.gov, a website operated by the Ministry of Justice, looks like a godsend to the supervision department. On a recent Monday, a document from the homepage details the confiscation of multiple departments, worth at least 200 yuan. Millions of dollars in digital currency. It can be seen that the Drug Enforcement Administration confiscated 140 Bitcoins from a drug dealer in New Hampshire and confiscated 25 Bitcoins from a drug dealer in Boston; Customs and Border Protection in Salt Lake City Seized 99 Bitcoin and 99 Units of Bitcoin Cash (another currency).
But this information is transparent and fleeting. From the moment the item is confiscated until it appears in the report, there is often a long lag between reports, and the report is not archived online. Every day, when the new report appears, the old report disappears. It does exist, but no matter what the time, whether on the Internet or in writing, can not find the federal government to keep a record of the cryptocurrency.
Alex Lakatos, a Mayer Brown attorney who once offered clients advice on confiscation of assets, said: 'The United States is a bit weird that it lacks a central registry.'. He added: ' Regardless of the actions taken by the FBI or the local authorities, we do not know how many properties have been confiscated.
When asked whether there was a public registry of property confiscated, the spokesperson of the Judiciary Police stated clearly that there was no. Moreover, the law did not provide that the government was obliged to create such a registry. The staff of Stadler and other law enforcement agencies basically supported this. This kind of opacity, they argued, increased transparency, may reveal secret agents’ methods of work or ongoing investigations to criminals.
In theory, any bitcoin in the hands of the federal government is traceable, because transactions in cryptocurrencies are permanently recorded on the public blockchain ledger. Although DOJ documents sometimes publicly identify 'safety government wallets', Many criminal cases do not, which makes Bitcoin's whereabouts unclear. Even if the wallet is identifiable, its contents appear to the layman's eyes as an endless string - they actually represent the anonymous personal currency, transactions and user.
To be sure, the industry, including forensics firms such as Elliptic and Chainalytic, is constantly emerging to help customers connect wallets with owners. Many of their customers are law enforcement agencies. However, public disclosure does not belong to the business of these companies. range.
This situation has led to the almost impossible to determine how much cryptocurrency the government actually owns. In addition, there are numerous institutions (including the Secret Service, Alcohol, Tobacco and Firearms Administration, Post Office) that have the power to seize Bitcoin. The government itself is also difficult to determine the confiscation of the cryptocurrency. The size of the currency. In fact, as long as the blockchain technology is in place, it is easy to know the amount of money, which is particularly vexing for those who support transparency.
Confiscated critics believe that the Bitcoin black hole is a digital display of a system that has been abused for decades. Opponents argue that state and local institutions have strong confiscation power that can have a negative effect and may even lead to police robberies. The civilians. Stuart said: 'I worked in the law enforcement department for 23 years. I believe that, whenever the police confiscated cash, someone always corrupted them. I don't think there will be any difference in this bitcoin.'
From this point of view, the gap between the public record and the actual situation is large enough to be worrying. When trying to track Bitcoin from court records and confiscation notices, Fortune Magazine found that several bitcoin captures were recorded. There is no record of sales.
For example, in 2014, court documents showed that the U.S. Department of Revenue seized 222 Bitcoin from a marijuana drug dealer in Texas, but did not have any written records about sales. Similarly, the Secret Service in 2014 from a pair of The 'JumboMonkeyBiscuit' website had 50.44 BTC coins seized by couples operating illegal drugs and currency exchanges, and there were no auction records. (The currency valuations in some other cases are also quite bizarre - for example, in early February, Salt Lake City seized 99 Bitcoins. In the confiscation notice, it was shown to be worth $0, but in fact it was worth about $800,000.)
Some of these currencies may be occupied by ongoing cases or are still in the hands of confiscation agencies. Since the judicial police station refuses to comment on internal processes, there is no way to know if they have a legitimate reason to explain the location of these bitcoins.
So far, there is no evidence that government officials use the procedural loopholes to steal Bitcoin, and former prosecutors (including Stadler) have emphasized that corruption is the exception, not the whole. Nevertheless, the long period of confiscation and sale is undoubtedly Increased suspicion of defense attorneys and civil libertarians. All sources believe that the characteristics of opaque surveillance coupled with the ease of transfer of digital currency can easily lead law enforcement to astray, the first large bits of the FBI. The currency capture action confirmed this.
Jarod Koopman is the director of cybercrime in the Criminal Investigation Division of the US Department of Taxation. About 2,000 agents in the Bureau of Combating Crime in the Inland Revenue Department - accountants with badges and guns - are a growing cryptocurrency expert team. Part of it. Koopman said: 'They are one of the best in the world.'
The team’s most famous arrest was also one of the most criticized because of the confiscated swindles. During the investigation of the Silk Road, the US Drug Enforcement Administration’s Carl Fosse and the Secret Service’s Sean Bree Chiss crazy crime, even Al Capone will be ashamed. Before the arrest of terrorist pirate Roberts, they stole Bitcoin from the principal and his website, and extorted his belongings.
The confrontational fellow even posed as a killer, forged a scene of killing the informant and attempted to cheat Ubrich again. Inspector of the Inland Revenue Department successfully trapped Flowserve and Bridges. Both admitted in 2015 that this case involved The allegations. The fraud of the two agents occurred before Ubu Lich’s assets were confiscated. Strictly speaking, they did not affect the confiscation process. Even so, it can be seen from this case that the digital currency was forfeited. When related laws, it may also breed wrongdoing.
The Judiciary is the best agency to provide confiscation of detailed property accounts, but its operation is not transparent enough. In September last year, after the staff of the Senate Judicial Commission completed a lengthy investigation, the chairman of the committee, Senator Chuck Grassley (from Iowa) slammed the Judiciary Police for accusing them of misusing confiscated funds to purchase additional benefits and luxury items such as 'high-end granite countertops and expensive custom artwork', most of which were built in Houston. The assets were confiscated by the college. This is perfectly appropriate. The above is not a case of genocide, but it cannot quell the anger of confiscation of critics or Bitcoin advocates. Many of them accepted Bitcoin because of the government. The lack of confidence in the integrity.
According to Koopman's estimation, his tax bureau team has helped seize virtual currencies worth tens of millions or even hundreds of millions of US dollars. This is just data from one agency. There are more than a dozen institutions in the United States that have the right to confiscate. Man's guess, we can estimate the influence of the U.S. government on the digital currency market. With the increasing popularity of cryptocurrency, this effect is bound to expand.
The process of finding illegal currencies will remain challenging. Former cybercrime prosecutor, Nowon Weller, an advisor to Aon Group, said that for years, bad people have been 'turning to other currencies that have not left the same digital trails.' Abandon Bitcoin and switch to Monroe and Zero Coin. They can also provide secure payment options but are almost impossible to trace.
James Smith, chief executive of the forensics company Elliptic, said that more and more online black markets are developing a technology called Tumbler, which can disrupt transaction records and add payment services. This is equal to an endless The virtual cat and mouse game. If law enforcement officers commit crimes themselves, the money they steal can be more easily hidden.
At the same time, the digital currency market is still booming. Forfeiture.gov recently issued a report saying that the Drug Enforcement Administration had seized 6 Bitcoin in New Jersey and that the Office of the Prosecutor confiscated an individual named Anton Peck in Colorado. Twenty-seven Bitcoins (valued at approximately US$330,000). According to reports, in the early February of this year, a raid against the Global Credit Card Fraud Group, the United States made a net profit of more than 100,000 Bitcoins.
In theory, Uncle Sam will auction all of these bitcoins one day.
Source: Fortune Chinese Website
Author: Jeff John Roberts Original published in: March 2018 issue of "Fortune" magazine
Translator: Yan Yizheng