FBI not waiting for Silk Road owner’s Bitcoin password

October 14, 2013

From the frenzied coverage of the U.S. Federal Bureau of Investigation’s takedown of the online drug marketplace Silk Road early this month one story has emerged as particularly popular among Bitcoin insiders: A report from Forbes on Oct 4 said the FBI had tried and failed to seize alleged Silk Road owner Ross Ulbricht’s personal stash of the digital currency, supposedly worth $80 million.

The FBI is now saying that’s just not true.

According to the Forbes report, the feds managed to seize all the Bitcoin Silk Road had in its accounts, but when it came to going after Ulbricht’s “personal” Bitcoin account, the job wasn’t that easy. Ulbricht had a higher level of protection on his own account than he did on Silk Road’s digital “wallets,” as they are called, and the feds are stuck waiting for Ulbricht to cough up his password before they can take his Bitcoin.

It’s a detail befitting a story whose main character is named Dread Pirate Roberts, as Ulbricht is said to have called his online persona. Bitcoin users who recount it are citing the out-of-reach money as an example of Ulbricht’s one heroic victory over the army of government authorities who crashed his Silk Road personal freedom party.

The criminal complaint against him filed in New York claims Ulbricht pulled in a grand total of 600,000 Bitcoin, worth roughly $80 million by current exchange rates, over the course of two years, as commission on sales of drugs and other illegal goods and services on his black market website. U.S. prosecutors filed a corresponding civil forfeiture action against Ulbricht and Silk Road, authorizing the FBI to go in and seize any assets tied to the operation of the website. In the end, they took hold of about 27,000 units of Bitcoin, which an FBI spokesman said on Monday is all they were authorized to take.

“We have seized everything we were entitled to seize under the civil forfeiture action,” said the spokesman, Peter Donald.

And indeed, while the civil forfeiture action does repeat the claim that Ulbricht at some point earned 600,000 Bitcoin for himself, it does not specifically address the question of where that currency ended up. Nor does it describe a digital wallet held by Ulbricht himself. It simply names the various wallets associated with Silk Road, all of which the FBI has accessed and emptied.

The difference is not a trifling one. The specter of $80 million being held in a place that can’t be accessed even by one of the world’s most aggressive law enforcement organizations is both a thrilling and a frightening possibility. It gives hope to those die-hard proponents like Ulbricht himself who see Bitcoin as a way to shrug off unwanted government interference in their lives. It also suggests there are limits on how far cyber cops can go – and that there is activity taking place well beyond those limits.

And there almost certainly is. While it may be true that the FBI isn’t trying to sweat a silly password out of Ulbricht as he sits in a California jail, one big question remains: If he didn’t keep them, what did Ulbricht do with the 600,000 Bitcoin that passed through his possession? To the imaginable delight of the idealists out there in Bitcoin land, that mystery remains to be solved.


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The FBI will probably want the password/wallet seed at some point if they offer any kind of a plea deal. Without a deal, they know that there is no way to force him to give it up, so they aren’t pursuing it. In the meantime, he is no more able than they are to access the funds, so it doesn’t matter much. Hypothetically, he could have entrusted it to someone else, but I find that unlikely. Regardless, there is no real mystery as to where his money is. It is in a cold storage wallet, the seed of which is almost certainly only stored in his brain, hence the term brain wallet. This is abundantly clear to anyone with a basic understanding of Bitcoin. It is likely less than 600k btc though, I’m sure he spent some of his earnings over the years.

Posted by isskewl | Report as abusive

You have to wonder how many coins he REALLY has.

They tallied the total amount of commissions he earned and multiplied by the bitcoin price on the day of the bust in coming up with that number.

From that total number of coins, recall that for most of Silk Road’s operating history, bitcoin was worth only a small fraction of what it’s worth today. So when he had to cash out $2000, $3000, or $4000 per month for living expenses, it amounted to a much larger amount of coins. Likewise for employee expenses, hosting, etc. No doubt the final number he has squirreld away is still in the millions, but i bet it’s a far cry from $80 million. But hey, even $20 million is a nice nest egg, if you can somehow gain access to it…. But given the lengths he went to when going after an employee who he thought was stealing from him, I doubt that anyone else has access or knowledge as to where it is.

And i wonder if he even knows… if it was written down and stowed somewhere, what are the odds of recovering his wallet upon release from jail, should he even be released? And then, what are the odds that Bitcoin will still be with us should he get out in 10, 20 or 40 years?

Posted by lucasjkr | Report as abusive