The Department of Justice has been cleared to sell off tens of thousands of Bitcoins acquired as part of the government’s largest-ever seizure of crypto assets.
A federal judge denied a motion from Battle Born Investments, a Nevada-based venture capital firm, to prevent the government from selling $6.5 billion worth of Bitcoin, according to a court filing from the Northern District of California on Dec. 30. The VC firm had argued that they had the right to the assets. The news was originally reported by DB News. The Department of Justice declined to comment further.
The legal decision marks the end of the road for a years-long legal battle over 69,370 Bitcoins, seized in 2020 from an unidentified hacker referred to in court documents as “Individual X.” While the hacker’s identity remains unknown, federal agents were able to trace the Bitcoin in their digital wallet back to the Silk Road, an infamous darknet drug trafficking website that was taken down in 2013.
Federal Bitcoin auctions
While the December court decision doesn’t expressly direct the government to sell the Bitcoin, it has become customary for the U.S. Marshals Service to auction off cryptocurrency seized by federal agencies like the FBI and the IRS, as it does with any other asset like real estate, cars and even planes.
If the government chooses to sell the Bitcoin, it would be one of the largest government liquidations of crypto ever—and could trigger a significant backlash among investors, who worry that a liquidation of this size could flood the market and tank Bitcoin’s price. However, in the past, the government has purposefully staggered auctions to avoid doing just that.
While it is unclear exactly how much Silk Road-related Bitcoin the government has seized over the years, the government has held multiple auctions to sell some of those tokens. Last month, blockchain analytics firm Arkham Intelligence pointed out that crypto wallets known to be owned by the U.S. government moved $1.9 billion worth of Silk Road Bitcoin to crypto exchange Coinbase. The move frightened some investors who took it as a sign the government was preparing to sell. However, it could be a part of the government’s contract with the exchange to manage their digital assets which was announced in July.
A potential government sale of Bitcoin comes as the election of Donald Trump—a crypto booster—ignites calls for a strategic national Bitcoin reserve as a hedge against inflation. The president-elect has urged investors to “never sell your Bitcoin,” and has supported Wyoming Senator Cynthia Lummis’ legislation that would require the government to purchase one million Bitcoin over the course of five years.
“I am announcing that if I am elected, it will be the policy of my administration… to keep 100% of all the Bitcoin the U.S. government currently holds or acquires into the future,” Trump said at the Bitcoin conference in Nashville, TN, last year.
