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Home»Analysis»The US government has over $4.4 billion in Bitcoin that could be dumped at any time
Analysis

The US government has over $4.4 billion in Bitcoin that could be dumped at any time

2024-09-06No Comments4 Mins Read
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Key Takeaways

  • The DOJ announced today that it seized 50,676.17 BTC from a Silk Road operator in November 2021.
  • The seizure is one of the largest in DOJ history.
  • The US government is currently one of the largest Bitcoin whales, owning at least 214,046 BTC.

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In recent years, the United States government has become one of the biggest Bitcoin whales simply by seizing illegally acquired funds. Ultimately, it will likely seek to liquidate these funds through private auctions.

More than 50,000 BTC seized

The US government owns a huge amount of Bitcoin.

Today, the Department of Justice (DOJ) announced that in November 2021 it seized just over 50,676.17 BTC (worth about $1 billion at current prices) from a Bitcoin trader named James Zhong. Zhong obtained the amount by defrauding the darknet marketplace Silk Road by using the platform’s withdrawal mechanism in September 2012; he pleaded guilty last week, on November 4, 2022, to one count of bank fraud.

The DOJ announced the seizure as a $3.36 billion loot, which, while correct at the time of the enforcement action, does not take into account the fact that Bitcoin is now down 69% from all-time high. Nevertheless, the seizure is notable: it is the third largest in cryptocurrency history Crypto briefing‘s count – especially considering the amount of Bitcoin the US government already controls.

Over $4.43 billion worth of Bitcoin

In addition to the 50,676 BTC seized from Zhong, the US government has already acquired at least 163,370 BTC over the past two years, for a total of at least 214,046 BTC, or approximately $4.43 billion.

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In November 2020, the DOJ captured 69,370 BTC (worth over $1.4 billion today) from another Silk Road user, published by the department as “Individual At the time, this was the fourth largest Bitcoin address on the network; the seizure officially made the US government one of the largest Bitcoin whales in the world.

The agency too seized more than 94,000 BTC from Heather “Razzlekhan” Morgan and Ilya Lichtenstein, claiming the couple conspired to launder the proceeds from the infamous 2016 hack of cryptocurrency exchange Bitfinex. The amount, worth $3.6 billion at the time, is now worth more than $1.9 billion.

Owning 214,046 BTC makes the US government a huge Bitcoin whale. According to BitInfoChartsonly one BTC wallet – labeled as Binance’s cold storage wallet – contains a larger amount, 252,597 BTC, and these funds are most certainly owned by Binance customers, not the exchange itself.

Sapphire

Searching for the largest BTC portfolios doesn’t give the full picture, however, as whales are likely to divide their holdings across several portfolios. For example, Satoshi Nakamoto, the anonymous creator of Bitcoin, owns over 1.1 million BTC, but the amount is spread across 22,000 different wallets.

Is the US government the biggest Bitcoin whale next to Satoshi? It’s hard to say, but it certainly involves more than just Bitcoin’s biggest public advocate, Michael Saylor. Saylor was able to do this through his software company Microstrategy accumulate more than 130,000 BTC in the last two years.

Care for Bitcoin holders?

Normally, the US government liquidates its Bitcoin holdings through the US Marshalls Service through public auctions. For example, venture capitalist Tim Draper bought 30,000 BTC from the government in 2014 for about $18.5 million – or about $616 per coin. Most likely, the BTC seized by the DOJ will be offered to the public in the same manner.

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In recent years, the DOJ has tried to time its auctions according to market fluctuations to sell its assets for the highest possible price. In November 2021, it auctioned $56 million worth of cryptocurrencies seized from a BitConnect promoter, successfully liquidating the holdings at the height of the bull market. Whether the agency will have the patience to wait for Bitcoin to rise again before selling its holdings remains to be seen. So far, it has refrained from liquidating the proceeds from the Individual X and Razzlekhan seizures.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other digital assets.

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