By Landon Manning
After seizing roughly 50,000 bitcoins from James Zhong in November 2022, the U.S. government has begun selling off these assets, with 9,800 sold most recently.
This sale, which took place in March 2023, was hardly the first time that the United States government has sold bitcoin seized from what it deems to be criminal operations. In 2014, for example, the federal government sold off roughly 30,000 BTC from the same source as this latest sale: Silk Road, a darknet marketplace that used bitcoin as its medium of exchange and was shut down in 2013. Zhong managed to steal these funds from Silk Road via wire transfer, as detailed in court documents. In light of his age, cooperation with prosecutors and other extenuating circumstances, he was given a relatively light sentence following the confiscation of his bitcoin.
Although the government has certainly sold off larger quantities of bitcoin before, the fact that Zhong’s ill-gotten spoils have blossomed from less than $1 million to nearly $1.5 billion in value has complicated matters. The federal government evidently used Coinbase as the platform to conduct these sales, apparently only offloading the first tranche of the hoard and custodying the remainder. The asking price was roughly $2,000 shy per bitcoin of the retail market asking price that day, and the transaction incurred roughly $215,000 in transaction fees. This fact prompted digs from the crypto community, with many noting that far more generous terms could be found on other exchanges. Still, the sale was successful in a sense, and the federal government plans to sell the rest in four batches.
The origin of these bitcoin is closely related to a cause célèbre in the international crypto community: the plight of Ross Ulbricht, Silk Road’s founder. Silk Road was one of the first major uses of Bitcoin to make international headlines, representing Bitcoin’s humble origins and the libertarian ideologies at the core of the early crypto community. As a darknet market, the Silk Road offered a venue to connect sellers and buyers of various prohibited substances pseudonymously. After the site was shut down, Ulbricht was arrested, and in 2015 given more than a double life sentence without possibility for parole, despite being a first-time, non-violent offender.
Ulbricht has reached out to the Bitcoin community from prison, claiming that he’s “spent the last eight years watching Bitcoin grow up from in here.” Citing the community’s courage and potential for innovation, he has stated that, “We didn’t know how things would turn out for Bitcoin back in the beginning, but over the years, I’ve been continually impressed with what you’ve accomplished.”
And indeed, it is incredible how far Bitcoin has come and that comparatively paltry sums while Ulbricht was free have grown to represent billions of dollars in value. However, the extreme harshness of his sentencing is a reminder that institutions of government and finance have been overwhelmingly hostile to Bitcoin in the past, and any acceptance now is itself a massive accomplishment.
In short, this particular sale, particularly compared to a larger one in 2014, represents the vast growth that Bitcoin has seen since its early days. Despite all of this progress, however, it is important to remember the humble origins of this international community, and all of those who suffered at the cusp of innovation. The events of Silk Road are still relevant to our thriving world of Bitcoin today, and will continue to be for some time to come.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
