14 July 2014

The Dark And The Bright Journey Of Bitcoin


By Dino Londis (Invests.com) – The same week that a winner was announced in the U.S. Marshals Service auction of nearly 30,000 bitcoins, the original owner of those bitcoins was struck with more bad news.

Judge Katherine Forrest denied a motion to dismiss criminal charges against Ross Ulbricht, the Kingpin behind Silk Road – charges that included narcotics trafficking and conspiracy.

Ulbricht’s attorney, Joshua Dratel, had argued that Ulbricht cannot be held responsible for what occurred on the website because Ulbricht was merely a facilitator – just like eBay and Amazon can’t be held responsible for illegal activity that they are unaware of.

But Judge Forrest would have none of it.

“Silk Road was specifically and intentionally designed for the purpose of facilitating unlawful transactions,” Forrest wrote. “Ulbricht is alleged to have knowingly and intentionally constructed and operated an expansive black market for selling and purchasing narcotics and malicious software, and for laundering money. This separates Ulbricht’s alleged conduct from the mass of others whose websites may—without their planning or expectation—be used for unlawful purposes.”

This was the second strike against Ulbricht’s team. The first came in April when Dratel argued that bitcoin is not money and therefore it could not be used for money laundering. After all, “the IRS has announced that it treats virtual currency as property and not as currency.”

Judge Forrest disagreed, calling bitcoins “funds” and that was close enough.

Meanwhile the winner of the U.S. Marshals Service auction plans to use the currency to help economies in emerging markets where there is little trust in the local currency.

Tim Draper, a venture capitalist, was the sole winner of last week’s auction of 29,655 bitcoins according to a statement on Wednesday.

“We want to enable people to hold and trade bitcoin to secure themselves against weakening currencies,” Draper said in a statement.

Draper is partnered with Vaurum, a Palo Alto-based bitcoin exchange. Draper, a major backer of Vaurum, has partnered with the company to use the coins as a liquidity source for Vaurum’s trading platforms.

The bitcoins had a market value of over $18 million at the time of the auction, but the winning bid has not been disclosed.

The U.S. Marshals Service seized the currency when the FBI arrested Ulbricht in California last year.

Before the auction the government accidentally leaked some of the bidders’ names and email addresses in a “reply all” mistake. Since then it issued an apology for leaking the names.

The mistake proved costly for Australian-based bitcoin arbitrage fund Bitcoins Reserve, which because of the leak lost a reported 100 BTC, which at the current market value is around $65,000.

With a combination of hacking and social engineering the bitcoins were sent to an anonymous bitcoin account. Others on the list reply all list were also targeted, but apparently unsuccessfully.

July 14, 2014 at 06:46AM

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