Civil forfiture doesn't require a criminal conviction. In fact there's hardly any process at all. Just one more twisted doctrine justified by the War on Drugs.
"In civil forfeiture cases, the US Government sues the item of property, not the person; the owner is effectively a third party claimant. The burden is on the Government to establish that the property is subject to forfeiture by a "preponderance of the evidence." If it is successful, the owner may yet prevail by establishing an "innocent owner" defense.
In civil cases, the owner need not be judged guilty of any crime; it is possible for the Government to prevail by proving that someone other than the owner used the property to commit a crime. In contrast, criminal forfeiture is usually carried out in a sentence following a conviction and is a punitive act against the offender.
The United States Marshals Service is responsible for managing and disposing of properties seized and forfeited by Department of Justice agencies. It currently manages around $2.4 billion worth of property. The United States Treasury Department is responsible for managing and disposing of properties seized by Treasury agencies. The goal of both programs is to maximize the net return from seized property by selling at auctions and to the private sector and then using the property and proceeds for law enforcement purposes."
Since the Government sues the property itself, and since property itself has few if any rights, you can understand how the entire process becomes rather... one sided.
You have to admit, whoever came up with that law was being pretty clever. If only they would use some of that cleverness to just send me a bill for my taxes.
This whole process just seems incredibly weird to me. What happens if the person is found not guilty of anything criminal after all the assets are sold off? This seems like police state tactics, pardon my French.
The beneficial owner(s) can show up in court and assert a legitimate claim on the goods if so inclined. Often they are not so inclined, as the cash in question was found in proximity to bricks of cocaine or suchlike and staking a claim to the cash tends to suggest an incriminating connection to the contraband.
In this case there's abundant evidence of a criminal enterprise involving the sale of drugs, attempts to purchase the services of hitmen etc. etc. So 'Dread Pirate Roberts' only likely defense is to claim something along the lines of 3v1l H4x0rs taking over his computer for the last several years while he played minesweeper or suchlike, and disavow any awareness of of or custody over the money; otherwise he'd have to explain just how he came to be in possession of several $m of BTC that was sent to Silk Road.
This is interesting as an example of BTC's strength being a vulnerability. Suppose you were arrested in a warehouse with a pile of cash and numerous bricks of cocaine, AK-47s, etc. Of course the government would claim you're a drug dealer, but you could attempt to convince the court that you had won the money in Vagas/sold a great deal of pizza/whatever and been kidnapped by evil drug dealers on your way to the bank, only to wake up alone and confused next to your cash in the warehouse just before the cops arrived. An unlikely story to be sure, but there are many legal means through which you might come to possess a large stack of currency (and which might also provide you with a much-needed alibi, eg video of you winning big and leaving the casino only to be waylaid on the strip by masked bandits). Where BTC is concerned, though, the blockchain itself is proof that the money was sent to the receiving address given out by Silk Road in exchange for contraband, so the government has a prima facie case that it consists of revenue from a criminal enterprise.
I believe that they have used raids on Silk Road buyer bitcoins going into this wallet as prima facie evidence that his wallet was credited for purchases verified to be sales on Silk Road.
He’s going to struggle to show why people around the world have paid $100M in bitcoins to him, some of which tie to Silk Road directly, and that the bitcoins are his and shouldn’t be seized or forfeited, but that the drug connection is false.
That fails the straight faced reasonable person test. It’s interesting how when it comes to some things like this, people conflate the “beyond a reasonable doubt” standard to be “beyond any doubt”.
How much evidence is required to stake your claim to whatever goods were seized? "Innocent until proven guilty" is still a founding principle of the rule of law, although your arguments make sense if we don't consider that part of it. The US justice system has in many cases removed itself quite far from the ideal concepts of the rule of law, and I don't think this is a good thing.
In this case, there was no one to fight on behalf of the Silk Road or its funds because Ross Ulbricht says he isn't Dread Pirate Roberts and doesn't represent the site (though he is fighting to keep the 144,000 BTC found on his computer -- those haven't been forfeited yet).
The real losers here are the Silk Road users who just forfeited whatever they had sitting in the site's coffers. Even if someone made the unwise decision to come forward and say, 'I used the site legally and that's my money,' the feds could still say it was a site devoted mainly to illegal activity and so that argument is moot.
Based on the current price it makes roughly 25K bitcoins, and using the current BUY backlog on MtGox, selling them would push the price back to $550. However such a volume will certainly create a panic wave and it could go below that.
If they are clever, they won't put everything on the market like this.
Cars at auctions are typically pretty damn cheap. That happens because there is risk for the buyer when buying a car at auction.
If cars at police auctions were unnaturally cheap, everyone would be making a killing with arbitrage. (To be clear, many people do, but as more people get in on that, prices at police auctions go up... the balance that is struck gets you relatively close to the legitimate value of a car at a police auction).
Probably. To understand price changes it's important to consider how they change.
Price movements occur as a result of a buyer or seller aggressing into a market and submitting an order such that the parameters of the aggressor's order match the opposite sides unfilled orders. This process is typically referred to as order matching. If a buyer aggresses into the market and matches against unfilled sell orders the price increases because they have removed the lowest prices from the order book. If a seller does something similar the price will drop because the highest prices have been removed.
Another reason price movements occur is because people are also reacting to the market and trying to predict where the market is going. As a consequence they will either enter the market at an off market price attempting to predict it, or cancel their outstanding orders and re-price them. But this is another topic entirely and I will leave it out as it's pretty complex and my understanding of that topic is newb level at best.
The second thing to consider is the why. Why do price movements occur? Mainly because people are consuming information and trying to predict where the market is going. For other assets such as FX & commodities there are non-speculative market participants who buy and sell based on their business need. An example from Foreign Exchange is a company such as Google having a stockpile of dollars and needing to pay employees in euros. The end result of these non-speculative market participants is greater price stability because they are always buying or always selling, not because they want to, but because they have to. But since bitcoin is largely a speculative currency (the majority of bitcoin trading volume is the result of speculation, not legitimate commerce) the news has a disproportionate effect on it's prices.
My 2 cents say that this will temporarily depress prices but they will quickly recover because someone such as myself recognizes that those bitcoins haven't entered the market, so nothing has really changed.
You seem like someone who knows something about markets and you accept that there are very few, if any, natural buyers of bitcoins, and that the price of bitcoin is largely driven by speculators. I'm just trying to understand how you think this thing doesn't end up at $0 some day in the not too distant future.
The only three events that could send bitcoin to $0 are, in my opinion, if people stop using it and decide that it's worthless, the encryption scheme or peer to peer network are some how compromised, or all nations simultaneously outlaw it. However the last one would only serve to send it near zero.
Consider if all governments outlaw it simultaneously. The market participants currently consist of free market type enthusiasts & hobbyists, rich celebrity speculators, drug dealers and cyber criminals. I think it is a fair assumption that most of the active traders are currently from the hobbyist & enthusiast category. Additionally when you consider that places like Silicon Valley and other hubs around the world have a large proportion tech savvy workers who make a lot more than subsistence wages, it's not too hard to see how some sort of speculative market could continue to lumber along without much reason for existence. Look at sports betting and horse racing.
If the government were to come out and drop the hammer, however, I think most of these people (myself included) would vanish. The volume would dry up and the only people left in the market would be criminals and people with a hard requirement for virtually untraceable digital currency, prison be damned. My opinion is that these people would continue to remain using it as a means of commerce and store of value provided that the underlying cryptography & p2p network remain sound and un-compromised. There are currently millions of bitcoin in existence so a price of near zero would probably satisfy the black market. How does $3 sound as a reasonable number that readers can use against me in the probable event that I turn out to be wrong 5 years from now?
Of course this all relies on the underlying cryptography and associated peer to peer network remaining sound and trustworthy. If a party is able to compromise the underlying encryption or execute a double spend by attacking the network then trust in bitcoin as a finite commodity would be irrevocably destroyed. No one would ever use it, thus a $0 price.
The utility of bitcoin is just too hard to ignore from a commerce perspective. It's taking away authority and power from banks to act as gate keepers to their countries finical & economic system and putting it in the hands of the people who engage in commerce themselves. I don't believe banks will cease to exist as some of bitcoin's most ardent supports hope it will, but the transaction costs for international business could drop substantially. Barring bad news on the legislative or technology front the only thing stopping bitcoin from gaining greater adoption is that too many people are psychologically fixated on an individual bitcoin. Bitcoin is sub divisible up to 8 decimal places, the vast majority of people who have heard about bitcoin that I have talked to do not realize this. Since the total number of bitcoins is fixed at 21 million this yields a total number of theoretical units of currency of 210 trillion. That's a pretty formidable island on which to create a base of trade on.
My math is wrong for total number of units of currency. It should be 2.1 * 10^15, which is 2.1 quadrillion. At the height of the financial crisis the notional value of all Credit Default Swaps was ~640 trillion.
Actually it might be interesting. Technically yes if they sold at any price they'd burn through the orderbook and the price would crash.
But if they set a flat sell price then that'd make a buy (edit: sell) wall (price can not go above this amount until all 25 million have been purchased).
They are not buying coins, they are selling them, so it would be a sell wall. The price couldn't go _above_ their selling price until all 25 million (dollars worth) have been sold.
I honestly don't think the Bitcoin market is sophisticated enough to react to events like this. Certainly, if the feds really want to sell and someone puts $0.01 on the order books for that size of a trade, and nobody else is around, it could be filled, but I don't see that happening.
The article speculates these Bitcoin will be auctioned off. I wonder if that would be the entire wallet as one lot. Not too many people have the resources and willingness to throw $25 million into Bitcoin outside of the Winklevoss twins and hedge funds. Odds are they might get a good discount, but that might be preferable to the Bitcoin economy than the government selling the coins in smaller lots. 30k coins suddenly flooding the market at once would cause a pretty dramatic drop in price.
Rereading my prior post, it was a little unclear. Let me expand on my prior point. The Bitcoin market is neither liquid or large enough to absorb 30k new coins and remain stable. That means the US government isn't going to get $850 per coin. The effects on the market will likely depend on how the coins are sold.
Scenario 1:
There is a single large buyer. Assuming the buyer and US goverment are smart, they will recognize the liquidity risk of Bitcoin. The buyer will then get a discount for this and be able to purchase the coins at a below market rate. Assuming their plan is to hold onto the coins for the long term (or at least not short term), I wouldn't expect a large movement in the general Bitcoin markets.
Scenario 2:
There are many small buyers. Each sale would slightly effect the price of Bitcoin as each sale would slowly satisfy demand. The US government might receive $850 per coin for the first sale, but certainly wouldn't for the last sale. This would cause the biggest harm to the market as the price would drop more than in scenario 1.
TL;DR - The US government either needs to accept a lower price for the sake of liquidity or accept that their sales will quickly lower the market rate for Bitcoin.
You are absolutely correct on the price they get for them being dependent on how they are sold. The industry jargon for this is how you execute the buy or sell. One option is they could sell the bitcoins using a VWAP algorithm.
For all other asset classes VWAP execution is a thing and a common one at that. Basic idea is split your large order up into slices and sell small amounts during a given interval. Bitstamp & BTCE have 24 hour volume of ~18k bitcoins. As a fun aside, if you don't randomize your time slice someone like me will see what you're doing and move the market to screw you :).
Buyer and Gov settle as a well below market price, possibly to rid of these e-tokens. Buyer then floods the market with cheap coins that are still a markup from what he bought them at. Market panics ($1000 vs $100), price of bitcoins drops.
It's not clear to me whether this drives the price up or down. Sure, naively, it's more supply therefore lower prices. However, it does lend an air of legitimacy to Bitcoin and will likely raise awareness as it gets played out on mainstream media.
In other words, it will likely affect both the supply of and demand for Bitcoin.
Well the government considers bitcoin to be a commodity and not a currency. So they're selling the commodity they seized, no different than selling a fleet of ferraris and armani suits seized in another drug raid.
I somewhat would think they'd actually want to maintain ownership - but create the illusion they no longer do, so then they can make transactions. It'd be smart to track how those Bitcoin move and all accounts it touches.
> approximately $25 million worth of Bitcoin will be auctioned off soon
At least they won't sell it via usual exchanges in one go. That would make quite a mess... (bringing price down to ~0 for a while before everything rebalances)
It is not possible to short anything directly. Only direct actions are to buy and sell.
Options are derivative products that other people offer. They looks at statistical volatility and price their options, such that they make some $ on average. This means you can short bitcoin, just like anything else - you need to find someone offering the service.
When you think about it, even "buying and selling" don't exist as far as the Bitcoin protocol is concerned. There is only creation of new Bitcoin (via mining) and transferring them around. Granted, there is a lot of potential complex functionality based on Script, but as far as I know not much is supported by widely-used Bitcoin clients.
No. Someone has to take the other side of that trade. Typically, a brokerage will loan you shares to sell short, and then you buy them back to pay back the loan. If nobody will loan you bitcoins, you can't sell them short.
So, if convicted, should he be able to keep the estimated $100MM of bit coin, the proceeds of a criminal enterprise (regardless of your thoughts on legalization, it remains that trafficking or facilitating/conspiracy to abett trafficking -is- a criminal offense)?
Or is your argument based solely on the lack of conviction - which is more worthy of discussion?
