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Feds seize stolen bitcoin worth more than $1 billion

Bitcoin's wild ride
Bitcoin's wild ride 13:29

Federal officials have seized more than $1 billion worth of stolen bitcoin linked to shuttered black market website Silk Road.

According to the U.S. Department of Justice, Silk Road enabled a range of criminal activities, including sales of illegal drugs and hacking. Its founder Ross Ulbricht was arrested in San Francisco in 2013 and convicted in 2015 by a New York federal jury of several criminal counts, including conspiracy to distribute narcotics and money laundering, according to the agency. He is now serving two life sentences. The FBI shut down Silk Road in 2013. 

Bitcoin is a virtual currency is traded across the internet; it isn't connected to an established government or private organization. Because they aren't housed in banks, bitcoins are hard to track, making the cryptocurrency ripe for hacking or usage in illegal activity. 

Silk Road mastermind Ross Ulbricht sentenced to life in prison 03:13

Goods and services on Silk Road were paid for using bitcoin. At its height, Silk Road generated more than $9.5 million in sales and its owner collected more than 600,000 bitcoins in commissions, court documents show. At least six people died of overdoses from drugs bought on the website.

"Silk Road was the most notorious online criminal marketplace of its day," U.S. Attorney David Anderson said in a statement Thursday. "The successful prosecution of Silk Road's founder in 2015 left open a billion-dollar question. Where did the money go? $1 billion of these criminal proceeds are now in the United States' possession."

The Justice Department did not immediately return requests for comment on Friday. 

Tracing transactions

The Justice Department and investigators from the Internal Revenue Service worked to track bitcoin-related transactions on Silk Road. The investigation found more than 50 previously undetected transactions.

Those transactions were then traced to a hacker, whose identity, while known to authorities, hasn't been publicly disclosed. Authorities said the hacker stole 69,000 bitcoins from Silk Road between 2012 and 2013. Justice Department officials took custody of those bitcoins Wednesday in what they are calling the "largest seizure of cryptocurrency in the history."

"Criminal proceeds should not remain in the hands of the thieves," Kelly Jackson, a special agent with the IRS, said in a statement.

Ulbricht discovered the hacker's online identity and threatened the individual to return the digital money, court documents show. But the hacker kept the cryptocurrency in a digital wallet without spending it, which is why the bitcoins went unnoticed for so long. 

When government officials seized thousands of bitcoins from Ulbricht when he was arrested seven years ago, they auctioned off cryptocurrency in 2014 and 2015. It's unclear whether the Justice Department will do the same with this week's seizure. 

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