If the coins were seized on Silk Road servers they didn't belong to anyone at the time but the Silk Road.
We can argue the merits of returning the coins to the last previously associated wallets; but I don't think the U.S. Gov has any intention of returning drug money to drug buyers the same way they wouldn't give gun money back to arms buyers.
An online shop selling clothing also happens to sell firearms illegally. Its assets are seized. What about money from pending orders for the clothing? It seems to me it's obvious in this case. Couldn't SR users start a class action lawsuit against gov for seizing their assets stored on SR servers? This is assuming not everything sold there was illegal (this might be wrong).
They could certainly petition the government for the return of money that couldn't be tied to anything illegal. But is the potential demand of return of money a hindrance for the government to auction of the Bitcoins? If anyone demands their money back, and the government agrees, or is forced by a court to pay it back, they can do so without holding BTC in the meantime.
Presumably they've made an assessment and come to the conclusion that either the percentage of assets held that belong to customers of SR that said customer may have a claim to is small enough that it's easier/cheaper to deal with that if/when anyone makes a demand than trying to sort it out before auctioning off the BTC.
Especially given that presumably very few customers of SR have only bought/sold legal goods, and so presumably most of them won't want to identify themselves.
there are times when analogies are very helpful.. this isn't one of them. instead of comparing it to that, let's talk about what it actually is. an illegal black market for drugs. you're either being greedy, disingenuous, or crazy if you think their money should be returned. if anything they are lucky the government doesn't pursue the users with legal action.
The moment I transfer a bitcoin to Silk Road, it's no longer my bitcoin. It's theirs. I've exchanged it for a promise from Silk Road to pass on the bitcoin to someone else or return it to me when I ask.
The government never seized my bitcoin. They seized Silk Road's bitcoin. This means Silk Road has more liabilities than assets. And since Silk Road hasn't given me a promissory note in exchange for my bitcoin, I'm an unsecured general creditor - and unsecured general creditors cannot establish standing to recover seized assets.
It's not illegal pre se, but if the website is engaged in illegal activity subject to seizure, you may lose your bitcoins, unless you can prove it is not connected to illegal activity.
The government would post a notice of the seized assets on www.forfeiture.gov. If you had a claim to some of those assets, for instance that you had already paid for them and they hadn't been delivered, you can submit a petition to get them back.
Once you've paid for an order it isn't your money any more (they're presumably not operating or licensed as a bank). In your clothing example your only recourse would be to sue the clothing store for failing to deliver your clothes (breach of contract or the like). In theory you could do the same thing with Silk Road, but the site operators being anonymous makes that rather difficult.
(Of course in practice what you'd do is a credit card chargeback - but bitcoin is specifically designed to make that impossible. If you choose to send an irreversible "currency" to an anonymous recipient, frankly you deserve what you get)
They were 'operating as a bank' in that you had a wallet on the site. The majority of the money seized was not in escrow for drug purchases but sitting in the accounts of the users.
Everybody who used Silk Road knew that the site was illegal, and everybody who used Silk Road willfully paid a commission to Ross. IANAL, but even if you only bought legal goods from Silk Road, you were still aiding and abetting a drug market.
I'm not sure that I like the sort of thinking that would put those two words together, ever.
It would appear as though you think it possible that a flea market should be responsible for the conduct of its buyers and sellers, or that a public bulletin board be responsible for all material posted there.
I dislike the idea that a government that nominally prohibits itself from abridging freedom of speech, or of the press, or peaceful assembly could ever declare an information service operating over the Internet to be "illegal", seize all of its assets, shut it down, and then sell off whatever it seized, all without ever establishing any crime or criminal intent to the public.
By the same reasoning that led to the seizure and shutdown of Silk Road, since some drug dealers arrange sales with mobile phones, the antennas and backhaul used by the likes of Verizon, Sprint, AT&T et al should be seized, the phone networks shut down, and the equipment auctioned off, all for facilitating prohibited activities.
Whether people knew they were committing crimes or not, the site itself was little more than a warehouse building filled with unmonitored flea market stalls, and a common cashier. While the intent of establishing the market was undoubtedly to facilitate commerce in crime and contraband, we still have some expectation that crimes be prosecuted to conviction prior to the application of punishments.
What, then, has Silk Road been convicted of? Maintaining a public nuisance?
In any sane society, the police would use Silk Road, posing as ordinary customers to collect evidence of crimes, and then prosecute the people that committed them individually. That probably would have eventually resulted in Silk Road becoming more like the semi-legit flea market of Bitcoin, like eBay is for PayPal. What they actually did showed that their actions were targeted at Bitcoin rather than at the drugs. At the time, they did not want Bitcoin to have a common marketplace for goods of any kind, whether contraband or not, and moved to destroy it utterly using the drugs as pretext.
If you only bought legal goods from Silk Road, you were not doing anything more than threatening dollar hegemony. And that is why you lost your Bitcoin. Innocent of any crime (except possibly something related to taxes), you suffered a loss, thanks to people trying to enforce one law by breaking another.
> It would appear as though you think it possible that a flea market should be responsible for the conduct of its buyers and sellers, or that a public bulletin board be responsible for all material posted there.
You don't find pounds and pounds of cocaine in flea markets. The site was illegal, to the extent that any site can be, because its owners were aware of the illegal activity and, rather than reporting it, acted to facilitate it. Flea market owners in the same position would be just as liable.
> What, then, has Silk Road been convicted of? Maintaining a public nuisance?
You don't find cocaine at a flea market because cocaine-sellers, not knowing that you are not a cop, do not show it to you. And even if they do show cocaine to pre-screened buyers, that guy could be an undercover cop or an informant. There is nothing inherent to the functioning of any market that makes it illegal.
Silk Road implemented some countermeasures aimed at preventing dragnet-style arrests and mass prosecutions based on casual scraping of the site and analysis of the blockchain, but it was still completely vulnerable to a buyer-informant attack. The real world metaphorical equivalent is that the flea market did not require shoppers to register their real names and addresses, and declare the serial numbers of any cash they might be using to make purchases. I do not know of any flea market that does this, or any that could even survive if it tried.
Was there anything inherent to Silk Road that prevented cops from using exactly the same buyer-informant model to prosecute contraband trafficking that they use for physical street-level buys? No.
And we are not the Stasi. We are not required to inform upon one another. Any duty to report is usually associated with exercising a privilege granted by the state. Actual misprision requires not only that the crime be a felony, the witness be aware that it is occurring, and that they take active steps to conceal it. Misprision itself is only a misdemeanor, and protection against self-incrimination still applies. If reporting the crime would implicate you in a crime, it is not a crime to not report the original crime.
You are suggesting that it is acceptable to seize a person's entire business and sell off its assets before they are duly convicted of their misdemeanor.
Thanks to the decreasing popularity of misprision among Common Law jurisdictions, it is usually only applied to actual agents of the state with some measure of public trust or responsibility. The flea market would likely only be liable for crimes committed by tenant-sellers if the conditions of their business license specified a duty to police and report and they did not.
Silk Road, as a business with no physical premises, could never be subject to such conditions, as there is no one with authority to license it to operate. The fact remains that even if there were tons of cocaine, Silk Road was not selling it, and had no particular interest in the details of the transaction beyond the amount of the commission.
It is very easy to say that Silk Road was a den of criminals, but we expect them to be sleazy and untrustworthy. The cops that we throw at them in the pursuit of law and order must themselves be lawful and orderly. When they steal from suspects, and establish by their attitude that everyone is a suspect, they present an existential threat to the security of private property, independent of any other crimes that may be occurring.
This auction is a slap in the face to anyone at all concerned about police powers.
Most of the business there was drugs, obviously, but some amount of that money would have bought legitimate items. So what gives them the right to sell off that money?
Users sent bitcoins to SR to hold for them, in return for a promise to return them on demand. So SR's assets and liabilities both increased with each deposit. Then USG seized SR's assets (under what right? That SR was an illegal enterprise established to facilitate narcotics sales). SR still has liabilities to its users, but now it can't meet them. Note that SR's liabilities are no concern of USG.
Come on guys, is it so hard to understand that if you exchange an asset for a security, you don't own the asset anymore?
> Come on guys, is it so hard to understand that if you exchange an asset for a security, you don't own the asset anymore?
In this case this fact is directly contrary to a worldview held by many at HN, so I suspect everyone pointing out how property law actually works is in for a long slog.
Also, if I understand it correctly, many of those coins were not preallocated to any sale. They were just sitting there to be used in the future. So whether they would be used for drugs or something legal is irrelevant.
Imagine you hand your local crack dealer a wad of cash to hold for you temporarily. The crack dealer adds it to his bigger wad of cash and promptly gets busted. The drugs and money he's holding are seized. That's what happened here. Would you expect the government to return your wad of cash?
Then you should've filed a claim with the court after:
1) the government filed "US v. A Wad of Cash Found in the Pocket of Danny Drugdealer"
2) the wad of cash was found to be subject to forfeiture
3) Danny Drugdealer didn't contest that he was innocent of drug dealin' or he attempted to and lost
4) The government posted that the wad of cash was subject to forfeiture at www.forfeiture.gov.
You'd then be entitled to make the case that ten dollars in Danny Drugdealer's wad of cash actually belonged to you and were not subject to forfeiture. You might've even won!
No one filed a claim to block forfeiture of all or part of the Silk Road bitcoins. Not even DPR. I think everyone knows why that is.
They did it because they had the capability. Civil forfeiture is an absolute perversion of the justice system, and is a direct contributor to police corruption. The damage it causes to the integrity of our rule of law is far greater than any deterrent effect it may have upon crimes.
