Before Ross Ulbricht’s conviction on charges related to his operation of the darknet market Silk Road, he held 144,000 bitcoins worth $28.5 million. Today, their value would exceed $10 billion.

Ulbricht earned this trove by charging a 10% fee from Silk Road transactions. When the FBI shut down Silk Road for various illegalities, federal agents seized — and stole — any bitcoin they could find.

Also, in a series of bizarre twists, a hacker swiped some of the bitcoin before it could be seized, and North Korean hackers swooped in to take a share.

This mess led the federal government to negotiate an agreement that some misappropriated bitcoin would be used to pay the $183 million in restitution that Ulbricht was required to pay to the US government.

As an illegal enterprise involved in sales of narcotics and firearms, most of the bitcoin on Silk Road went into US court proceedings and has slowly been auctioned off by US Marshalls. Some of it remains in the custody of the US government, pending court proceedings.

The two federal agents who stole bitcoin from Ulbricht’s stash face charges themselves, including wire fraud and money laundering. 

The federal government ultimately auctioned off Ulbricht’s bitcoin. Venture capitalist Tim Draper, who won nine of the auctions and a stash of 30,000 bitcoins, has since added his voice to the movement to grant clemency to Ulbricht.

Read more: Supreme Court won’t stop sale of 69,370 Silk Road bitcoins

That movement has gained momentum and has culminated in a solemn, repeated promise from incoming President Donald Trump that he will free Ross Ulbricht from federal prison by January 21, 2025.

Double life sentence could soon be ending

Ulbricht is serving a double life sentence for operating Silk Road. Supporters have called the sentence excessive, especially considering that he is a non-violent offender and prosecutors dropped charges related to allegations that he had hired a hitman.

Since then, Ulbricht has communicated with the outside world through his mother’s X (formerly Twitter) account. Because he has no internet access in prison, he sends paper notes to Lyn Ulbricht, who then posts his words to X.

In the years since his imprisonment, Ulbricht’s mother has led the push for his clemency. Specifically, Lyn wants a US president to commute, not pardon, Ross. This would not undo his conviction yet would allow him to leave prison.

She created a Change.org petition that has received over 600,000 signatures. Signers of the petition claim he is unlikely to become a repeat offender if released.

Tracing the blockchain for Ross Ulbricht’s bitcoin

Lyn has sold Ross’ physical art through a non-profit organization, Art4giving, raising $765,000 on Ulbricht’s behalf for causes such as prevention and treatment of drug addiction and supporting recently released convicts’ efforts to reintegrate into society.

On the blockchain, an NFT featuring Ulbricht’s hand-drawn art from prison has also fetched seven figures at auction. A supporter purchased one of his NFTs, for example, on December 9, 2021, for $4.1 million in ETH via NFT marketplace SuperRare.

Read more: Attorney who kept Ross Ulbricht in prison to lead DoJ crypto task force

However, this considerable donation is not in Ulbricht’s personal possession. Instead, as his website states, “All proceeds raised from the Ross Ulbricht Genesis Collection NFT auction will not be owned by Ross Ulbricht or his family, but by a legally separate entity that will redistribute proceeds towards the Art4Giving fund and efforts to free Ross Ulbricht.”

FreeRoss.org, Lyn Ulbricht’s website that she operates on behalf of Ross, accepts crypto donations as well. Its listed bitcoin wallet contains 0.14959432 BTC worth $11,500. Donors have also given him 1.5 BCH ($550), 881 DOGE ($150), and 0.19 ETH ($550).

There are several other crypto wallets with smaller amounts of funds, as well, such as Monero and Horizen.

As an important note, most of these wallets hold far less than their lifetime receipts. For example, Ulbricht’s bitcoin wallet has received a total of 12.45 BTC ($950,000) since inception. It is unclear whether these funds remain in his ownership after being swept or if they have already been expended on his clemency or philanthropic efforts over the years.

The blockchain only tells part of the story

Whether Ross or Lyn owns other crypto assets beyond the wallets listed on FreeRoss.org is unclear. Neither he nor his family is required to disclose donations publicly. Although he certainly has millions of supporters around the world — including some of the earliest and most wealthy Bitcoiners — his current assets are unknown.

In any case, Donald Trump promised to pardon Ross Ulbricht at the outset of his second presidential term, and, assuming Trump makes good on that pledge, Ulbricht will also emerge with at least a few thousand dollars — and possibly much more.

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The nine-month US Supreme Court term began this month, and it’s already impacting the crypto industry. Today, in an announcement of the lawsuits that the justices have agreed to hear during this term, the highest US court declined to hear an appeal regarding 69,370 bitcoins associated with the Silk Road.

With the justice’s denial to hear an appeal of Battle Born Investments, et al. v. United States, a 2022 ruling from the US District Court, Northern District of California will probably prevail.

Because the lower court ordered the US government to “dispose of the forfeited defendant property according to law,” the US Marshals or another agency might soon have court instructions for liquidating a massive seizure of bitcoin once stolen from the Silk Road.

In short, the Supreme Court’s denial of certiorari — a Supreme Court appeal — effectively removes a hold on the sale of $4.4 billion worth of bitcoin.

Supreme Court won’t intervene in this bitcoin dispute

Battle Born Investments purchased bankruptcy claims after the 2013 collapse of Ross Ulbricht’s dark web marketplace, Silk Road. Specifically, Battle Born claims to own bitcoin seized from ‘Individual X,’ that Individual X stole from Silk Road.

The wallet in dispute is 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx, which is now emptied and in the custody of the US government, pending court instructions.

Battle Born had requested certiorari of its claim to be “an innocent owner of all of the Defendant Property pursuant to its status as the purchaser of the bankruptcy estate.” However, because the nine justices will not hear that case this term, that forfeiture order from the US District Court will likely prevail. 

Read more: Did NASDAQ buy Barry Silbert’s Silk Road bitcoin?

Although there are a few more formalities and legal checks that need to occur before the US government will actually sell the bitcoin, it’s possible that the US Marshals might auction off several additional billions of dollars as a result of the Supreme Court denial.

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It’s rumored that NASDAQ once owned bitcoin seized from dark web marketplace Silk Road and, by extension, customers of disgraced Japanese crypto exchange Mt. Gox.

The story begins in December 2014, when Barry Silbert’s Bitcoin Investment Trust spent less than $17 million to acquire 48,000 bitcoins seized from the Silk Road at a US Marshals auction.

That trust would later morph into the Grayscale Bitcoin Trust (GBTC), but in late 2015, there was a time when NASDAQ itself might have controlled those bitcoins.

To understand the NASDAQ connection, we need to look back into Silbert’s career, specifically to 2004 when he founded SecondMarket.

SecondMarket originally gained popularity before the creation of bitcoin as a way to acquire employees’ equity in non-public companies via a secondary market-like platform (hence, ‘SecondMarket’). It diversified considerably over the next nine years and by September 2013, Silbert had launched Bitcoin Investment Trust, a bitcoin-only fund for high-net-worth individuals.

The month after the trust was launched, the FBI shut down Ross Ulbricht’s Silk Road and seized its massive trove of tens of thousands of bitcoin, placing it into the custody of the US Marshals.

Barely five months later, Mark Karpelès’ Japanese-American Mt. Gox bitcoin exchange declared bankruptcy and less than a year after that, Bitcoin Investment Trust purchased the government-seized bitcoin from the Silk Road.

The following year, NASDAQ acquired SecondMarket, Bitcoin Investment Trust, and the bitcoin itself, which today would be worth somewhere in the region of $3 billion.

Silbert’s 175X gain versus customers’ 0X gain

Although a select few Mt. Gox victims have received a small number of repayments from the bankruptcy, most customers still haven’t received anything. Indeed, its bankruptcy has deprived them of their assets for over a decade. Similarly, the US government simply seized Silk Road bitcoin outright from operators and customers, rendering them an equal return of $0.

Silbert’s fund — in contrast to Silk Road customers who will never be refunded, or Mt. Gox victims who still await their refunds — has enjoyed a 175X gain on the bitcoin held since its December 2014 US Marshals auction win.

Some people speculate that NASDAQ was particularly interested in its bitcoin holdings when making the 2015 acquisition while others are unclear whether SecondMarket still owned rights to any US Marshals-purchased bitcoin at that point.

Ultimately, it is unclear whether SecondMarket, its Bitcoin Investment Trust, or accredited investors of the Bitcoin Investment Trust became the ultimate beneficial owner(s) of the US Marshals auctioned bitcoin. 

Similarly, with SecondMarket, Mt. Gox, and Grayscale remaining private companies since their inception, there are limited public filings to track the ownership of SecondMarket’s auction-acquired bitcoin.

Barry Silbert is one of bitcoin’s earliest investors

In any event, there are theories that connect Barry Silbert to even more US government-seized bitcoin. For example, Cumberland of DRW is widely rumored to have won a third US Marshals-auctioned lot of 27,000 bitcoin. Cumberland has a known relationship with Barry Silbert’s Digital Currency Group, which was a sister company of SecondMarket.

Some blockchain observers believe that some of those 27,000 bitcoins ended up at Barry Silbert’s Grayscale, which had a deep relationship with Digital Currency Group’s Genesis and Tyler and Cameron Winklevoss’ Gemini via its doomed Gemini Earn program.

Read more: Barry Silbert’s Grayscale wants GBTC to commingle bitcoin ‘from time to time’

In the end, it is not difficult to trace bitcoin on the blockchain. However, it’s almost impossible to trace bitcoin whose ownership changes via paper contract within private companies. In the case of Bitcoin Investment Trust (now GBTC) bitcoin and other US Marshals lots, ownership rarely changed via on-chain transfer. As is often the case with private companies and non-public trusts, ownership changed frequently by signing paper contracts.

When someone buys a share of GBTC, the seller doesn’t transfer bitcoin on-chain. Nevertheless, over $160 million worth of bitcoin truly changes ownership every day via off-blockchain GBTC trades. Similarly, tens of billions of dollars of crypto assets change hands every day off-blockchain across the world’s crypto exchanges. This frustrates the work of on-chain sleuths.

Tracing government-seized bitcoin to NASDAQ itself

Tracking the history of Mt. Gox and Silk Road bitcoin from US Marshals auctions is certainly illuminating but it’s only a small part of the larger story. The blockchain does show that NASDAQ ended up managing — whether on its own behalf of on behalf of customers — some US government-seized bitcoin with ties to Silbert’s prescient purchases over a decade ago.

Similarly, US Marshals bitcoin auctions certainly link entities like Grayscale, Cumberland, Genesis, Digital Currency Group, and Gemini.

Every $1,000 of bitcoin one decade ago is now worth $100,000 and for anyone lucky to have had the capital to bid on Silk Road bitcoin auctions, and the wisdom to have never sold, the appreciation is certainly life-changing. The gains from these early auctions have capitalized some of the largest crypto companies in existence today.

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A British drugs kingpin involved in the US Drug Enforcement Agency’s (DEA) largest-ever crypto seizure, has pleaded guilty to running a network of dark web marketplaces, the Department of Justice (DoJ) said on Friday. 

Forty-year-old Banmeet Singh admitted to distributing hundreds of kilograms of drugs through vendors on dark web sites including Silk Road one and two, Alpha Bay, and Hansa. 

The DEA says it seized $150 million worth of crypto from Singh as part of the “largest single cryptocurrency and cash seizure in DEA history.” According to his plea agreement, the seizure comprised more than 8,100 bitcoin, worth roughly $342 million today. The US recently announced it would sell $130 million worth of bitcoin linked to a previous Silk Road seizure. 

Singh sold and distributed LSD, ecstasy, fentanyl, Xanax, ketamine, and Tramadol between 2012 and 2017 in exchange for crypto while laundering the profits. The DoJ claims he organized the shipment of drugs and sent them internationally, from England and Jamaica to Ireland and all 50 states of America. 

Read more: 50,000 bitcoin seized after criminal calls police on self

Attorney Kenneth L. Parker said that members of Singh’s network frequently “signed off with the signature phrase, ‘I’m still dancing.’” He added, “Today, with Banmeet Singh’s plea of guilty, the dance is over.”

Singh was indicted by the US in 2018 and arrested in London in 2019. He was eventually extradited from the UK in 2023. 

Singh was charged with conspiracy to possess with the intent to distribute controlled substances and conspiracy to commit money laundering. According to the Washington Post, Singh is expected to receive an eight-year prison sentence. 

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Blockchain analysis conducted by Protos shows that bitcoin related to the Silk Road seizure are moving, and some may have been sent to Coinbase.

Bitcoin stored in a US Department of Justice wallet that were seized from darknet marketplace Silk Road have been moved to new addresses. A total of 49,000 bitcoin were moved, including a transfer of over 9,800 bitcoin to an address beginning in 367Yo. That wallet also received an additional 35 bitcoin from an address beginning in bc1q.

Approximately 476 bitcoin were further transferred by 36Yo to an address which appears to regularly receive bitcoin from Coinbase addresses, based on blockchain analysis conducted by Protos. Cyptocurrency research firm Glassnode also linked 36Yo to Coinbase.

Read more: 50,000 bitcoin seized after criminal calls police on self

An additional 31 bitcoin were transferred to an address that has also appeared in Financial Times analysis of FTX US transfers, and is marked as a Binance Wallet on Breadcrumbs.

Several other small transfers were made to addresses connected to Binance, according to Breadcrumbs:

• A sum of 0.004 bitcoin was transferred to 1J8BzYDmVeSvGZBU1a9Pi4rcNN5td64g5X.
• An address beginnining in 1GvJ received 0.0008 bitcoin.
• Additionally, 0.0003 bitcoin were transferred to an address starting in 1PbH.

An address connected to Luno.com received about 0.04 bitcoin from 367Yo, along with 0.02 bitcoin deposited to a wallet linked to KuCoin. A small sum of 0.0005 was sent to an address connected to Rollbits.com.

The remainder of the bitcoin were transferred out of 367Yo, largely in around 93 bitcoin blocks to dozens of new addresses. It’s not clear why the majority of funds were distributed to new addresses with equivalent amounts, but small sums were transferred to these other addresses.

The US Southern District of New York declined to give any comment related to these asset movements.

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In an unprecedented move, the Department of Justice (DoJ) has announced that it has arrested a “James Zhong” and seized over 50,000 bitcoins. The coins in question were originally stolen from the dark web marketplace the Silk Road back in 2012 — a full decade ago.

The press release by the DoJ explains how Zhong used an exploit to steal the bitcoin from Ross Ulbricht, founder and owner of the Silk Road, in September 2012. The value of the stolen goods at the time was ~$500,000. Today, that same stash is valued at over $1,000,000,000.

The statements from the DoJ also point to Zhong taking profit from a bitcoin fork, Bitcoin Cash, back in 2017 as helping to provide traceability to his maneuvers.

Story unfolding

While not mentioned in the initial press release, Protos reached out to Lt. Shaun Barnett of the Athens, Georgia police department to explain how Zhong was flagged. According to Lt. Barnett, in 2019 Zhong called the police to “report a burglary.” He mentioned that numerous assets had been stolen, including “a lot of bitcoin.” This was apparently enough to get the attention of the IRS Criminal Investigation (IRS-CI) unit.

After investigating and following specific wallet addresses, the IRS-CI and Athens police department made an arrest in November of 2021. As of today, Zhong faces up to 20 years in prison for one count of wire fraud (he pleaded guilty and fully cooperated with authorities, so the likelihood he sees anywhere near 20 years in prison is almost zero).

Questionable tactics

There’s a lot of questionable behavior from Zhong in the memorandum provided.

Apparently, Zhong stored the billions of dollars worth of Bitcoin in “a floor safe” and a “popcorn tin.” Investigators seemed to have little trouble finding both.

Read more: Silk Road’s Ross Ulbricht sells NFTs to support bid for presidential clemency

Zhong also used an exchange to profit from the stolen bitcoin about five years after the exploit, seemingly in a way that was easy for investigators to trace.

Lastly, the defendant and another individual named Clayton Kemker ran a company in Tennessee called RE & D Investments, which, according to the press release, had “substantial real estate holdings” in the Memphis area.

Protos has reached out to the DoJ for further clarification and will update if and when we hear back.

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