On November 5, 2020, federal prosecutors filed a civil complaint describes the seizure of 69,370 bitcoin (worth about $ 1.06 billion at the time of writing) from a person who was able to steal the money from darknet marketplace Silk Road.
According to the complaint, money was stolen from Silk Road through 54 previously undiscovered bitcoin transactions in 2012 and 2013. Ars Technica earlier this year, federal authorities reported the blockchain analytics company Chain analysis to investigate these transactions. It found that the stolen BTC had been moved to two wallets (with addresses 1BADznNF3W1gi47R65MQs754KB7zTaGuYZ and 1BBqjKsYuLEUE9Y5WzdbzCtYzCiQgHqtPN) and then, in April 2013, those two wallets sent to BTC-47h in April 2013, those two BTC-47h5 wallets in April 2013, 47h5 wallets1 from April.
In 2015, that third wallet sent 101 BTC to BTC-e, an infamous cryptocurrency exchange that itself was seized by authorities in 2017 for money laundering charges. This decision to liquidate some of the money in this way may have given authorities a critical clue as to the real identity behind these transactions.
The remaining BTC remained in the third wallet until it was confiscated by federal authorities. The person who stole the money from Silk Road and has now forfeited it to authorities is referred to as “Individual X” in the civil complaint.
The connection of this third wallet with Silk Road has been known for some time. Since Bitcoin transactions are publicly recorded on the blockchain, the transfer of more than 69,000 BTC (the fourth highest amount of bitcoin in any wallet in the world) was made from this wallet quickly marked because of the sheer amount of money involved.
While some in space Initially speculated that this transaction was committed by Individual X to move the bitcoin to an updated wallet, it turns out the transaction was committed by federal authorities.
They first sent 1 BTC from the ‘third wallet’ to a wallet whose private keys they manage as a ‘test transaction’, before sending the remaining 69,369 bitcoin. Some Bitcoiners found this method naive because 1 BTC is still a lot of bitcoin to use for a test (the authorities could have sent a smaller fraction of a bitcoin as a test instead) and, because when you send bitcoin from an address, the remaining funds stored at that address will be sent to a bitcoin address assigned to that wallet is connected, through that test uncovered the full amount of funds.
Of course, the Bitcoin community is curious about the real identity of Individual X. Few details have been released, although the government has confirmed it knows who this is.
“According to the investigation, Individual X was able to hack Silk Road and gain unauthorized and illegal access to Silk Road and thereby steal Silk Road’s illegal cryptocurrency and move it into wallets that Individual X controlled,” the complaint said. According to the research [Silk Road Founder Ross] Ulbricht became aware of Individual X’s online identity and threatened Individual X for a return of the cryptocurrency to Ulbricht. Individual X did not return the cryptocurrency, but kept it and did not spend it. “
In addition to outstanding questions about Individual X, this story has raised questions about the role of blockchain analytics in tracking previously pseudonymous blockchain transactions, demonstrating some of the unique properties of bitcoin transactions (taking $ 1 billion in funds taken and confirmed by the government within minutes) and more. Clearly, the implications and consequences of this case will develop for some time to come.