Mystery bidder wins auction of Silk Road's nearly 30,000 bitcoin

US marshals do not release name of successful bidder as prominent contenders come forward and bitcoin prices rise

The US Marshals Service had one winner in its auction of nearly 30,000 bitcoin, a spokeswoman said on Tuesday, without revealing the name of the successful bidder.

The US Marshals Service had earlier revealed that 45 bidders registered, each putting down a deposit of $200,000, and that 63 bids were received. The winner was notified on Monday evening and the transfer of bitcoin took place Tuesday, according to Lynzey Donahue, spokeswoman for the USMS.

In October 2013, the US government came into possession of the bitcoins when it arrested San Franciscan Ross Ulbricht, now 30, and charged him with running the Silk Road, an online black market.

Several prominent participants have come forward to say that their bids were not accepted.

Alan Silbert, founder and CEO of online bitcoin luxury marketplace BitPremier, estimated that $20m worth of bids went unsatisfied, and that those bidders may now try and fulfil their demand on the open market.

Other bidders entered the auction in syndicates. Investment firm SecondMarket received 186 bids from 42 bidders, but said it was outbid on all blocks, while Pantera Bitcoin's syndicate also failed to get hold of any bitcoin.

The auction drew 63 bids from 45 registered bidders on Friday. The price of bitcoin rose on Tuesday, adding to Monday's gains. It was last priced at $652.02, up 2% on the session, and has gained more than 15% since 25 June, according to digital currency exchange Coindesk.

Hedge fund Pantera Capital, bid below the market price, according to Pantera chief executive Dan Morehead, and said Monday it had been outbid.

Bitcoin Shop Inc, which trades on the over-the-counter market OTCQB, said in a release on Tuesday that its bid had also been rejected. The virtual currency ecommerce company bid directly in the auction as well as through a syndicate organized by SecondMarket.

"Bitcoin Shop will continue to evaluate investment opportunities such as this in the future," the statement said.

Speaking to the Guardian before the results were announced, the CEO and co-founder of Circle, former Macromedia CTO Jeremy Allaire, said that the mere existence of the auction was likely to be a boon for the currency.

"I think it's a very legitimising activity. The fact that the federal government of the United States is saying 'this is a legal asset, and we're going to liquidate it like other financial assets' is a big deal."

Some have questioned whether reports from the bidders are to be trusted. Isabella Kaminska, writing in the Financial Times, pointed out that the individuals and companies reporting on failed bids "may have an interest in proclaiming that their bids were unsuccessful or that the accepted bids were higher than expected (even if they they were not)".

Writing later on her own blog, Kaminska went further, suggesting that "the whole auction was a sting."

"For, if I was the government stuck with a bunch of bitcoin I couldn’t shift because everyone knew my coins were the Silk Road batch, I too might be inclined to 'launder' the association away via a sealed auction that would make everyone assume that the coins were no longer on my book but actually still were," Kaminska said.


Alex Hern and agencies

The GuardianTramp

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