FBI struggles to seize 600,000 Bitcoins from alleged Silk Road founder

The FBI has found that seizing an anonymous decentralised peer-to-peer currency was trickier than it seemed, following the Bureau’s bust of the international drugs marketplace, Silk Road.

When Ross Ulbricht, known as Dread Pirate Roberts to users of the site, was arrested last week, the FBI seized 26,000 Bitcoins belonging to Silk Road customers. But it also attempted, unsuccessfully, to claim the nearly 600,000 – thought to be worth around $80m – which Ulbricht himself is thought to be holding.

Bitcoin is a digital currency based on a methods of cryptography similar to those used to protect confidential emails. Due to its decentralised nature – the currency does not rely on any centralised agency to process payments, instead relying on work done by users’ computers – it is popular for a number of fringe-legal and illegal uses. One of those uses was Silk Road, where Bitcoin was required for all transactions.

In order to transfer Bitcoins out of a “wallet”, the name for the digital file which contains the encrypted information necessary to spend the currency, users need to know that wallet’s password or “private key”.

According to Forbes’ Kashmir Hill, that hurdle is causing the FBI difficulty.

“The FBI has not been able to get to Ulbricht’s personal Bitcoin yet,” wrote Hill. An FBI spokesperson said to Hill that the “$80m worth” that Ulbricht had “was held separately and is encrypted”. At current exchange rates, that represents slightly more than 5% of all bitcoins in circulation.

Even if the FBI is not able to transfer the money, now that Ulbricht is in captivity and most of his possessions have been seized, the funds are likely to stay where they are. A few high-security ways of storing bitcoins, such as a “brainwallet”, a way of converting a bitcoin address into an easy-to-remember phrase, could still bypass their authority, but there is no indication at present that Ulbricht has used them.

This article has been amended to clarify why Ulbricht’s funds have apparently remained untouched.