Inside Uncle Sam's Secret Bitcoin Hoard
When Alexandre Cazes hanged himself in a Thai jail cell in July, the 25-year-old left behind the trappings of a big-league drug dealer: villas, Lamborghinis, a Porsche, bank accounts in Liechtenstein and Switzerland. But Cazes, who authorities allege operated AlphaBay, the world’s largest black-market website for drugs and weapons, also left something else: Internet “wallets” holding millions of dollars’ worth of Bitcoin and other virtual currencies.
Cazes’s digital loot is now property of the U.S. Justice Department, which seized it during a global sting operation. The agency plans to sell it, and given that Bitcoin’s value has soared more than fivefold since then, it could reap a huge windfall. But if you want to find out who’s holding those coins, or when they’re being sold, you’ll need extensive cybersleuthing skills—and a lot of free time.
These digital seizures and sales, unheard-of five years ago, are fast becoming routine. Bitcoin’s enduring popularity among online wrongdoers, and its growing presence in criminal busts, has turned Uncle Sam into a major player in cryptocurrency markets. While exact figures are impossible to pin down, documentary evidence and interviews with current and former defense attorneys and prosecutors suggest that at least $1 billion worth of digital coins, and possibly much more, has spent time in the custody of U.S. law enforcement.
But once in government hands, this digital hoard disappears behind a cloak of secrecy. The anonymity that makes Bitcoin a darling of libertarians—along with opaque property-seizure laws hated by those same libertarians—makes it virtually impossible for the public to follow the digital money. And as federal agencies have been drawn into an ever-growing role in the cryptocurrency boom, their efforts to guard their digital gold have led to surprises, stumbles, and sometimes sin.
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