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The DEA Makes Its First Bitcoin Seizure

  1. Phungushead
    The online currency widely used to purchase drugs may be less cop-proof than previously thought.

    For the first time since its inception, a small amount of Bitcoin—a form of online currency routinely used to buy drugs online—has been "seized" by the US Drug Enforcement Agency. The currency is a common form of payment on the online drug market Silk Road, where its secure and hard-to-trace nature is believed to protect buyers and sellers. But Bitcoin may not be as secure as previously thought. According to DEA documents, the agency has seized the grand total of 11.02 BTC ($814.22 USD) of the digital currency in forfeiture from Eric Daniel Hughes of South Carolina after he used it to purchase a "controlled substance."

    It remains unclear how exactly the Bitcoin was "seized," but it's unlikely that it was literally plucked from the web. The blog Let's Talk Bitcoin speculates it was part of a sting operation: “'Seizure' is probably a word used to imply that money was received in the process of a Silk Road sting operation, rather than actually seized from the bitcoin user’s wallet,” says Andreas M. Antonopoulos, a security expert and contributor to the site. By comparing the time at which the DEA claims it seized the Bitcoins and the Bitcoin's transaction records, it seems the DEA caught the money as it came out from Bitcoin's security protocols, not before. Let's Talk Bitcoin guesses the DEA may have set up a fake “honeypot” account to sell the drugs and reported them as seized when the payment came through.

    DEA statement is here: http://anonym.to/?http://www.forfeiture.gov/pdf/DEA/OfficialNotification.pdf


    Bryan Le
    The Fix


  1. Insomniacsdream
    Wow... I'm stunned the DEA is that petty or desperate for money. They definitely should have better things to do. Aren't they there to bust dealers or large operations like silk road not a small time user.
  2. Alien Sex Fiend
    this is not the first time. this seizure is the second time. when they raided the silk road few years back, the cracked some transactions but not all and they focused on guns that time.
  3. MikePatton
    Yeah I'm guessing the DEA is feeling pretty desperate since it can't do nothing about this thriving online drug market, so it made an attempt to scare people off by supposedly shattering the illusion of safety. They probably managed to get an undercover agent sign on Silkroad as a dealer, and then fucked some poor fellow who was only in for self use.

    Bottom line is they didn't catch any dealers, just a user, and there's nothing impressive about that what so ever... That said I always have been too scared to try to order anything illegal online, it just doesn't strike me as a bright idea even though it's supposedly relatively safe, there's no such thing as safe really.

    Even if the online transaction goes well, do you really want that shit mailed to you?Having illegal drugs go through customs is way too risky to be worth it in my opinion.
  4. Mind_Expansion
    The article states that over $800 worth of bitcoin was seized, I find it unlikely that the buyer was spending this sort of money for personal use.
  5. MikePatton
    Really? I mean what if he's buying his monthly supply? Or his supply for 6 months? It's an EBay of drugs after all, that "add to cart" button is very tempting when you have an endless catalog of psychoactives to choose from. There is no conclusive evidence that he was gonna sell drugs. And since there is no information, we don't know what he was buying. Could have been some REALLY good coke for a couple of months of personal use, for example.
  6. Mind_Expansion
    I didn't say that it was not possible he was buying for personal use, I just find it highly unlikely considering the amount he was spending.

    I mean realistically, who is more likely to spend $800 on drugs, someone buying for personal use or someone buying for resale? How many people do you know or have met that spend that much in one go for personal?
  7. MikePatton
    True, but when you order shit through the mail you tend to order a whole lot of it, because you're not gonna mail more drugs in every week as if it were a physical dealer, you know? You wanna minimize the amount of shipments, for obvious reasons, and for better price too.
  8. Tenman
    I know plenty of folks who spend that much for personal use...
  9. Mind_Expansion
    Who is 'you'? Without trying to be offensive (not my intention at all), you do not speak for every person who orders drugs through the mail :).

    Yes, Some people will order bulk to save money (this can also be done on the street but is generally not) but I think the vast majority of personal users still buy smaller amounts.
  10. MikePatton
    Yeah it could go both ways really, no point in speculating, but that's exactly the the point- a man's innocent unless proven guilty. Like I said I never did it, but I imagine that if I would go through the risk of ordering drugs online - I wouldn't want to run out after a few days, and have to go through that scary stuff again.
  11. kumar420
    well its not exactly a surprise, silk road dealers have been getting busted for years now. nice to see the taxpayers dollars being put to good use (sarcasm)
    the value of the bitcoin has sort of excluded a certain class of drug users- typically those with a very low income cannot afford to use this system. the value of the currency went up like ten thousand percent in less than a year, makes me wish i'd just held on to my BTC instead of wasting the money on drugs (that were of admittedly excellent quality). if i had kept all of my bitcoins, i'd probably have made at least ten grand. its better than the stock market
  12. Alien Sex Fiend
    ordering drugs from "ebay" it seems that one is unlikely to order a dime. the value of the currency went up like ten thousand percent in less than a year, yeah thats very true,
  13. Mind_Expansion
    Without getting too much into the workings of bitcoin, the fact that it became more valuable means nothing. I think that quite a few of the previous posters do not understand bitcoin correctly.

    A few years ago someone may have paid $10 for 1000 bitcoins but today they paid $10 for 0.1 bitcoin. Regardless of how many bitcoins were involved, both amounts were worth $10 at the time. You may have paid for $10 worth of goods with 1000 bitcoins then, but to cover the same transaction now would cost you 0.1 bitcoin. You can STILL buy $10 worth of bitcoin and just because it is a smaller number of bitcoins, for example 0.01 of a bitcoin, does NOT mean it is worth less than the $10 you paid for it. You can still buy $10 of goods for that 0.01 bitcoin.....

    All that changes is the amount of bitcoins per dollar. You can still purchase $1, $5 or $10 worth of bitcoins, but the amount of bitcoins you receive for this amount will be substantially lower than it was a few years ago.
  14. Cash.Nexus
    Assuming it was a 'sting' then it's not Bitcoin which is insecure, but Silk Road. The target/victim willingly paid BTC just as though it were cash in RW. Such technique seems like entrapment and 'creating' crime IMO.

    Was looking at the DEA seizure list and noticed that while vehicles from (horsebox to Harley) and jewellery (one dude had 9 Movado and 5 Gucci watches and a couple Rolex among others in his collection, although can't refer to him necessarily as a criminal according to DEA, just because they seized his and wife's bling) are precisely valued, weapons of various types and makes are all valued at $1.00 each. Growing equipment too, mostly. DEA claim they don't sell all this stuff, but it must be auctioned somewhere. Whoever bids on a one dollar Glock pistol or Remington shotgun should get a bargain. EDIT: just noticed an AK47 @ $150 in Arizona, so there are exceptions.

    Maybe the guns and grow-gear are usually destroyed? IDK.
  15. snarkymalarky
    Ok, but does this change the idea that if someone bought 1,000 bitcoins for $10 a few years ago and kept all of them, they would now have a lot more than $10 worth of bitcoins? If the exchange rate is currently .01 bitcoins = $10, then .001 bitcoins = $1, so those 1,000 bitcoins would now be worth 1,000/ .001 = $1,000,000, yes?

    I'm not that familiar with bitcoins, but I can't imagine that the amount of bitcoins one already owns is somehow altered in order to keep the dollar equivalent constant...
  16. Pondlife
    Digital currency seized in alleged drug law violation in Charleston

    In a case believed to be the first of its kind, federal authorities have seized a Charleston man's virtual currency due to an alleged drug law violation with possible links to a shadowy online black market.
    The U.S. Drug Enforcement Administration recently posted a forfeiture notice indicating that agents had seized 11.02 Bitcoins worth $814 from 31-year-old Eric Daniel Hughes for allegedly violating the federal Controlled Substances Act. No other details were provided.

    The seizure appears to mark the first time the federal government has gone after Bitcoins. That's prompted a flurry of speculation that the DEA had infiltrated the infamous Silk Road website, an off-the-grid marketplace where drugs are traded and Bitcoins are the only accepted currency.

    “This is the first time something like this has happened with Bitcoin,” Adam B. Levine, editor and chief of the website Let's Talk Bitcoin!, which tracks developments with the currency and first reported on the seizure. “And the interesting subtext is: We don't have any idea just how involved the DEA is with Bitcoins.”

    Bitcoins are basically an Internet equivalent of cash, a so-called “crypto-currency” that can be sent directly to other users with no involvement from banks or middle men.

    Introduced in 2009, Bitcoins have been a hot investment item of late and are the currency of choice for online drug dealers and other black market traders.

    “Bitcoins themselves do not provide anonymity guarantees, but their design makes it possible for transactions to be much harder to trace than traditional payment systems like credit cards or ACH (Automated Clearing House electronic credit) transfers,” Nicolas Christin, associate director of the Information Networking Institute at Carnegie Mellon University, said.

    The DEA stated it seized the coins from Hughes, also known as “Casey Jones,” in April, but the agency hasn't charged him with a crime.

    Attempts to reach Hughes were unsuccessful last week, and it is unclear if he has an attorney. No one answered the door when a reporter visited his St. Philip Street apartment last week.

    DEA officials would not discuss his case except to say it concerns an ongoing investigation being run by the DEA's Los Angeles field office. Two agency spokeswomen said they knew of no other forfeiture cases nationally involving Bitcoins.

    Charleston police also moved against Hughes last month, charging him with distributing marijuana and prescription pills after a June 5 raid on his apartment, according to county court records and a police incident report. The charges stem from 10 bags of the narcotic Suboxone found in Hughes' bedroom during the search and two undercover drug buys that occurred in April, according to arrest affidavits. He is accused of selling .77 grams of the muscle relaxant Clozepam and 10.7 grams of marijuana to informants working with police, the affidavits said.

    The search of his apartment also uncovered digital scales, a small amount of marijuana, various white powders and pills, computer equipment, a loaded pistol and other items, a police report noted.

    Charleston police would not discuss the case, referring all questions to the DEA.

    Marketplace for drugs

    The case has drawn a great deal of attention online due to its potential linkage to Silk Road, an underground marketplace that exists in the Deep Web, a sub-layer of the Internet outside the reach of standard search engines. Silk Road, accessible only through the anonymity cloaking Tor Network, is named after an ancient and enduring trade route that connected Asia to Europe.

    Silk Road offers a cornucopia of drugs for sale through anonymous peer-to-peer transactions conducted with Bitcoins.

    A couple of years back, U.S. Sen. Charles Schumer, D-N.Y., pushed to have Silk Road shut down, calling the site “a certifiable one-stop shop for illegal drugs.” That didn't happen. Instead, the site has blossomed into a booming enterprise.

    Christin, of Carnegie Mellon, spent six months studying Silk Road before authoring a 2012 paper on the subject. He determined that more that $1.2 million in business was conducted on the site monthly, mostly catering to drugs and involving “a relatively international community.”

    “People don't go there to hang out and have a good time,” Levine, of Let's Talk Bitcoin!, said. “They go there because there are specific things you can do there.”

    Christin said it is difficult to say what implications Hughes' case might have for Silk Road until more is known about what the DEA did and how they did it.

    Stories emerge

    Discussion of “Casey Jones” started popping up on a Silk Road chat forum after news of the seizure broke. Commenters described Casey Jones as an active vendor on the site who bought and sold drugs such as Suboxone and Adderall.

    Let's Talk Bitcoin! bloggers traced the activity for the Bitcoin account number listed in the DEA notice and found a transaction for 11.02 Bitcoins on April 12, the date the DEA stated the funds were seized.

    Just how the DEA managed to confiscate digital Bitcoins has been the source of much puzzlement and debate.

    Levine said law enforcement might have gotten hold of a computer that contained an unencrypted key to the electronic “wallet” where Hughes' coins were held. More likely, he said, is that the DEA set up an online sting operation involving a transaction on Silk Road.

    The DEA forfeiture notice states that the individuals named in the document are not necessarily criminal defendants or the targets of an investigation. The notice also states that those whose goods were taken can challenge the seizure in federal court. There was no record found Friday indicating that Hughes had filed such a challenge.

  17. Pondlife
    Thailand Government declares Bitcoin illegal, trading suspended indefinitely

    Thailand has declared Bitcoin as illegal following which all trading activities related to the electronic currently has been suspended indefinitely.

    Through a message posted on its website, the Bitcoin Co. Ltd. has said officials of the Foreign Exchange Administration and Policy Department cited absence of applicable laws, capital controls “and the fact that Bitcoin straddles multiple financial facets” as reasons because of which the virtual currency is illegal.

    Following this ruling activities such as buying & selling of Bitcoins, buying or selling any service in exchange of Bitcoins, sending Bitcoins to anyone located outside of Thailand, and receiving Bitcoins from anyone outside of Thailand are illegal. This has forced the company to indefinitely suspend operations up until the government has updated its laws such that it will allow existence of Bitcoin.

    Over the last few months the company was working to register itself with various Thai government agencies in a bid to operate in a lawful manner. The registration process came to a standstill following a hurdle in the form of Bank of Thailand, which is responsible for regulating the financial transactions in the country.

    Ban in Thailand is the first instance when Bitcoin has been officially deemed illegal; however, this is not the first time when the virtual currency has come under fire. Back in June authorities in US started examining Bitcoin for fears that Americans were evade taxes using the virtual currency. Mt. Gox has been repeatedly under DDoS attacks after the popularity of Bitcoin increased and its prices went up the roof. California served a Cease and Desist order to the Bitcoin Foundation back in June.

  18. Großschmackhaft
    So they banned it? I'd like to know the exact wording of that law, to see if they explicitly banned only bitcoin or all of the numerous currencies built on the same concept, some of which are easily convertible to bitcoin, thus rendering a bitcoin ban largely inconsequential in practice. Just buy some litecoins and exchange them. That is, if this law even impedes the buying of bitcoins at all in practice, which would require quite a large police effort to achieve. Seems more like a paper-only law :)
  19. AmbitiousStoner

    Scrolling through the DEA statement linked by the OP, the government has seized tens of millions of dollars from individuals throughout the U.S. One of the largest seizures was $ 398,000. The fact the individual in the article "only" had $800 worth of bitcoins suggests to me that he was making purchases for personal use, though I suppose he could have been a new/small time vendor on "ebay".

    Also, with all the seizures that are significantly larger and more suggestive of large scale vendors, ya gotta wonder why the press chose to write about one of the smaller fishes in the DEA pool.
  20. cjb85
    I think it's about the only thing they can do when it comes to Silk Road. I imagine they have serious trouble setting up sellers at this point, I mean it's practically impossible with Tor and Bitcoin. The only way they're going to bust sellers with trafficking via Silk Road is a local government raiding a house and finding incriminating evidence on a hard drive or something of that nature. Regardless of whatever chance there is to be caught buying from there, and you can call me paranoid I don't care, I don't want any of the hardcore dealers on there knowing my address or the address of anyone I know.
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