December 4, 2014 / 1:48 PM / in 3 years

U.S. auction of Silk Road bitcoins draws 27 bids

NEW YORK (Reuters) - The U.S. Marshals Service on Thursday received more than two dozen bids for 50,000 bitcoins seized from the alleged owner of Silk Road, an Internet black-market bazaar on which authorities say drugs and other illegal goods could be bought.

A Bitcoin (virtual currency) coin is seen in an illustration picture taken at La Maison du Bitcoin in Paris July 11, 2014. REUTERS/Benoit Tessier

Lynzey Donahue, a Marshals Service spokeswoman, said the government had 11 registered bidders and 27 resulting bids. Winning bidders for the bitcoins, valued at $18.6 million, will be notified on Friday.

It was the Marshals Service’s second such auction following one in June for almost 30,000 bitcoins seized during a raid on Silk Road in 2013.

To date, the government has recovered 173,991 bitcoins while pursuing the case, including 144,336 from computer hardware belonging to Ross Ulbricht, the alleged creator of the underground website.

As part of a civil forfeiture proceeding, Ulbricht and the government reached a deal in January under which the bitcoins on his hardware would be sold and the proceeds held, pending the outcome of his case.

The remaining bitcoins from Ulbricht’s hardware will be auctioned in the coming months.

Donahue said authorities “didn’t want to flood the market” with too many bitcoins at once.

The previous auction of 29,655 bitcoins, which were recovered from Silk Road’s servers, was won by a single bidder, Silicon Valley venture capitalist Tim Draper. Terms were not disclosed.

Steven Englander, global head of G10 foreign exchange strategy at CitiFX, wrote in a note ahead of the auction that bidders this time “will likely lowball their bids relative to the current market price.”

“My expectation is that most bids will be aggressively to the downside in the hope of getting a post-Black Friday bargain,” he wrote.

Draper said Wednesday he would be among the bidders participating in the auction. Others who have said they will bid in the auction include the Bitcoin Investment Trust and Pantera Capital.

Ulbricht, known online as “Dread Pirate Roberts,” according to prosecutors, faces trial Jan. 5 on charges including conspiracy, money laundering and narcotics trafficking. He has pleaded not guilty.

Bitcoin prices were down 0.7 percent late Thursday at $372.81. The digital currency has lost roughly half its value so far this year.

Additional reporting by Sarah McBride in San Francisco; Editing by Bernadette Baum and Steve Orlofsky

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