“I am surprised that the U.S. is auctioning off seized Bitcoins for tens of millions of dollars. Don’t these government auctions confirm Bitcoins status as a digital currency? Otherwise, how would it be ethical for the federal government to auction off something that they believe has little-to-no value and/or intend to later destroy, through regulation or enforcement?”, Mike Perry
Venture Capitalist Tim Draper Wins Small Piece of Bitcoin Auction
By Sydney Ember
When the United States Marshals Service opened its second Bitcoin auction on Thursday, some bidders were not optimistic about their chances. After all, a single bidder had won all of the nearly 30,000 Bitcoins in the government’s first auction in June, leaving the rest of the participants discouraged.
But the Bitcoin king of June ended up just a bit player today. On Friday, the venture capitalist Timothy C. Draper, the first auction’s sole victor, said he had won just one block of 2,000 Bitcoins, a fraction of the 50,000 the Marshals Service had put up for sale. Mr. Draper bid on behalf of his venture firm, Draper Associates.
“I will have to buy some more Bitcoin on the open market to fulfill my commitment to the new batch of Boost companies,” Mr. Draper said in an email. Draper Associates had teamed up with Boost VC, the Bitcoin start-up accelerator founded by his son, Adam Draper, to invest 300 Bitcoins in every company that works with Boost.
The Marshals Service said it would notify all winning bidders by 5 p.m.
“We are unable to confirm, deny or make any further announcements until the entire award process has concluded, including the completion of required financial transactions,” Lynzey Donahue, a spokeswoman for the Marshals Service, said in an emailed statement on Friday. Winners must initiate wire transfers to pay for their Bitcoins by 2 p.m. on Monday.
Thursday’s auction of 50,000 Bitcoins, worth around $19 million, was the second held by the Marshals Service for Bitcoins seized in connection with the defunct online marketplace Silk Road. In June, it sold nearly 30,000 of the Bitcoins seized from Silk Road, which was shut down in October 2013 after authorities said it was an online marketplace for illegal drugs and other illicit activities. Because of the slump in Bitcoin’s price since the June auction, when it was trading around $600, the total value for sale in both auctions was about equal.
The Marshals Service said on Thursday that only 11 registered bidders took part in its second auction, far fewer than the 45 bidders who participated in the first auction. It received 27 bids this time, compared with 63 bids in June.
Some of the same bidders who participated in the first auction also submitted bids on Thursday. Along with Mr. Draper, SecondMarket and Pantera Capital both allowed investors to bid through syndicates. SecondMarket said its syndicate received 104 bids from eight bidders, significantly fewer than the 186 bids from 42 bidders in the first auction. Likewise, Dan Morehead, the founder of Pantera Capital, said fewer investors participated in his syndicate this time, though he declined to give any figures.
Mirror, previously called Vaurum, also participated in the second auction with a syndicate.
SecondMarket and Pantera declined to comment on Friday evening.
There are still nearly 94,000 Bitcoins to be auctioned by the government. A spokeswoman for the Marshals Service, Lynzey Donahue, said in an email at the time the second auction was announced that the agency anticipated selling the remaining Bitcoins “in the coming months,” but that “no exact dates have been determined.”
Since the Marshals Service announced the second auction in November, Bitcoin’s price has held steady at around $375, according to CoinDesk. The auction appeared to have little effect on the price on Friday. In the days after the first auction in June, the price of Bitcoin climbed to about $655 from around $570.