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Comment by numlocked | Hacker News Reader

Weird. Why not sell them in much, much smaller increments? You stand a way better chance of getting full market value if you don't enforce the artificial liquidity constraint of "only buyers who want a zillion bitcoins right now". Or just legitimately sell them on an exchange. Is there a reason the gov't would be obligated to go about it inefficiently?

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They are the U.S. Marshals. They are most likely acting on a federal court order that says words to the effect of, "Auction this stuff." They sell vehicles, boats, buildings, anything that can be seized by the government. Auctions are the only method I've ever seen them use, I think because that allows the public to bid and avoids conflicts of interest (e.g., an agent's brother-in-law gets first crack at whatever they're selling).

Makes sense. It seems simple too. They don't have to develop any special skills on a per case basis. Sell everything the same way.

This is a typical assest forfeiture auction. They don't want to deal with multiple buyers or non-cash-on-the-spot buyers. They value disposing of assets quickly and cleanly over getting market value.

But it's an auction? Assuming that there are enough buyers with the multi-hundred-k around, they will get close to the market value.

Blind auction. Everyone makes 1 silent bid, highest wins.

If you want to buy a block of BTC above market price, there are several brokers who would be happy to help you at any time; you don't need to wait for a government auction to do that.

Good. That's what we want from asset seizure auctions.

It's kind of a modified The Price Is Right mechanic, isn't it? With the difference that the actual market price is known. So each bidder's goal is to guess how slim a margin every other bidder will try for, and go $1 more than that.

In the end, assuming anyone bids at all and all the bidders are rational, someone will make a profit. It just won't be a very big profit, probably.

Sealed bids are kinda beneficial here incase they only have one serious bidder.

Well you have to give them 100k cash to even bid.. so you at least need to be 10% serious to have that kind of money hand over to bid.

Also not to mention they need to be seen fair doing it. Wouldn't look good if the USMS was seen passing the coins off to their mates.

Especially considering some of these coins came from a lot seized from the FBI agents (Carl Force was one) who tried to pocket it during the Ross Ulricht case. ;) The risk of something unethical happening here isn't just high... it's already happened to this exact merchandise.

And with the blockchain permanently recording this stage of those coin's provenance - I'm wondering whether owning them is going to solve or cause problems for someone later... "That's a Silk Road bitcoin!!!" (I wonder if "Real Satoshi Bitcoins" will one day be worth many times their "face value" like Confederate Half Dollars?)

If my wallet contains 10 bitcoins, and I somehow end up with a Satoshi bitcoin, don't I now have 11 bitcoins that are all alike? When I go to spend one bitcoin, how do you know if it's the Real Satoshi one or if it's one of my others?

Coins have history, but coins spent together gets merged (and partially spent coins get split).

Especially if the proceeds go straight to Treasury and they have to manage the sale out of their existing budget.

"The U.S. Marshals Service (USMS) offers property for sale to the public which has been forfeited under laws enforced or administered by the United States Department of Justice, its investigative agencies (Drug Enforcement Administration, Federal Bureau of Investigation, and Bureau of Alcohol, Tobacco and Firearms), and certain other federal law enforcement agencies. "

My guess here is that bitcoin is considered property and not currency, and there are laws around this.

Edit: Looks like they are treating bitcoin as property -https://www.usmarshals.gov/foia/directives/asset_forfeiture....

I wonder if anyone has used this as evidence that Bitcoin should not be regulated under FinCen rules (as its property not currency). I guess it would depend in part how the Marshall's service treats foreign currency they seize.

No - the actions of a bureaucrat, or a bureaucratic committee are not grounds for court decisions. A court could force them to treat bitcoin a currency, but they can't force a court to recognize bitcoin as property.

It's a one time action. They're operating under what they know right now. In the future, if things change with how the government treats Bitcoin, they'll probably change their liquidation procedures accordingly.

The IRS designated it as property because they do not have the authority to designate anything as currency, only Congress does.

FinCen is not limited in congressional currency designations to carry out its regulations. Only services that exchange national currency to bitcoin are regulated under FinCen. Bitcoin is not regulated by FinCen.

Not sure about why not split them up, but usually there's a requirement that seized assets are auctioned off. Since the government can't treat that bitcoin amounts as currency doing an exchange like that probably violates some rule. I believe that they have to do similarly with any other security (stocks, bonds, etc.) that's been seized.

It's actually efficient to do it this way. The price may be higher b/c buyers are willing to pay a premium to buy coins off-exchange.

Also interesting to note that in previous auctions it looks like USMS only conveyed a "bill of sale" for the bitcoins. We don't know what arrangements were made for conveying the bitcoins themselves. I would speculate that they were transferred to a wallet designated by the buyer, but it's possible they were not.

It's only 2,800 coins. Why would anyone bother paying above market for that block? I would assume, if I went to an exchange and purchased 3,000 coins, the exchange price wouldn't go up much. But maybe I'm wrong on that, and BTC is thinly traded? I haven't been following it lately.

I think I've seen something around ~11k BTC volume per day on coinable exchange, so you are somewhat right, especially if you spread your trades over a period of a few days.

One reason to pay over market value, is once you buy these coins from the US Government, the sale legitimizes your ownership of it.

That is, whatever happens in the future between Bitcoins and the Gov/Fed/Treasury, your lot might have a standing in a court of law that other lots might not.

This sale basically cleans these coins from all previous illegitimate and/or illegal transactions that they went through - whether some of these where stolen, used to buy drugs, not reported or accounted for correctly with the IRS, etc.

In a way you are getting a government issued certificate of legitimacy. And you will not have to prove anything - when others will have to prove how they acquired theirs.

why is that weird, this is the smallest amount of bitcoin the US Marshalls have ever sold...

Their last auction was 44,000 bitcoin worth $20 million

It looks like they are not interested in maximum profit indeed. Maybe they'd like to be very sure about where they are going? Or maybe it is some legal constraint, like a country cannot subscribe to a consumer exchange?

Last time they sold 30k at once. 2k is really nothing, they will probably get close to market price.

Someone will jump through the hoops, and "earn" a profit in the process. Then, because the marshals set up the hoops just like they were told, some of that profit will find its way back to one or more of the more senior marshals involved in this farce. In USA we prefer our corruption giant-sized.

Wow, there's a lot going on here. It's probably just easiest to auction it off this way and be done with it.

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