$16 million worth of seized Bitcoin to be auctioned in June

Author: Velvet Gold Mine

Next month, about $16 million worth of bitcoins seized in criminal cases last year will go on auction in Sydney.

Ernst & Young will facilitate the first bitcoin sale in Australia and the second worldwide. U.S. Marshals Service held several bitcoin auctions in 2015 following the arrest and conviction of Ross Ulbricht, the operator behind the drug trafficking website Silk Road.

"This is a huge amount of bitcoin," said Adam Nikitin, a partner at Ernst & Young on the deal. "Because the price fluctuations are smaller, this will be a very competitive auction, more competitive than any previous one."

Currently, one bitcoin is worth $654. The price has fluctuated greatly in the past two years, soaring to as high as $1,200 per coin and as low as $200.

Last year, 24,518 bitcoins were seized, and they will be divided into 11 lots of 2,000 bitcoins each. Each lot now has about 2,518 bitcoins. Bidders can bid for one or more bitcoins, and the bidding will start on June 1 and end on June 7.

The 48-hour sealed auction will begin at 1 a.m. on June 20.

EY expects digital asset investors, digital currency exchanges, investment banks and hedge funds to be the main bidders and that most of them are from North America and Europe.

“Qualification for bidding is based on trading ability,” Mr. Nikitin said of the rigorous registration process, which requires a lot of capital.

“Given that so much bitcoin is going to come to market, we want to make sure everyone is competing against each other.”

OTC sales are the most common method of disposing of large assets, especially liquid assets like money or stocks.

“If you were to put them on a public exchange, a flood of orders would drive the price down,” Nikitin said. “It’s the same as if you were trying to sell a big share of BHP or Apple.”

In 2015, the U.S. Marshals Service seized 144,000 bitcoins from Ross Ulbricht, worth approximately $122 million at the time (now worth $169.7 million), and auctioned them in equal shares.

Mr. Ulbricht is appealing his sentence after being sentenced to life in prison for setting up an illegal online marketplace, Silk Road, that was primarily a cover for drug sales and other smuggled goods.

Bitcoin has a physical place to trade, called the blockchain, and is considered a method of payment for drug dealers and black marketeers. Mr Nikitin knew many of the bidders were legal entities bidding on behalf of other groups.

"If it's a body corporate bidding, which we believe there will be a lot, then we have the details of the individuals who run those body corporates," he said. "It's vital that we are familiar with the other side of the transaction with us."