David Canellis

Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) that once belonged to the Silk Road is on the move — about four months after the US Department of Justice (DOJ) sold millions of dollars worth of it on Coinbase.



A string of transactions involving Silk Road bitcoin was waiting to be confirmed Wednesday morning. Altogether, 9,825 BTC ($302.2 million) queued for sending by addresses tied to the DOJ.



The addresses are directing the bitcoin to unused addresses. The DOJ has shuffled its Silk Road stash before, so it’s too soon to say it intends to be sold immediately.&nbsp;



Still, authorities offloaded 9,800 BTC in March directly to US-based platform Coinbase for $21,800 per token, generating $215 million.



At the time, officials said they intended to sell an additional 41,500 BTC ($1.27 billion) <a href="https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34">seized</a> from Silk Road hacker James Zhong across four batches.



Bitcoin is today worth $31,600 after shedding a few hundred dollars after word of the transfers first broke.



Silk Road, one of the first marketplaces powered by bitcoin payments, went dark in October 2013 as US authorities arrested founder <a href="https://blockworks.co/news/imprisoned-silk-road-founder-sold-his-first-nft-to-a-dao-trying-to-free-him">Ross Ulbricht</a>. He was charged the following year and eventually sentenced to consecutive life sentences plus 40 years without parole.



The DOJ&#8217;s <a href="https://www.blockchain.com/explorer/transactions/btc/31f1ad8cec13978f1b93403641eb0c08144a450d7266eaf1fbaa4fd859b093d0">pending</a> Silk Road <a href="https://www.blockchain.com/explorer/transactions/btc/7dcbeff9e6da0f4ec5133d2f8b6fbe8bb73e05c5ddc8f5e410d408f8150e02ca">transactions</a> are currently facing a confirmation delay, potentially caused by inadequate transaction <a href="https://www.blockchain.com/explorer/transactions/btc/3c4e8e98890fa5c633d2a4f853751513e0a6558baa2318914eec73c727ef8316">fees</a>.&nbsp;(The transactions were later confirmed.)



One had been waiting 20 minutes at time of writing, another for more than 40 minutes, with <a href="https://www.blockchain.com/explorer/transactions/btc/7dcbeff9e6da0f4ec5133d2f8b6fbe8bb73e05c5ddc8f5e410d408f8150e02ca">both</a> blocks unconfirmed. The DOJ appears to have only allocated a meager sum, only $8 in fees, for these transactions. Bitcoin blocks are processed on average once every 10 minutes.



The last time the <a href="https://blockworks.co/news/us-government-dumps-bitcoin-silk-road">department sold coins</a> connected to the Silk Road, the US government paid more than $215,000 in transaction fees, officials said in court filings.



A <a href="https://jlopp.github.io/us-marshals-bitcoin-auctions/">portal</a> tracking bitcoin seized by the US government shows the Feds have missed out on $5.6 billion by selling BTC rather than holding it.



Updated Jul. 12, 2023 at 11:09 am ET: Two transactions were confirmed after around an hour. A third transaction is still pending after almost two hours. Code is law.



Updated Jul. 12, 2023 at 11:31 am ET: The third transaction was finalized after around two hours and five minutes.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

DOJ gets Silk Road coins worth $305M stuck in Bitcoin mempool

Casey Wagner

The Chamber of Digital Commerce has issued a Congressional call to action to prioritize moving a legal framework for crypto forward.&nbsp;



The advocacy group is requesting Congress to establish a “Digital Asset and Blockchain Technology Solarium Commission” to create a comprehensive policy package. The Commission proposal draws on President Dwight D. Eisenhower-era policy when “Project Solarium” was launched to address national security concerns during the Cold War.&nbsp;



More recently, Congress mandated the bipartisan “Cyberspace Solarium Commission” in 2019 to improve cyber defense strategies.&nbsp;



“Our allies&#8217; and adversaries&#8217; advances in blockchain and digital assets threaten U.S. leadership and dominance across next-generation finance, trade, business, and other verticals while the U.S. sits idle&#8211;effectively pushing the industry overseas,” the Chamber wrote in a statement Thursday.&nbsp;&nbsp;



A consensus among a number of bipartisan lawmakers has emerged: crypto-oriented businesses are leaving the US, but <a href="https://blockworks.co/news/anti-crypto-memo-democrats" target="_blank" rel="noreferrer noopener">political parties have different thoughts as to why</a>.&nbsp;



Rep. Stephen Lynch, D-Mass., said crypto companies, <a href="https://blockworks.co/news/waters-floats-stablecoin-bill" target="_blank" rel="noreferrer noopener">particularly stablecoin issuers</a>, are trying to go to the area of least regulation.&nbsp;



“A race to the bottom is the custom of this industry,” Lynch said Thursday morning during the House Financial Service Committee Digital Asset Subcommittee on Digital Asset stablecoin <a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408790">hearing</a>.&nbsp;



Their goal is to “escape regulation,” he said.&nbsp;



Other lawmakers, namely Warren Davidson, R-Ohio, <a href="https://blockworks.co/news/crypto-industry-takes-stock" target="_blank" rel="noreferrer noopener">have countered, challenging that crypto companies are really going offshore</a> in the pursuit of more regulatory clarity, lacking precision in terms of US industry oversight.&nbsp;



In its call to action, the Chamber of Digital Commerce highlighted work other countries are doing to advance crypto policy. South Korea has invested close to $45 billion to advance its “Digital New Deal” while Japan is miles ahead of the US on stablecoin legislation, the Chamber said.&nbsp;



“A Commission will render collaboration and leadership from government, industry, and academia for the future of the industry&#8217;s development,” the Chamber added. “We believe an effort of this magnitude is imperative in today&#8217;s divided Congress and we call all members of the 118th Congress to support it.”



The Chamber of Digital Commerce has already drafted legislation, to be released soon, and has sponsors “lined up,” Cody Carbone, vice president of policy at the Chamber, told Blockworks.&nbsp;



The Commission is &#8220;a unique approach to counter the stalled/political efforts we see right now,” Carbone added.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Blockchain Advocacy Group Calls on Congress to Get it Together 

Sebastian Sinclair

<div id="highlights-block_634fa8b0f6de7" class="highlights">
 <ul>
 <li>The concept will include the digitization of a series of government debt to be issued to select participants</li>
 <li>The private permissioned blockchain is compatible with the Ethereum virtual machine</li>
 </ul>
 
</div>



The Israeli government is planning to test blockchain-based digital bonds as it seeks to modernize financial market processes and reduce associated costs.



In a joint effort, the Office of the Accountant General in the Ministry of Finance and the Tel Aviv Stock Exchange (TASE) — the country’s only public equities bourse — will issue bonds via a permissioned private distributed ledger technology platform being readied for live testing.



The proof-of-concept will include the digitalization of a “new series” of government debt to be issued to select local and foreign primary dealers, marking the first time Israel has embarked on such a venture.



Digital assets infrastructure and custody solutions provider Fireblocks and US-based cloud computing tech firm VMWare will assist in the technical execution of the platform, while TASE has been tasked with leading the project.



Tokenized bonds will be sent to participants&#8217; digital wallets while the issuance consideration, in digital currency, will be transferred from the participants to the state of Israel’s own wallet, according to a statement.



The pilot project will begin within the next few days and is expected to be completed by the end of the first quarter of 2023.



“Israel is almost the only market in the world where government bonds are traded on the main exchange, so it’s an opportunity to generate a pilot, with the involvement of the State of Israel and leading international banks,” TASE’s head of clearing Orly Grinfeld told Blockworks in an email.



Unlike some experiments to tokenized bonds, such as <a href="https://cms.blockworks.co/major-french-bank-wants-to-back-the-dai-stablecoin-with-40m-in-bonds/" target="_blank" rel="noreferrer noopener">Société Générale’s partnership with MakerDAO</a> in October 2021, which used the Ethereum public blockchain, this one will remain entirely centralized for now. However, a Fireblocks spokesperson told Blockworks that the permissioned blockchain is compatible with the Ethereum virtual machine (EVM), and therefore, “if the Ministry of Finance wanted to issue digital assets on a public chain in the future, there would be little difference.”



The platform, which will also be based on smart contracts and tokenization, will be designed for the clearing and trading of non-crypto digital assets, TASE said.



<h3 class="wp-block-heading">Blockchain bond issuance</h3>



Typically, government debt raising through the issuance of bonds often requires large-scale coordination between various systems. Blockchain tech is often praised for its ability to expedite financial transactions while cutting out intermediaries.&nbsp;



In this instance, TASE is hoping its test will demonstrate the tech’s use in reducing bond issuance costs, speeding up settlement times, improving transparency and streamlining processes.



Following the first <a href="https://www.icmagroup.org/market-practice-and-regulatory-policy/fintech-and-market-electronification/distributed-ledger-technology-dlt/frequently-asked-questions-on-dlt-and-blockchain-in-bond-markets/5-what-are-dlt-bonds/" target="_blank" rel="noreferrer noopener">DLT bond</a> issued in 2018 by the <a href="https://www.worldbank.org/en/news/press-release/2018/08/23/world-bank-prices-first-global-blockchain-bond-raising-a110-million" target="_blank" rel="noreferrer noopener">World Bank</a>, TASE and the ministry said they had been following developments in the financial markets, including tokenizing various assets. 



Both said they were eyeing central bank digital currency test runs of financial institutions, which have begun to pick up in speed.



Several countries have begun leveraging DLT-based bonds to raise money for infrastructure from the debt instrument, including the Philippines, which earlier this year raised 11 billion Philippine pesos ($186 million) after investors rallied behind its debut.



TASE and the government also said they could read the writing on the wall when it came to a shift in the digitization of financial instruments.



“The financial markets are undergoing drastic transformations in recent years,” TASE CEO Ittai Ben-Zeev said in the statement. “We hope to see Israel spearhead financial technology while being the first to implement cutting-edge technologies and upgrade the capital market.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Israel To Test Blockchain-based Bonds

Jacquelyn Melinek

<div id="highlights-block_6202a9e31b921" class="highlights">
 <ul>
 <li>Both crimes carry a total maximum sentence of 25 years in prison</li>
 <li>It’s the department’s largest financial seizure ever, Deputy Attorney General Lisa Monaco said in a statement</li>
 </ul>
 
</div>



The US government has recovered the majority of the cryptocurrency stolen during the 2016 Bitfinex hack and arrested a married couple allegedly linked to it.



In 2016, hackers stole 119,755 bitcoin, worth approximately $5.3 billion at the current price, from the cryptocurrency exchange. The <a href="https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency" target="_blank" rel="noreferrer noopener">Department of Justice said</a> Tuesday that law enforcement had recouped more than $3.6 billion so far. 



This is the department’s largest financial seizure ever, Deputy Attorney General Lisa Monaco said in a statement. “[Today’s arrests] show that cryptocurrency is not a safe haven for criminals,” Monaco said.



New York residents Ilya Lichtenstein, 34, and Heather Morgan, 31, were arrested for conspiracy to launder cryptocurrency and money that was stolen during the hack six years ago. They were also charged with conspiracy to defraud the US.



Both crimes can carry a total maximum sentence of 25 years in prison. They are scheduled to make their first appearances in a Manhattan federal court Tuesday afternoon.



<blockquote class="wp-block-quote">“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions,” Monaco said. “Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”</blockquote>



Lichtenstein and Morgan allegedly conspired to launder 119,754 bitcoins that were stolen from the platform after a hacker breached the systems and made over 2,000 unauthorized transactions.&nbsp;



“Those unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control,” according to court documents. “Over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan.”



The remainder of the stolen funds, about 94,000 bitcoins, remain in the wallet used in the hack.



At the time of the theft, bitcoin was trading at $612, valuing the heist at $73.39 million — less than one 70th of its current worth.



Bitfinex <a href="http://12:37https://support.bitfinex.com/hc/en-us/articles/4417401349657-2016-Security-Breach-Bitcoin-Recovery-Frequently-Asked-Questions-FAQ-" target="_blank" rel="noreferrer noopener">said</a> it hoped to work with the U.S. Department of Justice to retrieve the stolen bitcoin. &#8220;We will provide further updates on our efforts to obtain a return of the stolen bitcoin as and when those updates are available,&#8221; the company said.



Prior to this, global law enforcement and other private sectors helped Bitfinex recover about 27.66 and 6.5 bitcoin in February 2019 and December 2021, respectively.



The complaint alleges the couple used a handful of laundering techniques, including using fictitious identities to set up online accounts and utilizing computer programs to automate transactions.



“Financial crime strikes at the core of our national and economic security,” Acting Executive Associate Director Steve Francis of Homeland Security Investigations said in a statement. “With a hack of this magnitude, public and private sector collaboration is crucial to ensure continued consumer confidence in our financial system.”



Crypto platforms in general have been struck by a number of exploits, including several that took place this year.&nbsp;



Earlier this month, hackers stole <a href="https://cms.blockworks.co/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether/" target="_blank" rel="noreferrer noopener">120 ether, or $320 million</a>, from the Wormhole protocol in the <a href="https://defiyield.app/rekt-database" target="_blank" rel="noreferrer noopener">second-largest</a> DeFi hack to date.&nbsp;



At the end of January, DeFi (decentralized finance) protocol Qubit Finance lost millions of dollars to a hack after 206,809 Binance Coin, roughly <a href="https://cms.blockworks.co/defi-protocol-qubit-finance-loses-80m-in-hack/" target="_blank" rel="noreferrer noopener">$80 million</a>, were stolen.



The DOJ was not available for comment on Tuesday.



This story was updated on Feb. 9, 2022, at 12:50pm ET, with additional details on the stolen funds and Bitfinex&#8217;s efforts to recover them.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.