German State to Receive Millions Thanks to Bitcoin Uproar

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Following the arrest of some darknet drug dealers more than three years ago, Hessian investigators confiscated the booty of a cybercrime, namely, bitcoins. At the time of the arrests, the total value of these digital cryptocurrency coins was nothing more than 50,000 EUR. At the time this was even considered a lot of money for anyone who held a bitcoin wallet.

Today, things are different, that is, bitcoin is close to hitting more than 20,000 EUR per 1 coin. The Hessian authorities never got rid of these coins either, unlike some agency’s, namely the FBI that held auctions for the bitcoins it confiscated from the Silk Road operator and convicted felon Ross Ulbricht. The agents of Hesse have left the digital currency sitting in a drawer, or on a computer rather.

Today, the city is going to net a profit of close to 2 million EUR, maybe, even more, when the coins actually go on sale.

selling bitcoin for euro in germany

It is common that criminals like to use bitcoins because of the level of anonymity the darknet provides and many of them do their own cleaning by sending their stash through a series of bitcoin mixers and tumblers. However, when the criminals are caught and thrown into jail, the first thing taken after drugs or weapons, is the money.

Yet, what is best about this story is that keeping them was not the full intention. No one was waiting to see the bitcoin explosion happen. Rather it was a result of some red tape and government lagging. It has been three years since this major coup, and not much has happened. In a joint effort with Europol and the FBI, several online darknet marketplaces were flipped based on which drugs were traded.

Two major sites that were up as part of the conversation were Silk Road 2.0 and Hydra, both illegally operating sites with criminal activity. According to the investigation, active users totalled 150,000 accounts, with several millions of EUR laundered for drugs and weapon sales. In total, about 126 bitcoins were confiscated, a small amount. There were immediately deposited into the Central Office for Combating Cybercrime in Gießen, as evidence.

Last summer, the same authorities helped capture the arms dealer responsible for selling the weapons used by the Munich shooter that murdered 9 people, wounding many more, before the suspect took his own life. But the success against the drug obsessed darknet marketplace Hydra was a first for bitcoin and the Giessener.

“It was the first time we were able to secure a large number of bitcoins in one fell swoop,” said prosecutor Benjamin Krause. “The sale should take place in the next few days,” Krause added.

The incoming 2 million EUR will help relieve some debt efforts for the state treasury. In less than a few months the value of the bitcoin has increased 300% from 5,000 to 15,000 euros. And while the value continues to rise, many German bankers and official politicians warn again its use and trade.

Therefore, the sale of these coins will go quickly because “[due to] the current price, of course, the sale is very [important to take care of now],” said Krause.

No one knows when this bubble will burst if it ever will and if bitcoin will just continue to boom upward. Cybercrime specialists believe it will remain the coin of choice for most darknet crimes. Other currencies are making headway, especially Etherum, Litecoin, and Monero, but bitcoin is the main one used for crime.

“We are treating Bitcoin only as perishable goods and therefore our desire to sell them is being used as part of an emergency sale only,” says Krause.

Or in other words, the German government is not using this as a precedent to start buying and trading bitcoin in the open market. Just as confiscated food is delivered to the poor and confiscated cars and homes are auctioned, these coins are also being sold off. Otherwise, they risk losing their value with time. Now, this is not the case at the moment with bitcoin, but the Hessian officials prefer to make the profit now, while it is guaranteed. The last thing they want is the stash of bitcoins held up by a court order or decision because of the eventual costs of holding onto these very expensive goods.

If the bubble does not burst, this will be the largest sale of Bitcoin by German authorities and even set a trend for governments that may be holding onto confiscated bitcoins.

It does not take much to sell of these coins either. Only a handful of signatures are needed and some technical details to remove the holding paperwork. The currency will be put up for sale on Bitcoin.de, which is the only regulated and official currency exchange format online for trading bitcoins in Germany.

The Gießeners are furthermore developing a standardized system that will enable other colleagues in Hesse to sell seized Bitcoins in the future. This is a pilot sale but it could be the future for making money off convicted darknet felons.

For two years now, the Federal Criminal Police Office (BKA) has succeeded in taking down cybercriminals and even contributing to closing down darknet marketplaces. Such was the case with the shutdown of Alphabay and Hansa with the joint work of the Federal Bureau of Investigation and other Europol and European Union member states.

Only starting in 2015 did bitcoin seizures in the multiple digits range begin to appear, with more than thousands taken. Such was the case in Bavaria last year where the fight against darknet marketplaces and illegal drug trades has increased. Several criminal arrests in Bavaria have led to “a significant number of Bitcoins secured,” said prosecutor Thomas Goger.

However, “often we do not get access to the wallets,” confirms Krause. So the government will take any amount of bitcoins at this point, even if it is a few. The problem is that many times when the Bitcoins are confiscated, the authorities cannot open the bitcoin wallets or bitcoin debit cards because they are password protected.

Leipzig recorded a bitcoin sale of over 432,000 EUR by the Saxon authorities last year. They had acquired the currency from the bust of the Shiny Flakes platform operator. Had the sale been made today, the 1197 bitcoins sold would be worth more than 18 million EUR. In the United States multiple bitcoin sales and auctions have taken place and in one instance, the FBI sold 144,336 Bitcoin for $48 million at the time. Today those coins secured from the Silk Road shutdown would be worth more than $2.4 billion.

silk road seizure

Bitcoin treasures can be found all over the world by local governments. Even in Bulgaria, officials confiscated over 200,000 bitcoins. These are worth well over 3 billion EUR and this could pay off more than 20% of the country’s current debt crisis. But who knows? Making such a drastic sale of bitcoins could actually burst the bubble and lead to a market collapse.

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