Authorities arresting a pirate and searching desperately for his plunder sounds more like a scene from a Johnny Depp film than a real-life court case, but when Dread Pirate Roberts – also known as Silk Road mastermind Ross Ulbricht – was arrested by the FBI last week, it seriously underestimated how difficult it would be to seize his assets.
The reason for the FBI's struggle is largely due to the fact that Ulbricht does not own an ordinary sort of money. Bitcoin is a digital currency based on the same sort of cryptography that is used to protect confidential emails. No centralised agency processes its payments; instead, users’ computers shoulder the work, making Bitcoin an anonymous, decentralised, peer-to-peer form of currency.
The lack of its physical existence meant that one of the biggest watering cans nurturing Bitcoin’s early growth was online drug marketplace Silk Road. Taking advantage of the currency’s anonymity, the organisation reportedly pulled in revenue of around 600,000 digital coins – in layman terms, that translates to roughly £49.7 million in commissions.
So when Ulbricht was arrested and charged with conspiracy to traffic narcotics from the site, the FBI seized 26,000 Bitcoins belonging to Silk Road customers. Its attempts, however, to claim the actual 600,000 coins of personal revenue which Ulbricht himself is purportedly holding have been so far unsuccessful.
The “wallet” which stores Bitcoins is essentially just a digital file which contains encrypted information enabling the user to spend the currency. To transfer money out of that wallet, the user must know that wallet’s password or “private key”.
This is where the FBI have found their path blocked. According to Kashmir Hill writing for Forbes: “The FBI has not been able to get to Ulbricht’s personal Bitcoin yet.”
Indeed, an FBI spokesperson reportedly told Hill that the 600,000 Bitcoins – an amount that represents just over 5 per cent of all Bitcoins in circulation - in Ulbricht’s possession were each encrypted and held separately.
At the very least, since Ulbricht is currently in captivity, his funds are likely to remain unspent for the time being whilst FBI agents attempt to crack his wallet.