The DEA Seizes Drug Dealer’s BitCoin Cache

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In the first operation of its kind, federal agents seize virtual currency from a Silk Road trader

Agents of the US Drug Enforcement Administration (DEA) have seized 11.2 Bitcoins from a man in South Carolina accused of dealing drugs through the infamous Silk Road online marketplace. This is the first known instance of a government organisation confiscating virtual currency as if it was an actual asset.

Eric Daniel Hughes was accused of selling prescription medication such as Adderall, Dexedrine and Marijuana through an anonymous network often cited as an example of illegal activity related to BitCoin.

The official seizure notice was discovered by Let’s Talk Bitcoin on Friday, but the arrest took place much earlier, in April.

War on drugs 2.0

Silk Road is an unregulated marketplace that can only be accessed through the anonymous Tor protocol. The fact that Silk Road is trading in drugs, weapons and even less agreeable items and services is widely known. However, so far the authorities haven’t made a decisive effort to close it down.

SilkRoad05_GQ_7Feb13_bIn April, the DEA seized 11.2 Bitcoins belonging to Hughes, currently worth around $814 (£533), saying they had been acquired as a result of a violation of the Controlled Substances Act.

It is unclear just how exactly the feds took possession of Bitcoins. It is possible that this was a ‘honeypot’ operation, with DEA agents simply taking the payment for non-existent merchandise, and then moving in to arrest Hughes.

But it’s a fact that the federal agents got their hands on the alleged dealer’s Bitcoin wallet number, and transferred the contents of that wallet into a government-owned account.

“This could mean that either the DEA took control of a computer with an unencrypted wallet and transferred the amount to a DEA controlled wallet, or more likely that this was not an in-person confiscation at all,” wrote Brian Cohen and Adam Levine on Let’s Talk BitCoin blog.

According to the experts, Hughes (known as Casey Jones on the Silk Road) is currently out of jail on a $10,000 bond. Some comments of the website suggest that he was careless when conducting business, and even his customers repeatedly warned him about using his physical address to trade.

Last month, the founder of the Silk Road known as ‘Dread Pirate Roberts’ admitted that attackers had found a way of exploiting the Tor network, and the illegal marketplace was under constant DDoS attack. “It’s looking more and more like a restructuring of the Tor software or even the Tor network will be required to mitigate the kind of attack we are under,” he wrote.

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