Crypto Auctions in the US — How to Buy Bitcoin at Lower Rates
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Crypto Auctions in the US — How to Buy Bitcoin at Lower Rates

11 months ago

Cryptocurrencies, such as Bitcoin, could be acquired cheaply in US government auctions. Learn more about how crypto came into US authorities hands, and how you could participate in the next Bitcoin government auction.

Crypto Auctions in the US — How to Buy Bitcoin at Lower Rates

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Investors, tech-personalities, and crypto-enthusiasts will be happy to discover that cryptocurrency can be acquired cheaply in US government auctions. Indeed, US government agencies, including the US Marshals (USMS) and General Services Administration (GSA) have distributed various digital assets via auction over the last few years. These assets were acquired in the course of criminal investigations or bankruptcy and are a fast and easy way to develop your portfolio. This guide will survey this practice and show you how to buy crypto at the next US government auction.

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Bitcoins on Sale at Government Auctions

Following a roller-coaster of a year for Bitcoinwith record highs and sudden drops — investors are seeking to acquire Bitcoin cheaply before the next big surge. One unique option has once again reared its head in the form of government auctions, which give prospective buyers an alternative to buying from OTC desks or exchanges like Binance.US or Coinbase.
In fact, on June 18, 2021 the General Services Administration announced the sale of 11 lots of cryptocurrency — including 8.93 Bitcoins and 150.2 litecoins. This totalled at a combined market value of $377,000 USD. This sale was notable as the first auction to sell Litecoin, but is one of several crypto auctions to have taken place this year.
Indeed, US agencies are increasingly auctioning off cryptocurrency acquired in the course of law enforcement. This litecoin, for example, was acquired during a tax non-compliance case.
Reports indicate that US government crypto auctions will increase in both prevalence and scale. Indeed, cryptocurrencies are expanding in use — with smaller countries even adopting it as legal tender, and major companies considering its acceptance in exchange for goods and services. At the same time, cyber-crime poses an increasing threat, and has been attracting more scrutiny from law enforcement agencies.

As these agencies tackle cybercrime, they will inevitably acquire digital assets, alongside the usual collection of bejewelled fire-arms, narcotics, and drug-stained hundred dollar bills. These assets will end up at auction, creating an opportunity for prospective investors.

Indicatively, a report by CNBC indicates that about USD $700,000 worth of Crypto was seized in 2019. This number grew to USD 137 million in 2020 and as of July 2021 had grown to US 1.2 billion.

Where is all This Crypto Coming From?

Asset seizure is nothing new in the United States and neither is following the money in criminal investigations. Government agencies, including the USMS and IRS have been taking things from criminals, tax evaders, and debtors since the country’s establishment. Whether taken as evidence, or seized as an ill-gotten-gain, the crypto currencies recently sold at auction are usually seized for the following reasons:
  • As the result of money laundering investigations
  • Due to tax evasion
  • As evidence in a crime
  • As ill-gotten-gains from ransomware

Examples of US Crypto Seizures

The first high-profile digital asset seizure involving the United States took place in 2013. Following and investigation and then crackdown, the FBI agents took down the website Silk Road — an online black market for firearms, narcotics, murder-for-hire, and everything in between.
This now-defunct illicit marketplace operated entirely on the dark web and did business exclusively in Bitcoin. While it was a Mecca for the crypto community at the time, it also attracted the patronage of criminals and despots, and ended up generating a lot of bad press for Bitcoin — starting the false narrative that cryptocurrencies are mostly used by criminals. Controversially its founder Ross Ulbricht (known online as Dread Pirate Roberts) was sentenced to two life sentences plus 40 years in jail on 7 non-violent charges as a clear deterrent and example to others.
As they dismantled the marketplace, prosecutors captured 30,000 ill-gotten Bitcoin. At the time, Bitcoin was still a fringe commodity, and the US government lacked both the know-how and infrastructure to sell it. Following some deliberation, the USMS stepped up and sold the 30,000 Bitcoin at auction for about 19 million USD to shrewd investor Tim Draper.
The government is usually playing catch up with criminals in its adoption of technology. Indeed, US taxpayers would be annoyed to find out that the same amount of Bitcoin is worth approximately USD 1.35 billion today! The incident helped though to establish a framework for future digital asset seizures and auctions.
Another, more recent example demonstrates the increasing prevalence of the practice. On Monday, June 7, 2021 a DOJ press release announced the seizure of 63.7 Bitcoins valued at over USD 2.3 million.
These coins represent the proceeds of the May 8th Colonial Pipeline ransomware attack and are one of a number of batches that will likely appear in auction houses following due process.

What Happens to the Money Earned in these Auctions?

After court proceedings, the auction's proceeds will be exchanged for fiat currency. The federal authorities typically divide up the earnings between the Treasury Forfeiture Fund (TFF) and the Department of Justice Assets Forfeiture Fund. 60 - 70% end up in the TFF where it is used to fund projects following approval by congress. There is no central database that monitors the US government handling of the proceeds accrued during crypto auctions.

What Does This Mean for the Investor/Buyer?

There are 3 basic conclusions that can be drawn from the US government’s present policy towards auctioning off digital assets.

  1. If you're a criminal or a tax evader hoping that cryptocurrency is immune to government seizure — think again.
  2. The amount of cryptocurrency being auction by the government is increasing
  3. Federal agencies have a history of selling crypto far below market value

In sum, crypto auctions may be a relatively low risk way to acquire large amounts of cryptocurrency.

So How Do I Get in on a Cryptocurrency Government Auction?

Before deciding to buy a cryptocurrency at auction, consider your finances carefully. Although easily acquired en masse at auction, past growth in value is not an indicator of future success. If you are comfortable with the associated risks, follow these steps:

  • Step one: Find an auction - several government organs sell cryptocurrency. Keep an eye on the GSA and USMS websites for upcoming auctions. The following covers instructions for USMS auctions — but buyers are spoiled for choice.
  • Step two: Register for the auction. This will require:
  1. A signed pdf copy of the Bidder Registration Form
  2. A copy of your ID
  3. A deposit in UD sent via EFT by a bank located in the USA
  4. A copy of the EFT transmittal receipt
  • Step three: Prepare the agreed upon deposit. This will vary by auction. You will lose this deposit if you fail to pay for a winning bid on time
  • Step four: After sending in the above documents, the USMS will decide if you're eligible. If so, proceed to step four
  • Step five: Place bids during the designated auction period by send them to USMSCryptocurrency@usdoj.gov. Bids will be considered open until confirmed otherwise. Remember to make bids in US dollars. If you win the auction you will be notified
  • Step six: If you win the auction, transfer money within the designated time period. Be ready to cover any transfer fees

Other Cryptocurrency Auctions

The USMS and GSA are not the only state-level organizations using cryptocurrency auctions. Several European countries, including France, are adopting similar policies. The Mt. Gox trustee in Japan was unfairly blamed for a Bitcoin price collapse in 2018 when it came to light that he was selling $400 million of BTC to make investors impacted by the infamous hack whole again.

Conclusion

As cybercrime and the use of ransomware continues to evolve and expand, so will the government's use of auctions. Savvy investors are presented with an opportunity to develop their crypto portfolio quickly, but this will entail jumping through bureaucratic hoops. For those willing to take the risk, crypto auctions could prove very lucrative.

It’s important to be realistic though. With Bitcoin more popular than ever and public interest from both retail and institutional investors at an all-time high, it might be near impossible for smaller investors to get a foot in the door with Bitcoin auctions. Still, it’s worth a shot trying. As the saying goes, anything can happen at an auction.

And if you don’t get that ill-begotten Bitcoin at a discount, there are other avenues to explore to stack up your Satoshis, such as the Grayscale Bitcoin negative premium shares or simply staking or lending your Bitcoin and other assets for a guaranteed return on investment.

Frequently Asked Questions

Q: Can non-US citizens partake in US based auctions?A: Yes! Provided they do not appear on restriction lists and are using a US bank.

Q: Can a group buy cryptocurrency at auction? A: Yes! Providing a member of that group meets the predefined requirements

Q:How much money do I need to participate in an auction?A: You should have enough to cover your purchase and any transfer fees. Remember you will lose your deposit if you fail to pay on time.

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