On Tuesday, Gal Vallerius, known as “OxyMonster” on the dark web drug hub Dream Market, was sentenced to 20 years in prison in Southern Florida for money laundering and narcotics trafficking. The French national was apprehended upon his arrival in the United States more than a year earlier, where he’d traveled to participate in the 2017 World Beard and Moustache Championship in Austin, Texas. (He sports an impressive beard.)
Vallerius, 36, had been selling drugs like oxycodone, heroin, cocaine, fentanyl, and Ritalin on the dark web, according to his plea agreement, in exchange for cryptocurrencies including bitcoin and Bitcoin Cash. He’d accumulated close to 100 BTC and 121.95 BCH—a current total of over $700,000—all of which he now has to forfeit to the government.
With the OxyMonster’s impressive forfeiture, a big question looms: What will the U.S. government do with all of his crypto?
There’s precedent for how to treat seized cryptocurrency assets. When Silk Road creator Ross Ulbricht was sentenced to life in prison in 2015, the government took 144,336 bitcoin found on his laptop, selling it off in multiple auctions for a total of more than $48 million. Back then, the price of one bitcoin was just over $300. This prompted a number of articles in late 2017 taunting the government for missing out on the millions they could have earned had they held onto Ulbricht’s bitcoin.
In January 2018, the United States Marshals Service auctioned off more than 3,813 bitcoin to the highest bidders who could offer a minimum deposit of $200,000. To register to bid, all hopeful bitcoin owners had to do was fill out this quick form, providing information like their home address, social security number, and bank account routing number—no more or less than what’s required when starting a new (non-government) job.
Vallerius’s plea agreement suggests that his cryptocurrency will meet a similar fate. Both his bitcoin and Bitcoin Cash will go to the U.S., and Vallerius will have to “provide all necessary passwords” for the government to gain access. But with the price of both cryptocurrencies at a recognized low and the lesson (possibly) learned from the sales of Ulbricht’s bitcoin back in 2014 and 2015, will the government auction off Vallerius’s forfeited crypto at the earliest convenience, or when the market’s looking good?
A representative at the Southern District of Florida’s Attorney’s Office told BREAKER that it’s “not too common we have to deal with bitcoin recovery,” meaning she didn’t personally know what to expect regarding the fate of Vallerius’s crypto. Personnel at the courthouse could only speak to what was on the docket, which didn’t include specifics on the bitcoin forfeiture. BREAKER reached out to the forfeitures department but hasn’t heard back yet.
Meanwhile, Gary Davis, an Irish native who earlier this week pleaded guilty to conspiring to sell drugs on the Silk Road under the name Libertas, is set for sentencing in the U.S. on January 17, 2019. He reportedly received $1,500 a week in bitcoin for helping Ulbricht operate the underground market. And just last month, a U.S. District Court in California seized over $8 million worth of cryptocurrency including bitcoin, ether, Monero, and Zcash from Alexandre Cazes, who committed suicide in a Thailand prison after being accused of running the dark web market AlphaBay. As more cases like these come up, more and more cryptocurrency will fall into the U.S. government’s lap.
With the U.S. Justice Department is working on a criminal investigation into cryptocurrency price manipulation, it seems unlikely that crypto obtained through the legal system would remain crypto in the hands of the government for long. But it’s worth remembering that for a time in 2013, after seizing funds from the Silk Road, the FBI did hold the record of “biggest bitcoin wallet.”