U.S. third bitcoin auction spurs more demand with 34 bids

[March 06, 2015] By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The U.S. Marshals Service on Thursday held its third auction of bitcoins seized from Ross Ulbricht, convicted of operating black-market website Silk Road, with a sale of 50,000 units attracting higher demand than the previous auction.

The government had 14 registered bidders for the 34 bids received, said Marshals Service spokeswoman Lynzey Donahue. That was higher than the bids received at the last bitcoin auction in December, when just 11 buyers submitted 27 bids.

The first auction in June attracted 45 bidders and 63 bids.

Donahue expects the auction process to be finished on Monday, at the earliest, when the financial transactions have been completed and the bitcoins transferred to the winning bidders. The winners though are expected to be notified on Friday.

The bitcoins on the auction block are valued at $13.9 million at current prices.

The six-hour online auction began at 8 a.m. EST (1300 GMT). The 50,000 bitcoins were offered in 20 blocks: 10 blocks of 2,000 bitcoins and 10 blocks of 3,000 bitcoins.

The Marshals Service conducted auctions in June and December for nearly 80,000 bitcoins seized during the 2013 raid of Silk Road, a website on which authorities say drugs and other illegal goods could be bought. Ulbricht, 30, was found guilty on Feb. 4 of conspiracies to commit money laundering, computer hacking and drug trafficking.

SecondMarket, owned and founded by Barry Silbert, won the bidding for 48,000 bitcoins auctioned in December. Silbert said that SecondMarket would participate in Thursday's auction, but his firm has not created a syndicate for the sale.

Pantera Capital, an investment fund founded by Dan Morehead, a former senior executive at hedge fund Tiger Management, said in its newsletter it is also participating and has formed a syndicate for the auction.

Meanwhile, billionaire venture capitalist Tim Draper, winner of the past two auctions, did not submit a bid. But he said in an email that the bitcoins on the auction block are "probably...the best deal anyone will get."

Draper won part of the bitcoin auction in December, successfully bidding on one lot, totaling 2,000 bitcoins, on behalf of Draper Associates. He planned to invest 300 bitcoins in every startup that participated in the current session of Boost, a program for bitcoin-related startups founded by his son, Adam Draper.

Tim Draper was the sole winner of the first auction of 29,655 bitcoins.

In late trading, bitcoin prices were up 2.3 percent at $277.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey Benkoe and Andrew Hay)

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