In November 2020, a person identified by the U.S. Department of Justice only as “Individual X” sat down with an IRS agent named Tigran Gambaryan and prosecutors from the U.S. attorney’s office in San Francisco. That anonymous individual typed the long string of characters of a Bitcoin private key onto Gambaryan’s laptop, allowing Gambaryan to move 69,370 bitcoins from Individual X’s bitcoin address to one controlled by the US government.
During the four years it has taken the US government to establish legal ownership of that enormous sum of bitcoins (identified by the IRS as stolen product from the Silk Road darknet drug market), its value has grown to a staggering $4.4 billion. The confiscation of the money appears to have been part of a deal that kept Individual X out of prison, although the terms of that deal have never been publicly revealed.
Instead, in a strange twist of fate, it is Gambaryan, the IRS criminal investigator who tracked down and confiscated that record sum of cryptocurrency, who is in a Nigerian jail while those billions ultimately end up in US coffers.
On Wednesday, the US Supreme Court declined to hear an appeal of a lower court ruling that the US government can confiscate Individual X’s nearly 70,000 bitcoins, which he allegedly took from Route de la Seda more than a decade ago exploiting a security vulnerability in the market. That stolen drug money has since been claimed by various parties for years, most recently by a company called Battle Born Investments that attempted to appeal the seizure ruling and claimed to have purchased the Silk Road bitcoins through bankruptcy proceedings. . Only now that this appeal has failed, four years after the stolen money was located in an investigation led by Gambaryan at IRS Criminal Investigations, can the US government finally take official possession of the wayward bitcoins, which will likely be auctioned for dollars by the US Marshals Service, as smaller sums of seized cryptocurrencies have been done in the past.
“The Supreme Court’s decision not to hear the case means that now the United States government will lose it,” says Will Frentzen, one of the US prosecutors who handled Individual X’s case and is now an attorney at a law firm. Morrison Foerster. “This is the largest ever cryptocurrency seizure that will go to the US Treasury.” In fact, thanks to the huge appreciation of Bitcoin in recent years, it appears to be the largest criminal seizure of bitcoin money ever made. any type which will be added to the United States federal budget. (A seizure following the theft of 120,000 bitcoins from cryptocurrency exchange Bitfinex was even larger, but will likely be refunded to victims and creditors rather than staying with the government.)
However, during those same years, Gambaryan has taken an even more unlikely path: In 2021, he left the IRS to accept a job as head of investigations at Binance, the world’s largest cryptocurrency exchange, a move many consider driven by Binance’s late decision. attempt to clean up its own widespread use for money laundering, leading the company to pay a $4.3 billion criminal fine to the U.S. government last year. When Nigeria followed up that fine by accusing Binance of similar criminal conduct and devaluing the country’s national currency, it was Gambaryan who was invited to Abuja to negotiate with the Nigerian government earlier this year. Instead, the Nigerian government detained Gambaryan, took away his passport and has now jailed him for more than six months, accusing him of money laundering and tax evasion as a representative of his employer.
