Digital Currency as an Asset Accessible in Litigation

February 10, 2014

Internet MoneyIn a criminal law enforcement action by the United States government, assets seized from the defendant included approximately 28 million dollars worth of “bitcoins,” the digital currency.  This action illustrates that assets accessible during criminal and civil law litigation now include digital currency and that the value of those digital assets can sometimes be substantial.

The founder of the Silk Road website, Ross Ulbrecht, was arrested by U.S. federal authorities and charged with money laundering, narcotics conspiracy, and computer hacking.  As part of this enforcement action, federal authorities seized the Silk Road website and approximately 30,000 bitcoins associated with the site.

The government argued that the website and the bitcoins were used to facilitate illegal activity, including money laundering.  As assets allegedly associated with illegal conduct, the government argued that the assets could be seized.

Judge J. Paul Oetken of the federal district court for the Southern District of New York agreed with the government’s arguments.  He authorized federal agents to take control of the website and the bitcoins.  The government reportedly plans to convert the bitcoins into dollars and add those funds to the federal government’s general purpose fund.  Reportedly, the U.S. government now holds seized bitcoins with current total value of more than 150 million dollars.

This case provides a useful illustration that digital currency holdings now comprise important assets that can play a significant role in litigation.  The Silk Road case demonstrates that digital currency is an asset that must be recognized by plaintiffs and defendants in judicial and regulatory proceedings.

Parties pursuing assets during litigation now routinely attempt to identify and access digital currency holding.  Owners of digital currency are increasingly making efforts to shield those assets when litigation is anticipated.  The increasing popularity of digital currency is helping to make its economic value substantial.

As individuals and organizations develop strategies and systems to manage their assets, they must now include digital currency holdings in that planning.  Gone are the days when digital currency assets where of minimal value and could easily remain unrecognized.

Digital currency is now the topic of significant attention and interest.  As use of digital currency expands and diversifies, expect more battles over ownership of those assets.  Individuals and organizations must now inventory their digital currency holdings and integrate those holdings effectively into their overall asset management strategies and practices.

Similarly, parties identifying assets of other individuals and organizations should remain mindful of digital currencies.  When assessing assets as part of litigation and in other contexts, digital currencies should be recognized and analyzed.