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U.S. seizes $28 million in bitcoins from man linked to online drug market

NEW YORK (Reuters) - U.S. authorities have seized an estimated $28 million in the digital currency bitcoins from the alleged owner of "Silk Road," the online marketplace for drugs and criminal activity that law enforcement shut down three weeks ago.

Federal prosecutors in New York said Friday that the 144,336 bitcoins, a digital currency widely used on the defunct site, were discovered on computer hardware belonging to Ross William Ulbricht, known online as "Dread Pirate Roberts," who was arrested October 1 in San Francisco and charged with various conspiracy counts. They said it represented the largest ever bitcoin seizure.

Ulbricht's lawyer could not immediately be reached on Friday evening, though he previously told reporters that Ulbricht denied the charges.

Since it began operations in 2011, Silk Road provided an anonymous site where drug dealers, counterfeiters and other criminals could shop for everything from heroin to hit men, according to the Justice Department.

More than 900,000 registered users of the site bought and sold drugs using bitcoins, according to authorities. The currency, which has been around since 2008, first came under scrutiny by law enforcement officials in mid-2011 after media reports surfaced linking bitcoins to Silk Road.

With nearly 30,000 bitcoins previously seized, federal agents have now collected more than $33 million in bitcoins, based on current value, the U.S. Attorney's Office in Manhattan said.

The seizures were carried out as part of a corresponding civil action against Silk Road and Ulbricht. Ulbricht, who is detained in California, is expected to appear within weeks in Manhattan federal court to face criminal charges of narcotics trafficking conspiracy, computer hacking conspiracy and money laundering conspiracy.

Court documents allege that Silk Road saw some $1.2 billion in bitcoins change hands during more than two years of operation and charged between 8 and 15 percent in commissions.

(Reporting by Joseph Ax; Editing by Lisa Shumaker)

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