$20 Million: DOJ Seizes Bitcoin in Operation Targeting Darknet Market Vendors

Francisco Memoria
  • Authorities recently revealed they've seized over $20 million worth of bitcoin and other cryptocurrencies.
  • Their operation led to the arrest of 35 darkweb drug dealers, and the seizure of various illegal weapons and drugs.

The US Department of Justice (DOJ), in cooperation with various other government agencies, has recently seized over 2,000 bitcoins and other cryptocurrencies after cracking down on darknet market vendors. Per the DOJ, over $20 million worth of cryptocurrencies were seized.

Through an announcement published by the Department of Justice, the operation was spearheaded by special agents of Homeland Security Investigations (HSI), which posed as money launderers on various darknet marketplaces.

This way, they were reportedly able to identify “numerous vendors of illicit goods,” which saw authorities open more than 90 active cases around the country. These led to the arrest of 35 darknet vendors, and the seizure of cryptocurrency miners, illegal weapons, drugs, $3.6 million in fiat and gold bars, and “2,000 bitcoins and other cryptocurrencies, with an approximate value of more than $20 million.”

Referring to the operation’s success, Deputy Attorney General Rod J. Rosenstein stated:

Criminals who think that they are safe on the Darknet are wrong… We can expose their networks, and we are determined to bring them to justice. Today, we arrested more than 35 alleged Darknet vendors.  We seized their weapons, their drugs, and $23.6 million of their ill-gotten gains.

Rod J. Rosenstein

Rosenstein revealed the nationwide effort is set to reduce the supply of drugs, and specifically mentioned fentanyl, a drug various darknet market vendors frown upon for being an extremely dangerous one, as it’s said an amount “as small as a grain of sand” can kill an adult. 100 grams of fentanyl were seized in the operation.

The seizures add to an existing pool of cryptocurrencies the US government has seized in the past. These could eventually be auctioned off into the market, as authorities have auctioned 80,000 BTC seized from the now-defunct darknet market Silk Road.

The DOJ’s announcement further touted the bust, adding that “the veil has been lifted,” and that “every criminal is within arm’s reach of the law.” Secret Service Assistant Director Kenneth Jenkins added that:

The Secret Service is proud to work with our law enforcement partners to help combat one of the largest threats to the U.S. financial infrastructure, money laundering with virtual currency.

Kenneth Jenkins

Notably these comments are seemingly part of an “intimidation game” authorities have been playing with darknet market vendors. Last year, when various US agencies coordinated with the Dutch police to take down two of the darknet’s then biggest markets, AlphaBay and Hansa, Dutch authorities told darknet vendors “you have our attention.”

As CryptoGlobe reported earlier this month, authorities have recently arrested a well-known darknet market vendor known as OxyMonster after tracking him down through his bitcoin transactions.

Notable Bitcoin Trader and Whale Not Bullish on the Hyperinflation Narrative

Colin Muller

Highly regarded Bitfinex trader and crypto whale J0E007 is not banking on the hyperinflation narrative, which is a highly popular notion in the cryptoasset industry, implying it's a fairy tale.

Screenshot from 2020-05-26 13-23-22.png(source: Bitfinex pulse)

This narrative, exhibited for example here, proposes that the aggressive fiscal and monetary intervention on the part of many central banks around the world will eventually lead to sharp devaluations in the values of many fiat currencies—and most importantly of the U.S. dollar.

Propagation of this concept of rampant fiat inflation in the cryptoasset space is generally tied to predictions of a huge increase in the price and/or market capitalization of Bitcoin and other cryptos, although most focus on the flagship cryptocurrency.

A Little More Complicated

In his post, JOE007 linked to a recent report from Alhambra Investments, an asset management and financial research outfit.

The report details lead analyst Jeffrey Snider’s view that the dollar is not going anywhere in terms of demand, although definitely not by virtue of the competence of the U.S. Federal Reserve in handling the unfolding economic crisis lit by COVID-19.

Conceptually, first, any strong desire to hold expensive dollar liquidity buffers is drawn from serious mistrust of systemic conditions – including the central bank’s place in them. If you thought Jay Powell well prepared in advance with effective countermeasures standing at the ready, buffers of any size need not apply.

Jeffrey P. Snider

In short, Snider contends that the Fed under chair Jay Powell has not responded appropriately to the emerging crisis with “effective countermeasures at the ready”; and this bungling in turn has led to a higher international demand for US dollars in order to sit on a larger and safer cushion of “expensive dollar liquidity buffers.”

A complicated subject, to say the least. The upshot for J0E007 being that the dollar-collapsing narrative may have some big holes in it—removing the keystone of that popular Bitcoin use-case narrative.

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