Bitcoin auction draws Wall Street, Silicon Valley bidders

The FBI transferred more than 144,000 bitcoins to the Marshals Office when it shut down Silk Road.
The FBI transferred more than 144,000 bitcoins to the Marshals Office when it shut down Silk Road.Lucy Nicholson/REUTERS

WASHINGTON — Buyers from Wall Street to Silicon Valley are lining up to bid on a cache of bitcoins worth about $17 million, underscoring the interest in the digital currency even after its boom and bust.

Pantera Capital Management, a San Francisco hedge fund backed by Fortress Investment Group, and SecondMarket Inc., a New York brokerage, are among those seeking to buy bitcoins from the US government at an auction scheduled for June 27. A broad swath of interested parties, from individuals to institutional investors, have requested information from the US Marshals Service, which is handling the sale.

‘‘I know of small and large investors who are talking about investing in this,’’ said Jaron Lukasiewicz, chief executive of Coinsetter Inc., a New York-based exchange. ‘‘And there are probably some hidden players out there — hedge funds who are looking to get into the market.’’


The auction of 29,656 bitcoins, part of more than 144,000 the FBI transferred to US Marshals after shutting down the Silk Road marketplace and arresting its operator last year, represents a rare opportunity to secure a large amount of the virtual currency. Because liquidity on the exchanges is low — a trade of 500 bitcoins can move prices — buying from the government offers a chance to avoid paying a premium.

‘‘If an investor wanted to buy this much bitcoin all at once in the open market, they could bid the price of bitcoin up by 10 to 20 percent by simply filling out that trade,’’ said Gil Luria, an analyst at Wedbush Securities Inc.

Mark Williams, a former bank examiner and now lecturer at Boston University, said the interest from Pantera and SecondMarket amounts to ‘‘a speculative bet, not of new buyers, but the same market promoters.’’

‘‘This auction doesn’t validate bitcoin but simply demonstrated that the US government is anxious to get out before prices drop again,’’ Williams wrote in an e-mail. ‘‘The US Marshals Service has over 29,000 reasons to sell by private auction and sell now.’’


Bidders are required to deposit $200,000 and verify their identities. The US Marshals will notify the winner or winners on June 30. More bitcoins may be sold later, the agency has said.

The sale excludes bitcoins the government obtained from computer hardware owned by Ross William Ulbricht, who prosecutors said ran Silk Road. The marketplace was an online bazaar where anonymous users allegedly bought and sold heroin, LSD, phony passports, and computer hacking services.

An e-mail from the US Marshals, sent by accident, indicated interest from representatives of Rangeley Capital, a New Canaan, Conn.-based hedge fund, and DRW Holdings, a Chicago trading firm. The companies declined to comment or did not respond to messages.

SecondMarket, which specializes in hard-to-trade assets, already runs a trust for investors that lets people buy into bitcoins without the risk or technical complications of owning them directly. SecondMarket began raising money in September for the trust, which now has $62.5 million in assets and is seeking to open it to smaller investors as well. The group is assembling a syndicate to bid for the bitcoins, according to chief executive Barry Silbert.

The price of bitcoins skyrocketed in 2013 to $1,147 from around $12 as technologists and speculators flocked to the currency, before tumbling amid regulatory crackdowns in China, Russia, and elsewhere. Its price was $562.39 Wednesday, according to the CoinDesk Bitcoin Price Index.