First ever Bitcoin bust: Feds seize electronic currency 'in connection to shadowy internet drug bazaar'

Known as the 'ebay of drugs,' the site is part of the so-called Deep Web, which is invisible to the typical internet surfer

Silk Road only accepts Bitcoins

Eric Daniel Hughes may have had connections to the site



First ever: Eric Daniel Hughes saw 11.02 of his Bitcoins, a type of online currency, taken by the federal government in the first ever seizure of its kind

A South Carolina man received a dubious honor in April when his Bitcoins became the first ever seized by the U.S. government.

The U.S. Drug Enforcement Administration seized the 31-year-old Eric Daniel Hughes’ Bitcoins, which are a type of online currency.

It’s believed that the seizure may have been related to shady online drug clearinghouse Silk Road, a site that only accepts Bitcoins as currency.

According to DEA documentation , agents seized 11.02 Bitcoins from Hughes, worth $814.

Though the forfeiture notice makes no mention of the online illicit drug seller, the Post and Courier reports that speculation regarding the involvement of Silk Road has quickly arisen simply because of the Bitcoin seizure.

When buzz began to spread of the seizure, users of the blog Let's Talk Bitcoin! were able to connect the Bitcoin account number listed on the DEA document to a transaction made in April on Silk Road of exactly 11.02 Bitcoins.

‘This is the first time something like this has happened with Bitcoin,’ said Adam B. Levine, editor of Let’s Talk Bitcoin!, told the Post and Courier . ‘And the interesting subtext is: We don't have any idea just how involved the DEA is with Bitcoins.’

Consequently, neither do Silk Road users know how deeply the so-called ‘eBay of drugs’ has been breached, if indeed it has at all, by the federal government.

eBay of drugs: Evidence suggests that Hughes' Bitcoins were seized in connection with shadowy internet drug bazaar Silk Road, which only accepts Bitcoins

Chomping at the bitcoin: Bitcoins are a virtual currency that are difficult to track and the fact some were seized by the government led many who follow the novel money to wonder how they did it

Federal authorities admit to seizing Hughes’ Bitcoins, however it is unclear how they went about actually holding onto the largely anonymous currency units.

The Post and Courier reports that the feds have not, however, charged Hughes as of yet.

The local authorities are going after him. The Charleston, South Carolina police raided Hughes apartment in June and, according to police affidavits, found 10 bags of the narcotic Suboxone during the search.

How'd they do that? The digital currency is stored virtually by sites like Bitcoin Wallet. The feds may have used Hughes' own computer to seize his 11.02 Bitcoins or staged an online sting operation

He is also accused of selling other prescription drugs as well as marijuana to police informants.

So how did the DEA confiscate completely digital currency?

According to Levine, the police would have either had to use the same computer Hughes used to make the transaction to take ownership of the currency or they undertook an online sting operation in order to confiscate the coins.

Unstable currently: Those in the know when it comes to Bitcoins seem at a loss as to how Hughes' virtually currency was seized and what it means for the illicit sale of drugs and other items on sites like Silk Road in the future

Either way, this remains one for the record books and likely has Silk Road drug buyers squirming as their so-called Deep Web—a difficult to access layer of the internet invisible to the typical user where Silk Road can be found—may have been penetrated by authorities.

They are no doubt chomping at the bitcoin as they wait to find out.