In November 2020, an individual identified by the U.S. Department of Justice only as “Individual X” met with an IRS agent named Tigran Gambaryan and prosecutors at the U.S. Attorney’s Office in San Francisco. This anonymous person entered a long string of Bitcoin private key characters on Gambaryan’s laptop, allowing Gambaryan to transfer 69,370 bitcoins from Individual X’s bitcoin address to an address controlled by the U.S. government.
In the four years it took the US government to establish legal ownership of this huge sum of bitcoin – identified by the IRS as stolen proceeds from the Silk Road dim drug market – its value grew to a staggering $4.4 billion. The forfeiture of the money appears to have been part of a deal that kept Person X out of jail, although the terms of that deal were never publicly disclosed.
Instead, in a strange twist of fate, it is Gambaryan, the IRS investigator who tracked and seized the record sum of cryptocurrencies, who is languishing in a Nigerian prison while those billions ultimately end up in American coffers.
The U.S. Supreme Court on Wednesday declined to hear an appeal of a lower court’s ruling that the U.S. government could seize nearly 70,000 bitcoins belonging to Individual . Since then, various parties have claimed this stolen drug money, most recently by Battle Born Investments, which sought to appeal the garnishment judgment and claimed it purchased Silk Road Bitcoins through bankruptcy proceedings. Only now that the appeal has failed, four years after the stolen money was traced to an investigation led by Gambaryan of IRS Criminal Investigations, can the U.S. government finally officially seize the recalcitrant bitcoins, which will likely be auctioned off for dollars by the U.S. Marshals Service, as in the past smaller amounts of cryptocurrencies seized.
“The Supreme Court’s decision not to hear the case means it will now be forfeited to the U.S. government,” says Will Frentzen, one of the U.S. prosecutors who handled the Individual X case and is now an attorney at the law firm Morrison Foerster. “This is the largest cryptocurrency seizure in history that will go to the US treasury.” In fact, thanks to Bitcoin’s wild appreciation in recent years, it appears to be the largest criminal money seizure in history any kind be added to the US federal budget. (The confiscation following the theft of 120,000 bitcoins from cryptocurrency exchange Bitfinex was even larger, but will likely be repaid to victims and creditors rather than retained by the government.)
However, in the same years, Gambaryan took an even more unlikely path: in 2021, he left the IRS to become head of investigations at Binance, the world’s largest cryptocurrency exchange – a move widely seen as due to Binance’s belated decision to try to tidy up its widespread operate of money laundering, which led to the company paying a $4.3 billion criminal fine to the U.S. government last year. When Nigeria, after imposing this penalty, accused Binance of a similar crime and devaluation of the national currency, Gambaryan was invited to Abuja earlier this year to negotiate with the Nigerian government. Instead, the Nigerian government detained Gambaryan, confiscated his passport and is currently imprisoning him for more than six months, accusing him of money laundering and tax evasion in his capacity as an agent of his employer.