Bitcoin Bidders in Big Sale Irked as Government Outs Their Names

Potential bidders for one of the largest blocks of bitcoins ever sold said they are irked after the U.S. government accidentally outed their names in an e-mail.

The U.S. Marshals Service, which is planning to auction bitcoins seized last year from the illicit Silk Road marketplace, sent a message today to almost 40 e-mail addresses of people and groups who submitted questions about the sale, which takes place June 27. The cache of 29,656 bitcoins being offered has a value of about $18 million at today’s prices.

The list of recipients included representatives of Rangeley Capital, SecondMarket Holdings Inc., Coinbase Inc. and DRW Holdings LLC, according to a copy of the e-mail seen by Bloomberg. Most of them haven’t responded to, or declined requests, for comment from Bloomberg. People who decide to bid in the auction must put up a $200,000 deposit. U.S. Marshals said they weren’t going to identify the winner or winners of the auction, and the now-public list of people and firms looking at the sale raised concerns among some potential bidders about privacy, competition and potential future harassment by hackers.

“It just removes some of the opaqueness that was originally intended around the process, and gives me an idea of how many people are going to be participating,” said Luther Lowe, who is considering bidding in the auction and whose e-mail address was exposed. The list of potential competitors seemed short, and may draw more people hoping to buy the virtual currency at a discount, he said in an interview.

Wary Buyers

Others said it could dissuade buyers.

“Many people, as individuals, haven’t found a good way to store bitcoin,” said Ilya Subkhankulov, co-founder of bitcoin-trading software provider BTX Trader LLC, which plans to bid. “There are some people on there, if they win the auction, they may be at risk for phishing attacks and other security issues. For us as a company, it’s not great. But we are a bitcoin company, we spend a lot of time thinking about these things and securing bitcoin.”

Lynzey Donahue, a spokeswoman for the U.S. Marshals Service, said the disclosure of e-mail addresses was unintentional and apologized for the breach.

“The message was not intended for any particular group of people, but for anyone who had e-mailed a question to the general mailbox to ask about the auction,” Donahue said.

The auction offers a chance for buyers to acquire a large stockpile of bitcoins without driving up prices in the market, according to Gil Luria, an analyst at Wedbush Securities Inc. He estimated that amassing a similar hoard on exchanges could boost prices by 20 percent. Bitcoin has declined 4.1 percent to $605 since the auction was announced on June 12, according to the CoinDesk Bitcoin Price Index, which represents an average of bitcoin prices across leading global exchanges.

“For us as a potential bidder, we get to see what other players might be bidding,” Subkhankulov said. “It helps us figure out who may be bidding, how much they might be bidding.”

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net; Pui-Wing Tam at ptam13@bloomberg.net David Scheer, Reed Stevenson

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