We have previously discussed a number of legal issues relating to the electronic currency known as Bitcoin, including implications with respect to corporate and estate law. The news broke Friday of the first-ever government seizure of Bitcoins, conducted by the Drug Enforcement Agency. The details can be found in the technology blog io9.com:
A few days ago, the federal Drug Enforcement Agency announced that it had seized 11.02 bitcons (~USD$814.22) from South Carolina's Eric Daniel Hughes, who was trying to buy illegal substances with the digital currency. It's the first time this has ever happened, setting a very important precedent in this emerging area.
So, while the government doesn't print or regulate Bitcoin, it can still seize it — prompting some experts to ask, how the hell did they do it?
According to Let's Talk Bitcoin, a DEA agent could have taken control of a computer with an unencrypted wallet and transfer the amount to a DEA controlled wallet. Or the DEA could have set up a "honeypot" trap at the popular Silk Road "anonymous marketplace" — an Internet safe haven prone to black market activities. And in fact, Bitcoin is regularly used to purchase illegal items through this back channel. If that's the case, Hughes would have unknowingly transferred the Bitcoins directly to the DEA. Ouch.
The full details, including an informational video about the Bitcoin phenomenon, are worth a look.
[NOTE: NEITHER BUSINESSLAWBASICS.COM OR ITS BLOGGERS, OR BERGER HARRIS OR ANY OF ITS ATTORNEYS, ADVOCATES, RECOMMENDS, OR OTHERWISE ENDORSES THE USE OF BITCOINS].