The Drug Enforcement Administration has seized 11.02 Bitcoins worth $814.22 from an accused drug dealer in South Carolina, according to a government press release spotted by Bitcoin bloggers. It is the first known instance of the government seizing the virtual currency as if it were property or cash.
The DEA arrested Eric Daniel Hughes on April 12th, 2013. One Bitcoin sleuth traced the user name "Casey Jones" to user "Truckin" on the underground drug bazaar Silk Road, where he appears to have been an active buyer and seller. His posts refer to pharmaceutical drugs such as Adderall, Dexedrine, Vyvanse, Klonopin, Clonazepam, and suboxone. One user claims to have bought from Casey Jones and says he was trustworthy but a bit careless.
User DealerOfDrugs wrote on the Silk Road forums:
The crazy thing is, he messaged me from his vendor account, and willingly gave me his entire personal address, not a drop address. I myself warned Casey at the time to be careful because anyone at anytime could blackmail him, and he pretty much dismissed the idea and said "no problem, I might start a alternate buyer account to start buying. I'm not worried about it."
It's unclear whether the agency seized the Bitcoins in a sting operation or through some other means. It's possible that the DEA set up a seller account and got Hughes's address under the pretense of sending him a purchase. However, it's also possible that the DEA seized a computer with the file containing the Bitcoins or got Hughes to hand them over.
So far, Silk Road has managed to facilitate criminal transactions while giving its users a fairly comfortable degree of impunity, thanks to the security of Bitcoin and the fact that users must connect to it through the anonymizing Tor network. However, the DEA has said publicly that it is investigating Silk Road, and users are always wary of what feels like an inevitable crackdown. This bust doesn't necessarily mean the DEA is cracking down on Silk Road; it's possible that Hughes ran afoul of the agency entirely offline. But it does show that the agency is increasingly aware of the importance of the virtual side of the drug business.