On Friday last week, the time had finally come. The wallet of the Federal Criminal Police Office (BKA) was completely emptied. Germany, or rather the federal state of Saxony, has sold the almost 50,000 Bitcoin seized by Saxon authorities as part of the trial against the operators of the illegal movie streaming service "movie2k". Although there has been no official statement on the sales to date, the transactions were openly visible via the Bitcoin blockchain.
Yesterday, the Dresden Public Prosecutor General's Office finally commented on the completed sales. According to their own information, 2,639,683,413.92 euros were raised. There is also finally information about the sales strategy and the use of the funds.
What happens with the 2.6 billion euros
The official press release from July 16, 2024 states that the "49,858 Bitcoins were sold between June 19, 2024 and July 12, 2024 with the support of the Federal Criminal Police Office". This was already traceable through the transactions of the "BKA wallet", but some of the recipients were not identifiable and it was disputed whether each Bitcoin transfer was actually a sale - but this has now been clarified.
What happens to the proceeds is still unclear. The more than 2.6 billion euros are "still only provisionally secured for the criminal proceedings on the "movie2k" complex at Leipzig District Court". The statement continues: "It is currently not foreseeable when a decision on confiscation will be made by the competent court and become legally binding."
In recent weeks, it has been suggested that film studios damaged by "movie2k" could still assert claims. Accordingly, it is not yet clear how much of the 2.6 billion euros will go to the Saxon state treasury.
For the time being, the proceeds do not represent any additional income for the Free State of Saxony in the state budget, but will be held in escrow until the final conclusion of the criminal proceedings.
From the press release
The fact that the Bitcoin was apparently sold almost in a panic without commenting on it caused a lack of understanding. The Dresden Public Prosecutor General's Office provides an explanation for this in the press release. It was in fact an "emergency sale".
As part of a so-called "emergency sale" pursuant to Section 111p of the Code of Criminal Procedure, the Dresden Public Prosecutor General's Office decided to promptly sell the bitcoins transferred by the accused at short notice. The sale of assets before the conclusion of ongoing criminal proceedings is always legally required if there is a risk of a significant loss in value of around ten percent or more. These conditions were met at all times in the case of the volatile bitcoins due to the enormous and extremely rapid price fluctuations.
From the press release
Ultimately, the aim of the sales was to convert the digital currency into euros as quickly as possible without trying to "time" the market.
The current daily value of the bitcoins and other unforeseeable circumstances influencing the price are irrelevant for the decision on whether and when to make an emergency sale. In the case of an emergency sale to be carried out as quickly as possible, any price speculation and any waiting for prices to rise is prohibited for a law enforcement authority.
From the press release
Market-friendly sale?
The statement nevertheless refers to a "market-friendly sale". In the Bitcoin community, however, the impression spread that the Bitcoin was sold in an almost amateurish manner. One indication of this was the fact that on July 4, the US Independence Day, transactions towards exchanges were noticeable.
Although Bitcoin trades around the clock every day, the general liquidity on the financial market is lower on US holidays, which is why large sales can trigger greater price slides, ultimately leaving the seller worse off. The Bitcoin price even slumped by over 5 percent on Independence Day, which has become quite unusual for US stock market holidays. It was therefore reasonable to assume that this was due to amateurish selling by Saxony.
However, the Dresden Attorney General's Office addresses these concerns in the press release:
The American national holiday on July 4, 2024 had no influence because only a small amount of Bitcoins with a market share of approximately 0.28 percent of the trading volume of that day was traded predominantly over-the-counter with European partners.
From the press release
In general, care is said to have always been taken to ensure that as small a proportion as possible of the total Bitcoin trading volume was sold and that the majority was sold over the counter (OTC).
From the very beginning, less than one percent of the market volume of bitcoins was regularly traded over the counter (OTC), usually more than 90 percent of the time.
From the press release
The General Prosecutor's Office in Dresden is quite certain that it did not exert any major influence on the Bitcoin price. During the entire sales period, however, the Bitcoin price fell by 13 percent - at times there was even a drop of almost 20 percent.
It is impossible to say exactly what leads to falling or rising prices and to what extent. The signaling effect always plays a major role on the capital markets. And if it becomes foreseeable that a relevant entity will sell a relatively large number of units, prices can also fall simply out of panic, even if the actual sales would hardly have a negative impact on the price of an asset.
During the period of the sale by Saxony, there was also the announcement that the Bitcoin exchange Mt.Gox, which collapsed in 2014, would begin redeeming around 140,000 Bitcoin in July. This is also expected to result in greater selling pressure of many thousands of units and the Bitcoin price fell accordingly by around 5% over the course of the day in response to the announcement on June 24.
The fact is, however, that since the BKA wallet was completely emptied, the Bitcoin price has recovered by almost 15% - within just five trading days. On the other hand, it was not such a bad "trade". After all, when the Bitcoin was seized, the almost 50,000 units were worth less than two billion euros - around 25% less than the final proceeds.
The approximately 49,858 bitcoins transferred on January 16, 2024 had a total value of around 1.96 billion euros at a price of around 39,400 euros at the time.
From the press release
Nevertheless, it will be interesting to see how much the share of the seized sum due to the Free State of Saxony at the end of the process would still be worth in the future if Saxony had "hodled " the Bitcoin - regardless of the many other advantages that a state Bitcoin position could entail.
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