Bitcoin auction: how do I participate in the auction?

Crime is also changing with the times. Increasingly, cryptocurrencies are at the center of crimes. The North Rhine-Westphalia judiciary in Germany seized 215 Bitcoins (BTC) worth more than 12 million euros in the course of its investigations in recent years. According to the Cologne public prosecutor’s office, most of them were proceeds from drug trafficking on the Internet. If the police seize valuables, it is common to auction them off afterwards. This is also the case with seized Bitcoins.

Justice announces bitcoin auction

In a press release, the ministry in North Rhine-Westphalia announced the auction of the cryptocurrency. The first day of the auction began on Oct. 25, 2021, at 11:30 a.m. Responsible authorities:

• Justice Minister Peter Biesenbach (CDU).
• Senior public prosecutor Markus Hartmann, head of the Central and Contact Point Cybercrime (ZAC)
• And the public prosecutor in charge, Andreas Brück.

Initially, it was only known that bitcoins “worth an eight-digit euro amount” were involved. The authorities did not disclose the exact amount until later. After word got out about the planned auction, “all hell broke loose” at the Justice Ministry. Employees reported how the phone barely stopped ringing. People reportedly even stopped by in person to buy the cryptocurrency on the spot.

How does a bitcoin auction go?

Interest in Bitcoin auctions is also growing in America or England. In a classic auction, the bids increase – the highest bid is called last and wins. However, there are also so-called reverse auctions with descending bids. While the seller wants to sell his goods at the highest possible price, the bidder wants to buy the goods at the lowest possible price. So how can I participate in a Bitcoin auction as an American or Englishman? We explain the background using the example of the auction in North Rhine-Westphalia:

• Interested parties can register via a website of the judicial authorities and bid online
• Those interested in buying (“bidders”) place bids on the Bitcoins by entering amounts online. In an auction, the bids are binding (this is also referred to as a declaration of intent with a conclusive contract)
• At the Bitcoin auction, the bidding cannot be viewed as is usual in a classic auction. An auctioneer was also missing
• The auction is limited in time. If a bidder has bought the Bitcoins online after the deadline, he must transfer the purchase amount in advance to an official bank account.
• He then receives a digital key. This enables access to the Bitcoins, which are secured in a digital wallet
• The authorities place the key in a sealed envelope on paper
• The buyer must pick it up in person, but the Cologne public prosecutor’s office writes: “Should an electronic transfer be desired instead of handover, this will be carried out at the buyer’s expense at the usual transaction fees.”

Auctions staggered from 4,240 euros

The auction in North Rhine-Westphalia, which has ended in the meantime, took place in several staggered stages:

• 0.1 BTC with a starting bid of 4,240 euros
• 0.5 BTC with a starting bid of 21,200 Euro
• 1 BTC with a starting bid of 42,400 Euro
• 10 BTC with a starting bid of 503,500 Euro

Is an auction worth it for me?

Initially, the prices offered by the authorities were still far below the current market value of bitcoin. While the starting bid for 1 Bitcoin was 42,400 euros, the first season of Bitcoins was listed with a value between 52,000 and 54,000 euros. Finally, the BTC were auctioned off at a price of 53,310 euros. Was that worth it for the buyer? Not necessarily. The Bitcoin price fell to 50,000 euros a short time later. One thing is certain: If he had bought the cryptocurrency on an exchange, he would have gotten off better. It is quite possible that the buyers paid more because the Bitcoins come from a special criminal case: They have a collector’s value. A resale could result in even higher prices – similar to art tokenization or tokenized shoes.

Why is the judiciary auctioning off Bitcoins?

The judiciary could also simply exchange the Bitcoins for euros on the stock exchange. However, the authorities let it be known before the auction that for legal reasons the Bitcoins have to be auctioned. The following should be noted in this regard:

• The North Rhine-Westphalian judiciary treats Bitcoin holdings like any other valuables that fall into the hands of investigators during their work. So similar to art objects, stolen vehicles or seized computers and hard drives.
• It is an auction. The Ministry of Justice does not sell the coins, but puts them up for auction. There is no direct sale at the current price.
• The amounts are on a paper wallet (see box) owned by Cybercrime North Rhine-Westphalia.
• The blockchain addresses of the Bitcoins holdings are publicly accessible.
• Once the auction is over, the profit flows into the state’s coffers.

Satisfied with the auction

“We are highly satisfied with how the auction has gone so far,” a ZAC spokesperson told the media. “The interest has been huge and we have many new registrations on our auction platform.” Asked why buyers were willing to pay above market value, he replied, “Maybe because people know they’ll get the goods from us.” Ultimately, this shows the fear of contact that many people still have with the world of cryptocurrencies. They are indeed interested in currencies such as Bitcoin, Ethereum or Chiliz and also in football tokens or a culture token. But crypto exchanges still represent an unknown venture for many – they fear the risk of cryptos and hacks.

Bitcoin crime cases on the rise

Failure to pay taxes on Bitcoins is one of many crimes. The seizures of cryptocurrencies from criminal activities are increasing. This is shown by the following cases:

• The first weighty case occurred in 2014, involving 30,000 BTC (worth $19 million at the time). These came from the activities of the darknet marketplace “Silk Road”. Venture capitalist Tim Draper (involved in Coinbase, among other things) won the bid for an unknown sum.
• In Finland, judicial authorities had accumulated $78 million worth of bitcoin in 2018. The coins originated from criminal offenses. Finnish authorities planned to cooperate with online brokers, Bloomberg writes. In order to continue to sell cryptocurrencies in a safe and reliable way. The goal of the Finns is to prevent money laundering and criminal activity with cryptocurrencies.
• In October 2021, the US General Services Administration (GSA) auctioned 4.94 BTC worth $300,000. In this case, the auction also took place in different tranches. The smallest amount started at 0.44 BTC with a minimum bid of $26,000.

The judiciary takes different approaches to classifying auctions, as the following example shows. At the end of 2017, the Central Office for Combating Cybercrime in Giessen had sold 126 BTC. The authority treated the cryptocurrency as “perishable goods.” That is, they would have to be sold as soon as possible. Due to price fluctuations, the reasoning goes, this was done as part of an “emergency sale.” Normally, this would cover food or cars, for example, which would lose value over time.

What is a paper wallet?
A paper wallet is a form of cold wallet. "Cold Wallets" differ from "Hot Wallets" in that they are not permanently connected to the Internet. For the most part, these are hardware wallets such as those from Trezor or Ledger. They store the access keys offline. A "paper", on the other hand, is simply a piece of paper with the seed or access key written on it. They are also available with a QR code.

More info on the wallet

FAQ – Frequently asked questions