When he gets out of prison, can this German get back his 1,700 Bitcoins « confiscated » by the police?

When he gets out of prison, can this German get back his 1,700 Bitcoins "confiscated" by the police?

François Manens

February 08, 2021

For two years, German police have been trying to guess the password to a wallet containing 1,700 bitcoins, or more than 50 million euros at current exchange rates. Just out of prison, the owner of the wallet could be tempted to recover the sum, despite police surveillance.

This is a kind of news item that is bound to be repeated. During the two years an offender spent behind bars, the German police tried to recover the more than 1,700 bitcoins they had « confiscated ».

The problem was that the convicted offender always refused to give the password to the wallet of cryptomonnages « seized » by the police. « Maybe he doesn’t know it, » a Bavarian official suggested to Reuters. So the police tried to break the digital lock to get his loot back, but without success.

Funny detail: the more time passed, the more the value of the loot increased. At the beginning of 2019, the 1,700 Bitcoins were being exchanged for around 5.5 million euros. Two years later, the price of cryptomoney increased tenfold. As a result, the sealed wallet was worth more than 55 million euros. In other words, the convict benefited from a kind of investment. If he knows his password, he could try to recover the sum, but this would not be without risks.

« Confiscate » Bitcoin, really?

"Confiscate" Bitcoin, really?

The term « confiscate » used in the Reuters dispatch has startled many a cryptomoney enthusiast. Without going into too much technical detail, Bitcoins are stored in a blockchain, a complex and decentralized digital infrastructure. In other words, the police cannot simply seize a device on which the digital transcript of the sum would be stored.

In contrast, the Bitcoin blockchain is public, which means that anyone can observe the transactions between the different portfolios. If the police manage to link the address of a wallet – which takes the form of a sequence of inconsistent letters and numbers – with its owner, they can ask for the password or, failing that, observe its activity.

But soon she will find herself in a dead end: the accused can claim that he has forgotten the password to access his wallet. And since the block chain is decentralized, no one but the wallet owner can lift the lock. There is no authority sensitive to seizure orders where, for example, a bank could act on its client’s account. It is because of this operation that several stories of portfolios sealed forever by simple forgotten passwords have made headlines.

Faced with this situation, the police have only one option: guess the password. As long as the password is complex enough, it is an extremely complicated task. As for breaking the encryption that protects the wallet, that would be a real feat.

Can the owner of the portfolio get his Bitcoin back?

The convict not only used the cryptos to store his loot, he had built his entire criminal activity around it. He was installing malware on his victims’ devices to undermine cryptosystems without their knowledge. Specifically, the malware exploited the components of the computer (including its GPU, a processor also known as a graphics card) to perform calculations on behalf of the blockchain.

In short, these calculations are used to validate bitcoin transactions, and thus to generate value. As a reward for this work, which is essential for the proper functioning of the blockchain, the owners of the machines involved in the calculation are remunerated with a portion of the value generated. Problem: This energy-intensive system considerably reduces the lifetime of the hardware used. It is therefore difficult to make a profit on a small scale. But since the German was taking advantage of other people’s GPUs, he was only reaping the benefit of the mining.

Now that he’s out of jail, he could be in a dilemma. The police told Reuters that they would not let him access Bitcoin. Indeed, if the offender converted the sum into euros, the authorities would have the means to intervene. On the other hand, he might be tempted to convert the Bitcoins against another, less easily traceable cryptomony, such as Monero, for example. A manoeuvre not without risk, because the police could confront him with the flow of Bitcoin coming out of his wallet. But the operation could work for lack of evidence. After all, the defendant could simply claim to have had his Bitcoin wallet hacked…

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When he gets out of prison, can this German get back his 1,700 Bitcoins « confiscated » by the police?
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