I don't think that the US government cares much about the seized bitcoins.

They will not keep the bitcoins as investment or try to manipulate anything.  As soon as the court confirms the seizure, they will sell them - not to make money, but because the law says that seized property must be sold and the money handed in to the Treasury.

Since the coins are merchandise, not foreign currency, they will almost certainly be sold in public government auctions, like sized cars, boats, dried figs, or whatever.  Not in the exchanges, not by private deals.  Again, this is not their choice, it is what the law says.

They will probably break the coins into lots just small enough to ensure that there will be enough bidders at the auctions, and perhaps spread the auctions over time for the same reason. Other than that, they will not worry much about getting the best price.

They do not give a damn as to what the sale will do to the BTC price.

That is my uderstanding of how US government officials think, from all that I have read over the years.

EDIT: Sample auctions: http://www.usmarshals.gov/assets/sales.htm

It is certain that those "proceeds" that were sold were bitcoins?  Could they be euros, merchandise, etc.?

Chinese Slumber Method prediction for Tuesday April 29

Prediction valid for: Tuesday 2014-04-29, 19:00--19:59 UTC (not before, not after)
Huobi's predicted price: 2684 CNY
Bitstamp's predicted price: 443 USD





[ Plot legend ]

The data point from yesterday (Sunday Apr/27 19:00-19:50 UTC) was one of the worst on record: Huobi had little volume during the day, but traded heavily during the night (S = 0.0343, W practically zero).  Today's data point however was fairly good (S = 0.0037, W = 0.758).  Two choices for the trend seemed reasonable, the trivial "tomorrow like today" predictor (which would give 2715 CNY), or a straight line trend fitted by weighted least squares to the last four points (which would ignore yesterday's given its low weight).  I chose the latter, namely A + B*(d-d0), where d-d0 is the number of days since Apr/25, A = 2836.60 and B = -38.22.

The Bitstamp prediction, as usual, is the Huobi prediction divided by the currency conversion factor R, which was assumed to be 6.06 CNY/USD. It was 6.05, 6.09, and 6.05 for the last three Slumber Times, skipping yesterday's.
 
Checking the previous prediction

Prediction was posted on: Saturday 2014-04-26, 22:21 UTC
Prediction was valid for: Sunday 2014-04-27, 19:00--19:59 UTC (~21 hours later)

Foiled again by the treacherous Chinese. But I got the right digits, only in the wrong order:

Huobi's predicted price: 2876 CNY
Huobi's actual price (L+H)/2: 2678 CNY
Error: 198 CNY (~33 USD)

Bitstamp's predicted price: 471 USD
Bitstamp's actual price (L+H)/2: 440 USD
Error: 31 USD
 
NOTE: "A rich man is nothing but a poor man with money." -- W. C. Fields

AFAIK, SecondMarket's BIT (and other similar funds, like Pantera's PBP) do not trade bitcoin.  When some person buys N "shares" from them, they buy N/10 bitcoins for that person, officially at market price, and keep them safe.  When that person liquidates the shares (which they cannot do for some period, e.g 6 month), they sell the bitcoins, officially at market price, and give the money to him. 

So, in principle, the SMBIT managers only buy bitcoins if someone else thinks that buying bitcoins through them now and being forced to hold for six months is a good idea.

If SecondMarket's managers or owners trade coins independently of investments and liquidations, it is separately from their official business, and they won't tell the public about that.  If they can buy below market when someone buys their shares, or sell above market when that person liquidates, the diffrence is added to their profit, and is not passed on to that person.

There is a thread that monitors SMBIT's buying and selling.

User @source101 appears to know Mr. Brewster since before he went to Cyprus, and his unique informations have not been shown to be incorrect yet:
https://bitcointalk.org/index.php?action=profile;u=301800;sa=showPosts;start=0

Besides describing Mr. Brewster's background and (lack of) qualifications he offers some interesting points:
1. Mr. Brewster's cars were being shipped out of Cyprus (2014-03-25 08:55:16).
2. Mr. Brewster and his fiancée were still in Cyprus shortly before Mar/30 (2014-03-30 04:57:00)
3. This is the third time that Mr. Brewster set up a business that failed (2014-03-30, 05:48:32)

Point 1 is interesting only because other posts have claimed that the cars were being sold in Cyprus. ("The Bentley was spotted in a dealership with changed plates" -- Hm, how did that poster know that it was the same Bentley?)

Point 2 is surprising since many people were already looking for him at the time, weren't they?  However it may not contradict the employees' accounts; I don't recall whether they claimed that he left Cyprus much before the 30th.

Point 3 is interesting because, if true, it is just amazing how that fact could have gone ignored for so long.

Robots and formulas have no respect for round numbers.

There should not be many traders doing arbitrage; it does not seem to be a game for amateurs.  Arbitragers could be people with a commercial foot on each side of the border, e.g. import-export firms; or partnerships between Chinese and non-Chinese traders.

The scenario I was considering is when neither A nor B are regular bitcoin traders, just (say) a businessman who wants to bribe a government official in another town, and learns that there is a relatively safe way to do it using bitcoin.

Sorry, "here" is Brazil.

They were not particularly retarded, just did not imagine that they were under police surveillance.  The bribes were in cash because it was the only viable alternative; bank transfers would obviously not do.  (In another case the payment medium was an expensive piece of jewelry.  But the bribee was caught when he tried to sell it at a jewelry store, because, by bad luck, that piece had been stolen from that same jewelry store a couple of months earlier.)

Most bribes of that magnitude (a few tens of thousands of dollars) probably do.  Money starts out in personal bank accounts and must end in personal bank accounts to be conveniently used.  Withdrawing or paying with big piles of cash calls unwanted attention.

Amounts involved in serious corruption or drug traffic (hundreds of millions) are too big to use BTC, and do not need it.  Did I mention that a couple of months ago our federal police caught a helicopter shipment of 450 kg of cocaine (one of a regular series it seems) in a farm here?  The helicopter belonged to a Senator, the pilot worked for the Senator, the farm belonged to the Senator, but to this day the police does not have a clue as to who could possibly be the owner of that cocaine.

I don't think that opening accounts on exchanges outside China would be easy for a typical Chinese small businessman.  Doing that sort of thing would require familiarity with the bitcoin technology and markets, not likely for such people.

If I were the FBI or NSA, I would set up dozens of bitcoin tumblers out there, with the cheapest rates and best service.  It would save a lot of time compared to tracing coins through the blockchain.

For all I know there is a lot of wishful thinking about "chinese oligarchs adopting BTC"...

Yeah, great. A local subsidiary of the Shrem Karpeles & Friends Foundation...

The discussion may have gotten too confusing.  I am trying to understand why the Chinese government felt necessary to further restrict the money flow to the exchanges, if they do not intend to ban bitcoin outright.

Until a month ago, the bitcoin situation in China seemed to be "safe" enough from the Chinese government's viewpoint.  Bitcoins could not be used in commerce (so the yuan's role as the only currency was assured), could not be handled by banks (so their financial stability was assured), and could not be bought through e-commerce sites.  For the most part, they could only be exchanged by yuan inside the exchanges, who would surely hand over all their deposits and withdrawals records to the police if requested.

So it would seem that there was no room to use the exchanges for illegal money transfers (bribing, money laundering, drug traffic, whatever) without the police being able to detect and trace them.

But the Chinese government was not satisfied, and the apparent reason for the further round of restrictions was continuing concern about illegal money transfers in or through the exchanges.  So, what were they still worried about?

One must take cash out of a bank and then carry the suitcase to the other guy, meeting him in person and in private.  Seems easy and safe to you?

Here, a few years ago, a State governor and a couple of Congressmen lost their posts and faced criminal charges because they were recorded by hidden cameras receiving packets of cash with the equivalent of 50'000--100'000 dollars.  Another one was caught boarding a plane with a large sum stuffed in his underwear.

I don't understand.  If A puts the coins into some address X and sends its private key to B, the path on the blockchain just gets reduced to one node X and zero edges.  With the exchange deposit and withdrawal logs, the two links from A's bank account to the coins on X and the two links from there to B's bank account can be traced. What am I missing here?

The discussion was about possible use of exchanges in China for illegal money transfers by Chinese. That could be the reason for the last round of restrictions, that will ultimately prevent money transfers to/from exchanges through banks and payment processors.

I suppose that more and more Chinese exchange clients are coming to the conclusion that, for them, the game is over: the price is unlikely to rise again until the exchanges are closed. Therefore the best strategy for them is to sell as soon as possible. 

The buyers must be optimists who still hope that the exchanges will find a way to survive and that the price will recover.  Or traders who hope to make some last-minute profit out of temporary ups on the way down.

I understand that BTC-China is denying rumors that withdrawals were stopped.

AFAIK, no exchange has reported the blocking of CNY withdrawals through bank transfers.  I would think that the banks will leave that step for last so that clients have a chance to get their money out. 

Indeed.  Like the other day when I suggested that stealing bitcoins by address spoofing would be a problem unique to bitcoin.

There are many other ways to pay a bribe of course.  But suppose that person A in Shangai needs to transfer 250'000 yuan (say = 100 BTC = 40'000 USD) to person B in Beijing without the payment being spotted by the police.  Any scheme that requires complicity a third person is risky because he could be an informant or a blackmailer. 

Can he use bitcoin exchanges for that purpose, without leaving a trail?  Transfers of bitcoins are visible on the blockchain, so A cannot just buy bitcoins on an exchange, withdraw them, and transfer them to B: the conversions of BTC from/to yuan would be in the exchange's deposit/withdraw logs, they would connect to the blockchain transfers to trace the path.  But if there were a way to transfer the yuan from A to B while they are inside the exchange, then...

A smart professional trading advisor will tell his paying clients to sell while offering free public advice to buy, and vice-versa.

A really smart professional trading advisor will realize that the public will see through that ruse, and advise the public to buy when he wants them to sell.

A really really smart professional trading advisor will know that the public will see through that too, and ...

A smart member of the public should ignore any free advice to buy or sell anything.

My understanding is that these measures are not due to PBoC being worried about the economic/monetary impact of bitcoin.  It seems to be the law enforcement and national security agencies that are worried about criminal uses of bitcoin trading for money laundering, bribes, etc..

Whathever their ultimate origin, the orders are coming through the PBoC because banks and payment processors are subordinated to the PBoC, so it is the PBoC task to figure out the detailed rules and inform the banks etc..

This interpretation seems consistent with public statements by PBoC officials, that for them bitcoin is a harmless tradeable commodity "like stamps" and they see no problems in their ownership or trade.  The problem seems to be the flow of yuan between clients of the exchanges.  I suppose that one can easily launder money or pay a bribe that way.

In most exchanges, trades usually happen at the ends of the spread, when a buyer or a seller moves his order to meet a waiting order on the other side.  However, the last time I looked at the individual trades at OKCoin, there were many small trades that occurred at random prices within the spread.   Perhaps (I haven't checked) these middle-of-spread trades account for the steady background of volume (~10% of total volume) that one sees at OKCoin (and only there).

The explanation I can think of for these middle-of-spread trades is a buyer and a seller (perhaps the same person) agreeing to post matching orders at the same instant at that price.  Such "rendez-vous" trades could be a way to launder bitcoins and/or money in a way that would be difficult for the police to trace, even if they had access to the deposit and withdrawal records of all the exchange's clients (which the exchanges presumably provide).  

Only by analyzing the trade logs one could figure out who ended up transfering money to whom.  Even then, if the trick is played with three or more client accounts (A "loses money" trading with B, who "loses money" trading with C, etc.) it may be impossible to detect intentional money transfers, say from a businessman to a government official.

As for mining, if this interpretation is correct, neither the PBoC nor the security agencies should object to it.  On the contrary, if the mined bitcoins are sold outside China for dollars, they are adding to the country's exports, which makes the government happy.

EDIT: PS. here in Brazil, illegal gains have often been disguised by buying winning lottery tickets (at a premium ofcourse).  A congressman made headlines a couple of years ago by winning dozens of large prizes, with tickets supposedly bought in the same remote small town.  "I am a lucky guy", he explained.

It's 08:00 am in China.  OKCoin broke through the 2650 barrier, now pounding at 2630.

From OKCoin, via http://www.reddit.com/r/BitcoinMarkets/comments/243j3p/how_are_huobi_okcoin_deposit_funding_currently/


And  Huobi apparently has been offline since 01:00 am local time, now it is Monday 07:00 am.

EDIT: some claim that Huobi's catatonia it is a Bitcoinwisdom bug.

Good advice begs good advice in return: if you intend to invest in Bitcoin, be sure to do that before October 2013.