The Bitcoin Bugle: January 17, 2014

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Here's your daily wrap-up of all things cryptocurrent.

First, to Preet Bharara's office:

U.S. Attorney for the Southern District of New York Preet Bharara announced the forfeiture of about 29,655 bitcoins—an Internet currency that allows buyers to remain secret—that were seized from the Silk Road server, as well as the forfeiture of the Silk Road hidden website….

In December, federal prosecutors in New York unsealed an indictment against three men who allegedly helped run Silk Road, an online market where users could buy everything from narcotics to forged passports.

The charges, unsealed in federal court in Manhattan, expanded the case against Silk Road, and provided new insight into how the online bazaar was run. The case is a challenge to prosecutors who have to deal with technologies not yet fully addressed by the law. Silk Road allegedly dealt entirely in bitcoin.

U.S. District Judge J. Paul Oetken signed off on the forfeiture happily. But a federal judge in Seattle wants absolutely nothing to do with the stuff.

After telling Alydian's lawyers to provide more details about the company's operations—including whether the company even owns the bitcoin-mining rigs that it is trying to sell—Judge Karen Overstreet of the U.S. Bankruptcy Court in Seattle denied the request to sell Alydian's 34 bitcoin-mining rigs at a Jan. 27 auction. Company officials had proposed to kick off bidding at $400,000.

Judge Overstreet also threatened to kick Alydian out of bankruptcy altogether, which would allow one of its customers to continue suing Alydian in a New York court over millions of dollars' worth of unpaid bitcoins it hasn't received from Alydian yet.

"I am very close to…dismissing this case and letting the parties just fight it out in state court or in federal court in New York, where perhaps they ought to be," Judge Overstreet said during the Jan. 10 hearing, according to a transcript….

"What I see is a debtor that has absolutely zero existence," Judge Overstreet said. "I want to make sure that when we do this world-wide advertising [to promote an auction] we are not misrepresenting to the world what we have to sell, because the integrity of the bankruptcy process is at stake."

Would you prefer being paid in real fake cash to accumulating hotel rewards points? Your wish is PointsHound's command—and it may even be worth it, until bitcoin's price craters, anyway.

Hotel guests will have the bitcoin deposited into their online bitcoin wallets. The amount they receive will vary depending on an in-house algorithm that PointsHound uses to translate the value of the traditional loyalty reward points into the digital currency. It will vary according to the status of different hotel rooms and users, but at current exchange rates the firm calculates that a “Level 3” frequent PointsHound user could right now earn as much as 0.26 bitcoin for a three-night stay at a top-end New York Hotel.

At those same current exchange rates, that’s the equivalent of $223.

Of course, maybe Byron Wien is as wrong about bitcoins as he was about everything last year. If he is, bitcoin enthusiasts from anarchist hackers to right-wing lunatics will obviously have porn to thank.

Porn.com has seen sales increase by nearly a quarter since it started accepting payments in bitcoin, leading the site to claim that porn could be the currency's "killer app"….

"Privacy and confidentiality are paramount when joining an adult service for the majority. In general you can surf porn.com for free, anonymously but if you want to upgrade to the premium services you have to enter a method of payment which historically has been credit card. In order for the transaction to process you have to include your full name and address. This is not necessary with BTC."

Silk Road Forfeits $28 Million of Bitcoins [WSJ]
Bankruptcy Judge Blocks Bitcoin Miner Alydian From Auction [WSJ]
Nervous About Buying or Mining Bitcoin? Have Your Hotel Give You Some Instead [WSJ MoneyBeat blog]
Will buying porn turn out to be bitcoin's killer app? [Guardian]

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