user5757: It was reported today that the US government shut down the web site Silk Road, where people bought and sold things (allegedly including illegal drugs) using Bitcoins.  The operator was arrested, and BTC 26000 was seized.  (Source: New York Times).
A few months ago, it was also reported  that the US Drug Enforcement Agency seized BTC 11.02 from a person suspected of buying or selling illegal drugs.
Is anything known about what the US government (or any other government) does with seized coins?
Some possibilities:

Sell them on an exchange for USD, and turn the proceeds over to the Treasury
Sell them at public auction, as is commonly done with other seized property
Use them in future sting operations
Do not return them to circulation, but hold them indefinitely
Destroy them by transferring them to an address with no private key


user153: Property seized is held until a conviction, then sold at auction.   If there is no conviction, property may or may not be returned to the rightful owner.

user12034: The bitcoins will be sold, but they haven't said precisely how that will happen. Since there is no bitcoin exchange that is properly legally licensed in the US, they will likely auction them off directly, like seized property.
The bitcoins, if you're interested, are sitting in two very large wallets: one with ~144K bitcoins (~US$117.6M right now) and another with ~30K bitcoins (~US$24M), all siezed from Silk Road.
The above is based on the news sources Fox News, Forbes, and Wired. What follows is my own opinion.
This approach makes sense, since bitcoins aren't inherently illegal (thus only useful in sting operations or to be destroyed, like seized drugs), and aren't US cash (and thus sensible to directly deposit in the Treasury). Like all other valuable property, the best way for the government to liquidate them is at auction.
When this sale happens, the price of bitcoin will likely go down, but will probably be lost in the noise of trading. (Edited. At first I said that it'd be driven down fairly drastically.)
Update (2014-06-13): The smaller chunk of bitcoins, nearly 30K bitcoins (now ~US$18M) seized from Silk Road (including all of the little transactions people have given to it since then) now have an auction page set up on the U.S. Marshals Service website: they'll be sold in blocks of 3,000 bitcoins (less for the final block). The actual bidding will occur on June 27th, the fiat money will be wired by July 1st, and I'd expect the coins to be transferred via Bitcoin transactions shortly after. See Forbes for a news source talking about this.

5757: <p>It was reported today that the US government shut down the web site Silk Road, where people bought and sold things (allegedly including illegal drugs) using Bitcoins.  The operator was arrested, and BTC 26000 was seized.  (Source: <a href="http://www.nytimes.com/2013/10/03/nyregion/operator-of-online-market-for-illegal-drugs-is-charged-fbi-says.html?hp&amp;_r=0" rel="nofollow noreferrer">New York Times</a>).</p>

<p>A few months ago, it was also <a href="http://letstalkbitcoin.com/users-bitcoins-seized-by-dea/#.Ukx4LnjWGRY" rel="nofollow noreferrer">reported </a> that the US Drug Enforcement Agency seized BTC 11.02 from a person suspected of buying or selling illegal drugs.</p>

<p>Is anything known about what the US government (or any other government) does with seized coins?</p>

<p>Some possibilities:</p>

<ul>
<li><p>Sell them on an exchange for USD, and turn the proceeds over to the Treasury</p></li>
<li><p>Sell them at public auction, as is commonly done with other seized property</p></li>
<li><p>Use them in future sting operations</p></li>
<li><p>Do not return them to circulation, but hold them indefinitely</p></li>
<li><p>Destroy them by transferring them to <a href="https://bitcoin.stackexchange.com/questions/1851/how-to-generate-a-valid-bitcoin-address-for-destroying-bitcoins/1852#1852">an address with no private key</a></p></li>
</ul>
 153: <p>Property seized is held until a conviction, then sold at auction.   If there is no conviction, property may or may not be returned to the rightful owner.</p>
 12034: <p>The bitcoins will be sold, but they haven't said precisely how that will happen. Since there is no bitcoin exchange that is properly legally licensed in the US, they will likely auction them off directly, like seized property.</p>

<p>The bitcoins, if you're interested, are sitting in two very large wallets: one with <a href="https://blockchain.info/address/1FfmbHfnpaZjKFvyi1okTjJJusN455paPH" rel="nofollow">~144K bitcoins</a> (~US$117.6M right now) and another with <a href="https://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX" rel="nofollow">~30K bitcoins</a> (~US$24M), all siezed from Silk Road.</p>

<p>The above is based on the news sources <a href="http://www.foxnews.com/tech/2014/01/17/feds-to-sell-28-million-in-seized-bitcoins/" rel="nofollow">Fox News</a>, <a href="http://www.forbes.com/sites/kashmirhill/2014/01/16/the-feds-are-ready-to-sell-the-silk-road-bitcoin-kind-of/" rel="nofollow">Forbes</a>, and <a href="http://www.wired.com/wiredenterprise/2013/12/fbi_wallet/" rel="nofollow">Wired</a>. What follows is my own opinion.</p>

<p>This approach makes sense, since bitcoins aren't inherently illegal (thus only useful in sting operations or to be destroyed, like seized drugs), and aren't US cash (and thus sensible to directly deposit in the Treasury). Like all other valuable property, the best way for the government to liquidate them is at auction.</p>

<p>When this sale happens, the price of bitcoin will likely go down, but will probably be lost in the noise of trading. (Edited. At first I said that it'd be driven down fairly drastically.)</p>

<p><strong>Update (2014-06-13):</strong> The smaller chunk of bitcoins, nearly 30K bitcoins (now ~US$18M) seized from Silk Road (including all of the little transactions people have given to it since then) now have an <a href="http://www.usmarshals.gov/assets/2014/bitcoins/" rel="nofollow">auction page</a> set up on the U.S. Marshals Service website: they'll be sold in blocks of 3,000 bitcoins (less for the final block). The actual bidding will occur on June 27th, the fiat money will be wired by July 1st, and I'd expect the coins to be transferred via Bitcoin transactions shortly after. See <a href="http://www.forbes.com/sites/kashmirhill/2014/06/12/silk-road-bitcoin-on-the-move-as-government-prepares-to-auction-off-18-million-worth/" rel="nofollow">Forbes</a> for a news source talking about this.</p>
