California investor wins federal government's bitcoin auction

Backer of Six Californias initiative wins federal government's bitcoin auction.

Venture capitalist and entrepreneur Tim Draper is rolling in bitcoins after winning a U.S. government auction Monday.

The 29,656 bitcoins – a new form of digital currency – were part of a trove that the government seized from a raid of online illegal drug market website Silk Road last year.

Draper, co-founder of Silicon Valley investment firm Draper Fisher Jurvetson, beat out 44 other participants during the 12-hour auction Monday and identified himself as the winner Wednesday. Though the dollar amount of the winning bid wasn't released, the stash is worth about $19 million at current market prices.

Draper will use the bitcoins in a partnership with start-up bitcoin exchange Vaurum to provide liquidity as they launch bitcoin trading platforms in "emerging markets," the company announced. Draper and his son Adam were early investors in Vaurum, which aims to serve financial institutions looking to exchange and store bitcoins.

“Bitcoin frees people from trying to operate in a modern market economy with weak currencies," Draper said in a prepared statement. "With the help of Vaurum and this newly purchased bitcoin, we expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies."

Vaurum, based in Palo Alto, Calif., raised $4 million earlier this year in seed funding from investors including Draper, Battery Ventures and America Online Inc. co-founder Steve Case.

Draper has a history of investing in tech-centered companies, including Skype, Hotmail and Overture.com.

More recently, Draper has made news as the backer of a ballot initiative to separate California into six smaller states. The venture capitalist has until July 18 to collect 807,615 signatures of registered voters for the initiative. 

"California as it is is ungovernable,” Draper said in an interview with ABC News. “It is more and more difficult for Sacramento to keep up with the social issues from the various regions of California."

Draper also served on the California State Board of Education in the late 1990s, and founded an entrepreneur-centered boarding school called Draper University of Heroes in San Mateo for adults.

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