I think you meant legitimate in the eyes of the law. Yes, governments have the legal right to auction off seized property and they do it all the time. I don't see anything wrong with that.

What the heck are you talking about?  Why are you stuck on the private keys?  They can just send the BTC to all the addresses of all the new owners using standard Bitcoin transactions.  That is how they consolidated the BTC they recovered into the two addresses they control now!  Private key transfer makes no sense in this situation.

This may be the stupidest idea I have read on this forum so far.

And it completely goes against what bitcoin represents and strives for.

Indeed so, though we would have to sacrifice bitcoin to achieve this goal.  The moment that power is wielded we damage fungability AND become a central bank with an agenda.

In the end what's most interesting about this idea to me is thinking of a way to ensure it would be impossible for it to ever be implemented at all.

It IS remarkable that so much power resides in the community that is connected by the bitcoin network, but this idea is so antithetical to the foundation of bitcoin that I can almost begin to give credence to the paranoid background choir singing about anti-bitcoin sock puppets.  Almost.

Bitcoin is not a tool to promote a single political agenda.

I originally supported this idea, but think about it. If we actually do this, what will the world think about the fact that miners have the power to "steal" BTC? Even if it is for a good cause, it will cause people to distrust Bitcoin even more.

If the FBI wished to set an example of integrity, they will use the profits from those coins to either lower their funding requirements to government and or increase their conviction and peacemaking rates - spoken like an adding machine, does not reflect feelings either way.

They could probably get all the rest of those coins on tax rules, commerce rules, fda, literally throw the book case at him. If I were in his shoes i would not have been in his shoes any more after that first knock on the door. Of course they probably had a tail on him if not an implant... half kidding.

Another brilliant idea after blacklisting addresses... No, no, and once again no.  

I have a better one. Lets play judge and monitor how people spend their money and reverse the transactions we don't like.

The irony is also that many people who talk about writing code and forking have no clue how to do it. Not to mention the huge community hate that suddenly erupts when something actually gets forked (remember dogecoin?)

As said earlier, it's not really a fork of the blockchain, it's a totally new blockchain with 1 block containing everything but the FBI's coins.