By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The U.S. Marshals Service on Thursday started auctioning off 50,000 bitcoins following the conviction of Ross Ulbricht for running Silk Road, the underground website where authorities said drugs and other illegal goods could be bought using the virtual currency.

The six-hour online auction of roughly $13.5 million worth of bitcoins at current prices began at 8 a.m. EST (1300 GMT). The 50,000 bitcoins were being offered in 20 blocks: 10 blocks of 2,000 bitcoins and 10 blocks of 3,000 bitcoins.

The winning bidders will be notified on Friday.

The Marshals Service conducted auctions in June and December for nearly 80,000 bitcoins seized during the Silk Road raid in 2013. Ulbricht, 30, was found guilty on Feb. 4 of conspiracies to commit money laundering, computer hacking and drug trafficking.

Billionaire venture capitalist Tim Draper said he would be a bidder. "Probably the best deal anyone will get," said Draper on Thursday in an email to Reuters.

Draper won part of the bitcoin auction in December, successfully bidding on one lot, totaling 2,000 bitcoins, on behalf of Draper Associates. Draper said he planned to invest 300 bitcoins in every startup that participated in the current session of Boost, a program for bitcoin-related startups founded by his son, Adam Draper.

Draper was the sole winner of the first auction of 29,655 bitcoins.

SecondMarket, owned and founded by Barry Silbert, won the bidding for 48,000 bitcoins auctioned in December. Silbert told Reuters that SecondMarket would participate in Thursday's auction, but his firm has not created a syndicate for the sale.

Pantera Capital, an investment fund founded by Dan Morehead, a former senior executive at hedge fund Tiger Management, said in its newsletter it is also participating and has formed a syndicate for the auction.

In midmorning trading, bitcoin prices were down 1.4 percent at $267.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey Benkoe)