The US Marshals Service (USMS) is tasked with managing assets seized by law enforcement during criminal investigations, such as real estate, cash, jewelry, antiques or vehicles.
It also has to deal with cryptocurrencies – for example, the billions of dollars worth of Bitcoin (BTC) seized by the Federal Bureau of Investigation (FBI) from Darknet Marketplace Silk Road in 2013.
However, USMS does not seem to know how much crypto it currently has. In fact, the agency is struggling to come up with a rough estimate of even its Bitcoin stocks, a source told the case, Coindesk.
It may be a problem in the light of the White House Crypto Czar David Sacks’ message earlier this month that the US government is actively studying the opportunity to constitute a national cryptor reserve – which means the government can stop liquidating seized cryptocurrencies and Even potentially produce crypto purchases.
“When you start talking about reserves, you must be familiar with the unique features of the assets, such as forks, air drops and the constant volatility,” said Les Borsai, co -founder of Wave Digital Assets, a company that provides capital management services and has been In a conflict with USMS not to be hired as a contractor in an interview with Coindesk. “You must have the agencies trained enough or deal with professionals who understand how they can help them achieve their goals.”
Even if Crypto Reserve never sees the light of day, the management and liquidation of seized digital assets is a crucial role in the agency, especially since the forfeiture of assets is used to help fund the Ministry of Justice (DOJ).
“As far as I know, USMS is currently managing this with individual keystrokes in an Excel spreadsheet,” Chip Borman, Vice President of Capture Strategy and Proposals at Addx Corporation, a company that provides technological solutions to the US government and was also rejected for A USMS contract, Coindesk told. Borman said he saw USMS processes occurred in real time in 2023.
“They are a bad day away from a billion error.”
USMS HISTORY OF CRYPTO MANAGEMENT
The agency’s problems with crypto are not new. Timothy Clarke, CEO of Crypto Consulting Firm ECC Solutions, said Coindesk that a lot of frustration had built up against USMS from both the public and private sectors over the years.
As late as 2019, the agency handled only a handful of cryptocurrency assets, such as eight or 10, so all the various US public agencies had to do their own storage instead of USMS doing its jobs and catching up for seizures, “said Clarke, one earlier Special agent at the Department of Treasury.
Not only would USMS take weeks to give Bitcoin indications addresses to agencies when they had just made a seizure, he said, but the agency would simply share them via e -mail without any encryption or verification process.
On other agencies, such as IRS Criminal Investigation (IRS-CI) specialists do not come directly on site to deal with crypto drawing books themselves.
“It was very, very uncertain,” Clarke said. “It’s just shocking that nothing happened in the years they did.”
USMS refused to comment.
Back in 2022, the Office of the Inspector (OIG) warned that USMS was fighting the management and tracking his stocks.
“USMS did not have sufficient policies related to seized cryptocurrency storage, quantification, valuation and disposal, and in some cases guidance was contradictory,” said OIG.
For example, USMS did not have measures to track fork assets – Cryptocurrencies created every time a blockchain makes a split known in the industry as a hard fork – think Bitcoin Cash (BCH) or Bitcoin Satoshi Vision (BSV), both like Gaffed by Bitcoin. “As a result, USMS may not identify and track fork assets, thereby losing the opportunity to sell these assets when lost,” Oig said.
The spreadsheets that the agency depended on tracking its various crypto -stocks also contained inaccuracies found OIG.
In November 2022, five months after the OIG report was published, USMS said (while looking for a contractor to help it deal with its crypto assets) that it had lost control of two Ethereum -cartoons due to a software update.
“It’s unclear whether the private key is wrong or that wallet did not work,” the agency said. “The contractor will identify the questions (s) and potentially open the wallet. If the wallet cannot be opened, documentation of efforts taken to unlock or open the wallet will be delivered to the USG. “
Clarke told Coindesk that it was unclear whether the problems with the Ethereum cartoons had happened before, during or after the OIG audit. The OIG report itself does not mention incorrectly administered Ethereum drawbooks or lack ether (ETH).
“As a minimum, it speaks to a lack of a backup design book and lack of competent storage, updating and handling procedures,” Clarke said.
“The notion is that everything has been the same since the OIG conclusions in 2022,” John Millward, CEO of Addx, told Coindesk in an interview.
Millward said he understood that there was a single employee who managed the disposal of assets “right now in a retail account”, although the agency was not available to confirm such details. He said the task had not been awarded a senior employee “despite the massive financial responsibility and responsibility that this one person controls.”
Liquidation of crypto prior to the decision
In July 2024, at a Bitcoin conference in Nashville, President Trump said if he was elected, he would instruct the federal government to stop selling seized Bitcoin. It was an idea that was first pushed by Senator Cynthia Lummis (R-WY), one of Bitcoin’s most vocal bakers in Congress, introducing legislation aimed at constituting a national bitcoin reserve.
On January 15, just a few days before Trump was set to join, Lummis wrote a letter to Ronald L. Davis – who at that time was still director of USMS – where she expressed her alarm that DOJ -Attorneys seemed to be Engaged in a process to liquidate the 69,370 Bitcoin (worth approximately $ 6.6 billion) seized from Silk Road.
“Recent submissions of judicial from earlier this month show that the Department of Justice quotes Bitcoin Price Volatility to justify an expedited sale of these assets,” she wrote.
“Even more worrying, the department continues to aggressively push forward with liquidation plans despite pending legal challenges, demonstrating an unusually urgent nature to dispose of these assets,” she added. “This rushed approach, which occurred during the president’s transitional period, directly contradicts the incoming administration’s declared political targets regarding the establishment of a national Bitcoin stock.”
Lummis Bad USMS (which handles seized assets but does not make decisions with regard to liquidation) to share the total amount of Bitcoin it currently has to explain why this information has not become easily accessible in a public way and describes its Tracking and steering procedures. The agency was given until January 31 to answer, but has not yet formally responded, according to a source familiar with the case.
USMS has contacted Lummis’ office twice since the letter was issued, the source said, but the agency was unable to answer how much Bitcoin it had under its control, and accused the shaking caused by the change in administrations. Lummis’ office refused to comment.
Significant amounts of Bitcoin are apparently held by different agencies across the administration – including DOJ and the Department of Treasury – and USMS has no reconciliation process to find out where it all sits, the source says.
USMS shopping matches
In 2022, OIG noted that USMS took proactive steps to increase its management procedures by trying to get the private sector. The move would “help USMS tackle some of the problems we identified,” Oig said.
However, the agency has taken a long time to award these contracts and its decisions have been questioned by some of the parties involved.
USMS began to investigate purchases in 2018 and first awarded the contract to Crypto Exchange Bitgo in April 2021. However, it was decided that the exchange did not meet the definition of a “small business” (which was one of the requirements for the contract). The award then transferred to Crypto Coardy Firm Anchorage Digital in July 2021-but still Anchorage was also found too large to meet the criteria for small businesses.
The agency changed gears in 2024 and awarded two different contracts: the first to control so-called Class 1 Cryptocurrencies (meaning coins supported on centralized exchanges and in cold storage wallets) and the second for class 2-4 cryptocurrencies (coins that meet not Class 1 requirements).
Crypto Exchange Coinbase won the award for Class 1 in July, while Class 2-4 contract went to Command Services & Support (CMDSS) in October, a technology service provider with experience with DOJ.
Controversial allocation
These prices were both disputed in court. Anchorage’s protest, against Coinbase, was dismissed, but it is unclear whether the company has filed another protest. The US government spending suggests that Coinbase has not yet received payment for the contract. (Anchorage refused to comment. Coinbase did not respond to a request for comment.)
The Class 2-4 Prize is meanwhile the subject of a running protest from Wave, which claims that CMDSS is missing the right license to the contract CMDSS is not licensed with Securities and Exchange Commission (SEC) or the Law on Financial Sector Authority (Finra)- and that the agency could not investigate a conflict of interest from CMDSS using a former USMS official with access to non -public information.
USMS, for its part, stated that the winning bid was not required to be licensed with SEC or Finra in the first place; The Agency also claims to have properly examined any conflicts of interest in connection with former USMS employees.
“If you are not interested in the basics, such as being licensed to handle securities, which is the most basic understanding of the handling of digital assets, what are you doing then? It just shows you how little they know about the process, ”Borsai said. CMDSS did not respond to a request for comment.
Addx competed against Wave and CMDSS on the contract. Nevertheless, Millward said it would have made more sense for Wave than CMDSS to secure the price when the company had a technical upside and offered to do the work at a lower price.
“I think there is a lot of personal confidence in the management of the assigned unit to find out and not make USMS look bad,” Millward said.
Handling minor cryptocurrencies
The central theme of USMS ‘critics is that the agency does not sufficiently understand digital assets.
“They treat crypto as if it’s a boat or a piece of real estate,” Borsai said. “USMS could possibly understand what they have if they don’t understand the assets. … They will never get an exact figure unless they all go on a shared system with multiple agencies. “
Millward and Boreman said that USMS had difficulty understanding that custody companies need the same amount of resources to manage a specific number of class 2-4 coins, whether tokens is worth billions of dollars or just cent.
The agency had suggested to add that if it won the price, it can only have been paid in a percentage of the assets it would end up steering instead of a fixed fee. The agency seemed surprised when Addx explained where expensive custody would be.
“They said,” We expect we never have more than $ 500 in value at all times, “Borman said. “They do not understand that FOB, which contains 20 cents worth of Bitcoin, knows the referee of referee, which contains 20 cents worth of Bitcoin, must be traced and analyzed, and to destroy some fellow fellow 20 cents is as irregular as going down a lamborghini On the way to the acquisition party. “
