There appear to have been two failed agreements for managing confiscated bitcoin holdings.
The U.S. Marshals Service has been charged with handling and disposing of bitcoin and other digital assets due to the rising number of criminal prosecutions involving cryptocurrencies. Through the Department of Justice’s Asset Forfeiture Program, the law enforcement department is in charge of seizing possession of cryptocurrency and even occasionally auctioning it off, just like with other confiscated property.
However, managing cryptocurrency is much more difficult than marketing a Chagall, at least from a technical one. The law enforcement organization has been attempting to work with a private tech business to assist for the past few years because of this. At least two transactions, however, seem to have fallen through despite reaching agreements with crypto businesses. The Marshals Service is still keeping all of the crypto that has been seized today.
A representative for the DOJ’s Asset Forfeiture Division told FedScoop that as the seizure and forfeiture of cryptocurrencies has grown more widespread, « the USMS has sought to create a contract with private industry, just as it does with nearly all other asset types. » The cryptocurrency portfolio of USMS is not currently managed by a private entity.
When the US Marshals Service asked businesses for information about the possibility of handling the organization’s cryptocurrencies, the search for a contractor began some years ago.
But once the Small Business Administration recognized BitGo as being too big to qualify for the contract, the firm lost the partnership a few months later. (Back in May, a firm by the name of Galaxy Digital claimed it intended to invest $1.2 billion to buy BitGo; however, the deal later fell through.) Another business, Anchorage Digital, situated in San Francisco and providing bitcoin holding services, was engaged by the Marshals Service in July.
However, it now looks that the Anchorage Digital contract has also fallen through. The federal procurement data system reveals that, similar to the BitGo deal, a Marshal Service contract with Anchor Labs was « terminated[d] for convenience. » On its website, Anchorage Digital claims to be a division of Anchor Labs. An article on Medium that promoted the arrangement appears to have been removed by the firm.
In response, « both awards were stayed pending the outcome of protests filed with the U.S. Small Business Administration (SBA), challenging the companies’ business size, » the USMS spokeswoman told FedScoop. In the end, the SBA found that none of the businesses qualified as small businesses.
A request for response from the corporation was not answered, however it is important to note that the Comptroller of the Currency issued a consent order against the organization in 2022. The company has an OCC banking charter. When this article was published, the Small Business Administration had not yet commented.
The DOJ spokeswoman said, “Not all cryptocurrency seized for forfeiture by the federal government is transferred to the USMS for custody and liquidation.” In order to manage and liquidate all of the assets in its custody in the most efficient and secure way possible, the USMS makes use of the greatest techniques and services offered by the private sector.
A DOJ Office of Inspector General study from last summer highlighted the USMS’s difficulties managing crypto. Because digital assets like bitcoin are difficult to trace in a DOJ property management system called the Consolidated Asset Tracking System (CATS), the Marshals Service was managing its cryptocurrency using various spreadsheets at the time the report was published.
The inspector general claims that these documents lack « documented operating procedures » and « inventory management controls. » Also « inadequate or absent, and in some cases provide conflicting guidance » are policies for dealing with, holding, and valuing crypto.
The inspector general noted that the additional spreadsheets for the USMS « do not have the capability to track edits made to the cryptocurrency entries in the USMS’s inventory records. » « As a result, these inventory records could be changed or removed without leaving a trace and without the knowledge of those in charge of maintaining the spreadsheets, » the report said.
According to the study, the Marshals Service « was not fully complying » in some instances with the guidelines for monitoring cryptocurrency in CATS.
The Marshals Service should create more detailed crypto policies before working with a private company, the inspector general added. He cautioned that « without properly documented policies and procedures, the USMS lacks an adequate foundation for building performance requirements for a cryptocurrency services contract. »