U.S. Marshals Service (USMS) and Cryptocurrency Management

The U.S. Marshals Service (USMS) is responsible for managing assets seized during criminal investigations, including real estate, cash, jewelry, antiques, vehicles, and now cryptocurrencies. This includes billions worth of bitcoin (BTC) seized from the Silk Road darknet marketplace in 2013.

Current Challenges

Despite these responsibilities, the USMS lacks a clear picture of its cryptocurrency holdings. A source indicated that the agency struggles to estimate its bitcoin assets. This issue is concerning as the U.S. government considers creating a national crypto reserve. Experts note that managing seized digital assets is critical, especially since asset forfeiture funds the Department of Justice (DOJ).

Chip Borman from Addx Corporation mentioned that the USMS is currently managing its crypto data using Excel spreadsheets, describing it as dangerously inefficient. “They’re one bad day away from a billion-dollar mistake,” he noted.

History of Crypto Management

The USMS’s difficulties with cryptocurrency are well-documented. In 2019, they handled only a small number of crypto assets, forcing other agencies to manage their seizures independently. Tim Clarke from ECC Solutions criticized the USMS’s handling of sensitive cryptocurrency information, which was often shared insecurely via email.

An OIG report released in 2022 highlighted the agency’s inadequate policies for cryptocurrency storage and management. It noted that the USMS lacked necessary procedures to track forked assets, which could result in missed opportunities for asset sales. In November 2022, the USMS acknowledged losing control of two Ethereum wallets due to software updates.

Liquidation Concerns

President Trump’s comments in July 2024 hinted at changing the US government’s liquidation strategy for seized assets. However, urgent liquidation plans were pushed by the DOJ, raising concerns about the urgency of asset disposal ahead of the incoming administration.

Procurement and Management Issues

The USMS has faced procurement challenges since starting to seek private sector assistance in 2018. After delays, the agency eventually awarded contracts to both Coinbase for managing Class 1 cryptocurrencies and CMDSS for Class 2-4 cryptocurrencies. However, these decisions faced legal disputes and criticisms regarding the qualifications of the awarded firms.

Critics argue the USMS typically lacks understanding of the digital asset landscape, treating crypto like traditional physical assets. Without an accurate understanding of what they manage, it remains unclear how the USMS can effectively oversee seized cryptocurrencies, leading to potential mismanagement and asset loss.