The Mysterious Fate of Bitcoin Wallets Forfeited by the U.S. Government

It’s relatively common practice for the United States law and order machinery to seize illegally obtained properties from criminals. Traditionally, the seized properties are often in the form of black money, luxury cars, real-estate investments, and so on.

Opacity in an Ocean of Transparency

However, a new trend has emerged over the past few years wherein authorities are increasingly confiscating digital currencies during crackdowns on criminal activities such as drug trafficking, illicit trading, smuggling, and so on.

Take the example of Alexandre Cazes, the alleged mastermind behind the now-defunct dark web marketplace AlphaBay. Cazes, who was in his early 20’s when he founded AlphaBay, committed suicide at the age of 25 in a Thai jail following his arrest by the authorities.

He left behind the trappings usually linked to big-league mafia bosses: Several luxury cars, villas, multiple overseas bank accounts, and what not. However, among the most valuable assets confiscated from the now-deceased were digital wallets with as many as 175,000 bitcoins. Convert that to the U.S. dollar today, and it amounts to way over a billion dollars.

Caze’s digital assets are now a property of the United States Justice Department, which, according to reports, plans on selling it. Mysteriously, however, there’s hardly any information regarding who exactly is holding those coins and when they are selling it.

Such digital seizes are a relatively new concept that authorities didn’t have to deal with until only five or six years ago. However, as bitcoin’s popularity continues to soar, more and more criminals are being drawn toward it because of its ability to bypass the traditional banking systems while still ensuring a rich potential regarding profitability.

And that is precisely how the United States government has become a supposedly unwilling but active participant in the global crypto economy.

While we don’t have an exact figure as of yet, people familiar with the possible magnitude of digital seizures are of the view that over the past few years, the government came into possession of at least a billion dollars (possibly much more) worth of cryptocurrencies.

However, the moment the digital hoard comes under the government’s possession, it instantly vanishes into thin air. A cloak of secrecy, combined with the pseudo-anonymity of bitcoin transactions, makes it virtually impossible to know the fate of the confiscated assets.

Following Digital Bread Crumbs

There’s a government website called that appears to host detailed information on digital currency forfeitures by various law enforcement agencies. However, the level of transparency the website guarantees is far from being ideal considering that there are often significant lag times between a seizure and its entry in a report on the site.

What’s even worse is that reports are not archived online. Therefore, in essence, if a new report appears on the site, it basically replaces an old one. While paper copies of these reports exist, they do not document the tally of the cryptocurrency in custody of the federal government.

Theoretically speaking, any bitcoin in the federal government’s possession can be traced considering that cryptocurrency transactions are, by design, forever registered on a public ledger powered by blockchain technology. But the problem here is that when the DoJ sometimes publicly identifies “secure government wallets,” it can not reveal the details about the coins linked to specific criminal cases.

That essentially renders any digital currency forfeited by the government untraceable. Even if one had access to the public key linked to a government-owned wallet, the content would appear like absolute gibberish to a layperson.

As of today, there is no credible evidence to suggest that government agents are manipulating digital currency forfeitures to steal hefty chunks of it.

Nonetheless, the opaque nature of the system and the huge gaps between seizures and documentation and sale of digital assets by the government only amplifies the suspicion of rampant corrupt practices in concerned circles.

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