FBI Seizures of Crypto for Forfeiture

When the government seizes cryptocurrency like Bitcoin or Ethereum, or stablecoins like USDT or USDC, they might issue a notice of seizure. Regardless, a civil asset forfeiture attorney can help you file a verified claim which often speeds up the process and makes it more likely the property is returned to you quickly.

In some cases, with high value cryptocurrencies, the FBI will convince an Assistant United States Attorney (AUSA) to file an in rem action seeking forfeiture of a certain amount of cryptocurrency under 18 U.S.C. §§ 981(a)(1)(A) and (C).

In its complaint—which is often verified by an FBI Special Agent—the government might allege that the Federal Bureau of Investigation (FBI) is responsible for investigating federal law violations involving computers and related technologies.

When the Cyber Squad in a local FBI office received information from a fraud scheme involving the purchase, sale, and exchange of virtual currency, it might result in the FBI taking action to freeze and seize the crypto for forfeiture. Some schemes involve the diversion of virtual currency to unknown subjects. The investigation usually begins with the Victim contacts the FBI to report the crime.

FBI Investigators might trace transfers of cryptocurrency out of the Victim’s wallet and through multiple other wallets and cryptocurrency exchanges. The FBI might allege the transfers were intended to obfuscate the source and destination of the stolen property.

FBI agents might obtain information concerning the address that first received the subject property and then trace the crypto through the blockchain. FBI Agents might then obtain a seizure warrant that forces the exchange to transfer the virtual currency to a government-controlled account which is subject of the in rem action.

The alleged violations might include the subject property being derived from wire fraud, in violation of 18 U.S.C. § 1343, and that, as property relating to money laundering, it is subject to forfeiture under 18 U.S.C. § 981(a)(1)(A).

The Government then files its notice of publication in which it certified that it posted a notice of this forfeiture action identifying the subject property on an official government website (www.forfeiture.gov) for at least 30 consecutive days. That same day, it might request an entry of default as to all persons and entities.

If no one files a judicial claim, the clerk might post an Entry of Default. Then the government might file a motion for default.

Seizures of Crypto for Forfeiture by the FBI

“Under the Civil Asset Forfeiture Reform Act (‘CAFRA’), which governs all federal forfeiture proceedings, the Government bears the initial burden of establishing by a preponderance of the evidence that the property is subject to forfeiture.” $25,000 in U.S. Currency, 2023 U.S. Dist. LEXIS 120569, 2023 WL 4494773, at *2 (citing 18 U.S.C. § 9981(c)(1)).

The government’s complaint must presents facts sufficient to establish a reasonable belief that it can meet its burden to show by a preponderance of the evidence that the specified property is subject to forfeiture.

First, the government’s complaint is verified. See FRCP Supp. G(2)(a). The complaint must sufficiently allege grounds for subject matter jurisdiction under 28 U.S.C. §§ 1345 and 1355(a) and in rem jurisdiction under 28 U.S.C. § 1355(b). The complaint must sufficiently alleges proper venue because acts giving rise to the forfeiture occurred in this district.

Second, government must describes the property with reasonable particularity by identifying the precise amount of cryptocurrency is seized.

Third, the government must identify the statutes authorizing forfeiture:

1. forfeiture of property related to wire fraud under 18 U.S.C. 981(a)(1)(C); and
2. forfeiture of property related to money laundering under 18 U.S.C. § 981(a)(1)(A).

Fourth, the government’s verified complaint must allege sufficiently detailed facts that support “a reasonable belief that [it] will be able to meet its burden of proof at trial.” See FRCP Supp. G(2)(f).

The complaint must trace the movement of the subject property from the initial wallet to the point where it is seized. The complaint will typically allege that the subject property was moved in the manner it was in an attempt to obfuscate the source and destination for the illegal proceeds. Based on these allegations, the court must decide whether the government has alleged sufficiently detailed facts establishing a reasonable belief that it would be able to meet its burden at trial under §§ 981(a)(1)(A) and 981(a)(1)(C).