The United States Marshals Service has auctioned more than 31,000 bitcoins seized in criminal investigations.
How much of the cryptocurrency will be used by law enforcement and how likely is it that criminals will be able to access their assets?
Cryptocurrency is a digital asset that uses cryptography to secure its transactions, control the creation of additional units, and verify the transfer of assets. Read more in detail here: is cryptocurrency legal.
Prince Charles informed parliament of two legislations at the annual Queen’s Speech in the United Kingdom earlier this year. For example, the Economic Crime and Corporate Transparency Bill would give the government the power to seize and reclaim crypto assets.
Meanwhile, the United States Internal Revenue Service (IRS) seized more than $3 billion worth of cryptocurrency in 2021.
As the money supply of digital currencies grows and regulators’ oversight of the developing sector intensifies, the amount of cash seized is sure to increase.
But if the money is not returned to the victims of scams and fraud, where do they go? Are there auctions for forfeited property, as there are for forfeited property? Or will these coins be housed in a special wallet that can serve as an ideal investment fund for law enforcement agencies? Cointelegraph was trying to get some information.
The Dark Origins of Civil Forfeiture
Cryptocurrency is money for the newbies in the room. As a result, the fate of seized cryptocurrency should be similar to that of seized money or property. Civil confiscation, or the forcible seizure of assets of people or organizations accused of improper conduct, is a controversial law enforcement tactic. It became a regular practice in the United States in the 1980s as part of the drug war, and it has been the subject of outspoken opponents ever since.
If a prosecutor can determine that the assets are related to criminal conduct or if no one is pursuing their return to the United States, all seized assets become permanent property of the government. As part of a plea deal with the prosecution, the assets are sometimes returned to their owners. However, other estimates suggest that only 1% of seized assets are ever recovered.
What do police forces do with the money they don’t have to return? They can spend money on anything they want or need, including training equipment, police vehicles, prisons, and military weapons. For example, the St. Louis County Police Department spent $170,000 in 2001 on a BEAR (Ballistic Engineered Armored Response) tactical vehicle. It spent $400,000 on helicopter equipment in 2011. The Washington Post examined more than 43,000 forfeiture files and found that the money was spent on various items, including an armored personnel carrier ($227,000), a Sheriff’s Award Banquet ($4,600), and even employing a clown ($225) to ‘ improve community relations’.
Some states, such as Missouri, require that confiscated money be distributed among schools, but as the Pulitzer Center notes, law enforcement agencies pocket nearly all of the money by exploiting a loophole in the federal Equitable Sharing Program. U.S. Attorney General Eric Holder issued an injunction in 2015 banning federal agency confiscations, but it was revoked by his successor, Jeff Sessions, in President Donald Trump’s administration, who called it “a critical tool that helps law enforcement organized crime.”
The fate of seized coins in the United States, the United Kingdom and the European Union
While none of the specialists who spoke to Cointelegraph were able to comment on the technical difficulties of storing seized crypto assets, the rest of the process is very similar to that of non-crypto assets.
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Don Fort, a former head of the IRS Criminal Investigation Division who heads the investigative division at law firm Kostelanetz & Fink, told Cointelegraph that the single most important distinction is the need to auction the digital assets:
“At the federal level, seized cryptocurrency is sent to the Department of Justice Forfeiture Fund or the Department of Treasury Forfeiture Fund.” The proceeds can be used by the various federal law enforcement agencies after the crypto funds are auctioned off by one of the forfeiture funds.
The agency seeking forfeited assets, such as non-crypto funds, must present some strategy or initiative to recover and spend the funds, and the plan must be approved by the Department of Justice before the funds can be handed over to the agency. Fort said. †
In the United Kingdom, a similar system regulates the distribution of seized cryptocurrency. The Profits of Crime Act of 2002 specifies how to treat seized cryptocurrency proceeds from crime. Tony Dhanjal, Koinly’s head of tax, told Cointelegraph:
“In general, the Ministry of the Interior receives 50% of the seized assets – as opposed to cash – and the other 50% is split between the police, the prosecutor and the courts.” There is also the possibility that some of the seized assets could be returned to victims of crypto crime.”
Dhanjal, on the other hand, believes the law should be amended to explicitly address crypto-assets, as they pose a “unique challenge to criminal organizations like anything that has ever preceded them”. The aforementioned announcement of the Economic Crime and Corporate Transparency Bill didn’t provide any specifics, other than an intent to “create powers to more quickly and easily seize and recover crypto assets”, but an update on the seizure procedure. taken crypto asset allocation. welcome.
The European Union, as is typically the case with regulatory systems, is more complex. Although the EU has established mutual aid procedures for criminal matters, criminal law is the responsibility of individual Member States and there is no central body to coordinate enforcement or seizures.
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As a result, seized crypto can be treated in a variety of ways. Thibault Verbiest, partner at Metalaw law firm in Paris, gave Cointelegraph many examples. The Agency for the Recovery and Management of Seized and Seized Assets (AGRASC) in France, for example, is responsible for handling seized property. Most eloquently said:
“When goods are seized as a result of a judicial investigation, they are transferred to the AGRASC by decision of the Public Prosecutor, who will decide the fate of these assets in accordance with Articles 41-5 and 99-2 of the Criminal Code Procedure; they will be sold at public auction or destroyed.”
However, seizing crypto assets is not always feasible. After seizing the cold storage devices used by convicts who had their encryption keys stored on a USB stick, the AGRASC auctioned 611 Bitcoin (BTC) in a public auction in 2021. As Verbiest put it:
“Since the above provisions allow the seizure of movable property, the USB stick (and its contents) may be confiscated.” Since the aforementioned laws do not allow for the seizure of intangibles, the situation would have been different if the cryptocurrency had been kept on a third-party server through a delegated storage service.”
Property forfeiture is still a controversial issue, with some even preferring the term “highway robbery” to describe it. However, cryptocurrencies provide at least some security to their owners. Regardless of the technology, both coiners and non-coiners will have to resist the historical legacy of the scope of law enforcement in the field of policy.
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