“The agency has been plagued with Procedural and Organizational Issues for Years.”, – WRITE: www.coindesk.com
IT IS ALSO SUPPED TO BE HANDING CRYPTOCURRONCies – For Example, The Billions of Dollars Wrtho of Bitcoin (BTC) Seized by the Federal Buretigtiget (FBI) In 2013.
However, The USMS Doesn’t Seem to Know How Howch Crypto It Currently Has. In Fact, The Agency Is Struggling to Come Up with A Room Estimate of Even It ITS Bitcoin Holdings, A Source Familiar with The Matter Told Coindesk.
That could be a problem, in light of white housa czar david sacks’ AnnounCement earlier this month that the US government is actvely Studying the possibality of the cot. that government might stop Liquidating seized Cryptocurrencies, and Even Potentilly Make Crypto Purchases.
“WHEN YOU START TALKING About Reserves, You Need to Be Familiar with The Unique Properties of the Assets, Like Forks, AirDrops, and The Constant Valativity,“ SAID LES BORSAI, COFAI FIRM THAT PROVIDES Asset Management Services and Has Been in A Dispute With The USMS Over Not Getting Hired As A Contractor, In An Interview with Coindesk. “You have to have the agencies readucated edum or dealing with professionals that understand how to Help them Acive Teaeir Goals.”
EVEN IF The Crypto Reserve Never Sees the Light of Day, Managing and Liquidating Seized Digital Assets Is A Crucial Role for the Agency, Especiali Since Asset Forfeiture Justice (doj).
“AS FAR AS I’M Aware, The USMS is Currently Managing this with Individual Keystrokes in An Excel Spreadsheet,“ Chip Borman, Vice President of Capture Strategy and Propossals ATPSALSALSAL Technological Solutions to the US Government and Was Also Turned Down for A USMS Contract, Told Coindesk. Borman SAID HE SAW USMS PROCESSES OCCUR IN REAL TIME IN 2023.
“They’re One Bad Day Away from A Billion-Dollar Mistake.”
USMS History of Crypto ManagementThe Agency’s Troubles with Crypto Aren’t New. Timothy Clarke, Ceo of Crypto Consulting Firm ECC Solutions, Told Coindesk That A Lot of Freustration Had Built Up Against The USMS from the thers.
As recently as 2019, the agency “Only Handled a Handful of Cryptocurrency Assets, Like Eight or 10, so All the Different US GOVERNMENT AGENCIES HADTTSEAD INTAKING SEIZures, ”SAID CLARKE, A FORMER SPECIAL AGENT AT THE DEPARTMENT OF TREASury.
Not Only Willd the USMS Take Weeks to Provide Bitcoin Deposit Addresses to Agencies WHEN WHO’D JUST MADE A Seizure, He Said, But The AGENCY WOMAPLY SIMPL Encryption or verification process.
AT Other Agencies, Like IRS Criminal Investigation (IRS-CI), SUCH SENSTIV INFORMATION IS USUALLY EITHER COMMUNICATED IN VIDEO CALLS OR VIA READ-OLLSUPTED ATACHPTED ATACH. Passwords and read-back verification of the addresses-and that’s if specialists don’t come directly on-Site to Handle Crypto Wallets Themselves.
“IT WAS VERY, VERY UNSECURE,” CLARKE SAID. “IT’s Just Shocking That Nothing Happy in the Years They Did That.”
The USMS Declined to Comment.
Back in 2022, The Office of the Inspector General (OIG) Warned that USMS WAS STRUGGLING in the Management and Tracing of It Holdings.
“The USMS NOT HAVE ADEQUATE Policies Related to Seized Cryptocurrency Storage, Quantification, Valification, and Disposal, and In Some Instance, Guidance Was Conflicting,” The Os.
For Example, The USMS NOT HAVE MEASURES IN PLACE TO TRACKED Assets – Cryptocurrencies That Are Created Whenever A Blockchain Does a Split, Known In The Industry ASK. Bitcoin Satoshi Vision (BSV), Both of Wich Forked Off of Bitcoin. “As a result, the USMS May Fail to Identify and Track Forked Assets, and Thereby Lose The Opportunity to Sell Those Assets WHEN ARE FORFEITED,“ The OIG SAID.
The Spreadsheets on Whosh The Agency Was Rely to Track ITS VARIUS Crypto Holdings Also Contained Inaccuracies, The Oig Found.
In November 2022, Five MONTHS AFTER The OIG REPORT WAS PUBLISHED, USMS STATED (While It Was Looking for A Contractor to Help It Handle Iterpto Assets) to a software update.
“IT is unclear if the private key is incorrect, or the wallet malfuncyded,“ The Agency Said. “The Contractor Will Identify the Issue (S) and Potentilly Open the Wallet. If the wallet cannot be opened, Documentation of Effrts Take to Unlock or Open the Wallet Will Be Provides to the USG. ”
Clarke Told Coindesk that It Was Unclear Whather the Issues with the Ethereum Wallets Had Occurred Before, Durying, or After the Oig Audit. The OIG REPORT ITSELF MAKES NO MENTION OF MISMANAGED EHEREUM WALLETS or Missing Ether (ETH).
“AT MINIMUM IT Speaks to A Lack of a Backup Wallet and Lack of Competent Stage, Update, and Handling Procedures, Clarke Said.
“The perception is that every everything have remained the Same Since the 2022 Oig Findings,” John Millward, Chief Operation Officer at Addx, Told Coindesk in An Interview.
Millward Said He Understood there to be a single empidae managing the assets disposal “Right Now a Retail Account,” Thought the Agency Wasn’t Available to CONFIRM SUCH DETAIL. He Said the Task Had Not Been Assigned to A Senior Employee “Despite The Massive Financial Responsibilities and Liability This One Person Controls.”
Liquidating Crypto ahead of Stockpile DecisionIn July 2024, at a bitcoin Conference in Nashville, President Trump Said That, If Elected, Hew Instruction The Federal Government to Stop Selling Seized Bitcoin. That was an idea First Pusted by Senator Cynthia Lummis (R-WY), One of Bitcoin’s MOST VOCAL Backers in Congress, Who IntroduCed Legislation Aimed TaStTertue.
On Jan. 15, Only a Few Days Before Trump Was Set to Take Office, Lummis Wrote A Letter to Ronald L. Davis – Who at The Time Was Still Director of the USMS Engaged in A Process to Liquidate the 69,370 Bitcoin (Worth Roughly $ 6.6 Billion) Seized from Silk Road.
“Recent Court Filings from Earlier this month show that the department of justice is City Bitcoin Price Volatility to Justify An Expedited Sale of Thesestats,” She Wrote.
“Even More Troubling, The Department Continues to Aggressely Push Forward with Liquidation Plans Despite Pending Legal Challenges, Demonstration An Unusual SHE. “This Rusned Approach, Occurring Durying the Presidential Transition Period, Directly Contrachers of the Incoming Administration’s Stated Policy Objectives Regarding The Establishment.
Lummis Asked The USMS (WHICH HANDLES SEIZED Assets, But Does Not Make Decisions with Regards to Liquidations) to Share the Total Amount of Bitcoin It Curretly Hold Readily AVAILBLE IN A PUBLIC Manner, and to Describe ITS TRAKING AND MANAGENT PROCEDES. The agency was given util Jan. 31 to Answer, But Has Yet to Formally Respond, Account to A Source Familiar with The Matter.
The USMS Contacted Lummis’ Office Twice Since the Letter Was Issued, The Source Said, But The Agency Was Unable to Answer How Bitcoin It Had Under ITSTROL administrations. Lummis’ Office Declined to Comment.
Significant Amounts of Bitcoin Are Apparently Being Held by Various Agencies Across The Administration – Including the Doj and Department of Treasury Sits, The Source Said.
USMS Procurement StruggglesThe Oig Noted in 2022 that USMS WAS Taking Proactive Steps to Boost Its Management ProCedures by Seneming to Enlist the Private Sector. The Move Wuld “Assist The USMS in Addressing Some of the Issues We Identified,” The Oig Said.
However, The Agency Has Taken A Long Time to Award These Contracts, and Its Decisions Have Been Quesified by the Parties Involved.
The USMS Started Looking Into Procurement in 2018 and First Awarded The Contract To Crypto Exchange Bitgo in April 2021. However, It Was Determined What The Exchange didn. One of the requirements for the Contract). The Award Ten Passed On Crypto Custody Firm Anchorage Digital in July 2021-Yet Anchorage Was Also Found Too Large to Meet the Small-Business Criteria.
The Agency Switched Gears in 2024, Awarding Two Different Contracts: The First For the Management of So-Called Class 1 Cryptocurrencies Wallets) and the Second for Class 2-4 Cryptocurrencies (Coins that Don’t Meet Class 1 Requirements).
Crypto Exchange Coinbase Won the Award for Class 1 in July, While the Class 2-4 Contract Went in October to Command Services & Support (CMDSS) Doj.
Controversial AwardingTHESE AWARDS WERE BOTH CONTESTED IN COURT. Anchorage’s Protest, Against Coinbase, Was Dismissed, But It’s Unclear Whoar Wheether The Firm Has Filed Another Protest. The US Government Spending Website Suggests that Coinbase Has Yet to Receive Payment for the Contract. .
The Class 2-4 Award, Meanwhile, Is The Subject of An Ongoing Protest by Wave, WHICH CLAIMS THAT CMDSS LOCKS The PROPER LICENSING FOR THE CONTRACT (Sec) Nor the Financial Industry Regulatory Authority (Finra) Information.
The USMS, for it part, has stated that the Winning Bidder Wasn’s Required to Be Licensed with the Sec or Finra in the First Place; The Agency Also Claims to have Properly Investigated Any Conflicts of Interest Related to Former USMS Employees.
“IF YOU DON’T CARE About the Basics, Like Being Licensed To Handle Securities, WHICH IS The MOST BASIC Understanding of Handling Digital Assets, Then What Are You Doing? It Just Shows You How Little they Know About the Process, ”Borsai Said. CMDSS DID NOT Respond to A Request for Comment.
Addx Competed Against Wave and CMDSS for the Contract. Neverthaless, Millward Said that It would have a Made More Sense for Wave What CMDSS to Secure, Since the FIRM POSSSESSED TECHNICAL UPSIDE AND OFFERED TO PERM.
“I Think There’s A Lot of Personal Trust in the Leadership of the Awarded Entity to Figure It Out and Not Make the USMS Look Bad,“ Millward Said.
Dealing with Smaller CryptocurrenciesThe Central Theme from USMS’s Critics is that agency doesn’t sufficient understand Digital assets.
“They Treat Crypto Like It’s A Boat or A Piece of Real Estate,“ Borsai Said. “The USMS Could not Possibly Understand Whaty Hold If They Do not Understand the Assets. … They will Never Get An Accureate Figure, Unless they Go All-in on A Multi-Agency Shared System. ”
Millward and Borman said that USMS HAD DIFFICULY UNDERDANDING THAT CUSTY FIRMS NEED The SAME AMOUNT OF RESURCES TO MANAGE A SPECIFIC NUSHTHER o Dollars or meray Cents.
The agency have suggested to addx that if it won it is a one mayen been paid only in a percentage of the assets it wound end up managing, Insthead of a Flat Fee. The Agency Seemed Surprised WHEN Addx Explained How Expensive The Custody Solutions would be.
“They said, ‘we ant Icipate Never Having More Than $ 500 in Value at Any Given Time, ” Borman Said. “They don’t undesandand that by Judge’s Decree, that fob that contraains 20 CENTS WORTTHCOIN NEEDS to be tracked and Analyzed, and Destroying some fellow’s On the Way to the Impound Lot. ”