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A US Marshals auction can sell a lot of items seized by federal officials, including cryptocurrency. This is something that can impact everyone who owns digital currency.

As cryptocurrency grows in popularity and becomes more mainstream, it is ending up in the middle of criminal investigations. As a result, federal officials can seize the currency and auction it off to the highest bidder.

US Marshals Auction Of Cryptocurrency

Most people don’t realize it, but the U.S. Marshals Service is tasked with auctioning items seized by numerous federal law enforcement agencies. This form of confiscation is known as asset forfeiture.

In recent years, federal agencies have been cracking down on drug dealers and other individuals having committed digital crimes. Assets tied to the criminal activities would be seized by the federal agencies and then sold during an auction. The basis of this activity was outlined in a 2014 guide by the United Nations about locating and grabbing cryptocurrency in suspected criminal activities. Numerous individuals selling illegal drugs online, with one example being the Silk Road, often had a lot of cryptocurrency in assets from the drug crimes. Although federal agencies typically hold cash that was seized during investments, these agencies never HODL when it comes to cryptocurrency.

One estimation says that federal law enforcement officials have seized at least $1 billion worth of digital coins so far. Officials then sell the digital coins during a US Marshals auction. A previous US Marshals auction in March 2018 sold $25 million worth of bitcoin alone. Buyers were required to deposit $200,000 in order to bid on it.

With civil asset forfeiture, law enforcement can confiscate assets from individuals who are suspected of committing a crime, with no arrests needed. In fact, they can often take assets — including bitcoins — without any justification. For example, being friends with an accused criminal has been justification for federal officials to seize assets. Unlike criminal asset forfeiture, there is no legal procedure to get back confiscated assets. That’s the controversial aspect of this, because this can literally happen to anyone with cryptocurrency.

How To Prevent Asset Forfeiture Of Digital Currency

Although anyone can be a target of this problem, there are some preemptive solutions around it. The irony is that the purpose of cryptocurrency was to be decentralized and free from authorities.

The first of many ways to prevent asset forfeiture of cryptocurrency is to take the money out of the exchanges and to store it in an offline physical cryptocurrency wallet. If the authorities ask you for your private key or password to your cryptocurrency wallet, don’t tell them unless they present a warrant. Another possible solution is to use advanced cybersecurity methods, including 2-step verification and backup codes, to prevent the authorities and hackers from getting your cryptocurrency.