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In U.S. federal cases, investigators must have legal authority to seize cryptocurrency, move it into government-controlled custody, and track it while forfeiture is pending. A seizure is not a final forfeiture: the government generally cannot use the property before a final forfeiture order, and victims are not automatically repaid. The process varies by jurisdiction, agency, token type, and where the cryptocurrency is held, so the federal process described here is not a universal model.
How does the government get authority to seize cryptocurrency?
The U.S. Department of Justice’s 2025 Asset Forfeiture Policy Manual says an agency should obtain a seizure warrant unless it already has warrant authority or the owner consents. The required steps depend partly on whether the cryptocurrency is held in a wallet controlled by its owner or by a service provider.
| Where the cryptocurrency is held | Federal process described by DOJ | Important distinction |
|---|---|---|
| Self-custodial wallet | Obtain the required legal authority, then secure the asset in a government-controlled wallet. | Someone else may have a copy of the private key and could move the cryptocurrency, making prompt transfer important. |
| U.S.-based virtual asset service provider | Obtain and serve a warrant on the provider in a manner similar to seizing funds held in a bank account. | The provider holds the assets; the government must use process directed to that provider. |
| Foreign-located virtual asset service provider | Prosecutors should consult DOJ’s Office of International Affairs about the required process. | Foreign restraint may require mutual legal assistance or comparable process. DOJ cautions against accepting a transfer without the required process or OIA permission. |
Authority is only one consideration. DOJ’s manual cautions that thousands of cryptocurrency types exist and the U.S. Marshals Service (USMS) may not be able to store or liquidate every asset. Prosecutors and agents are directed to consult USMS about whether a specific asset can be processed before seizing it. Enhanced-anonymity cryptocurrencies have separate instructions and should not be assumed to follow the ordinary transfer procedure.
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1. Secure it in government-controlled custody
After authorization, the seizing agency should transfer cryptocurrency to a government-controlled self-custodial or cold-storage wallet. The purpose is to establish control of the asset: a private key is what permits transactions, and another person may have a copy of it. DOJ policy directs agencies to keep each cryptocurrency type in its own wallet, so a seizure involving more than one type may require multiple wallets.
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2. Record the asset in the forfeiture process
The agency’s forfeiture department processes the seizure and assigns it a Consolidated Asset Tracking System (CATS) identification number. For eligible cryptocurrency, the agency may transfer the assets to a receiving wallet supplied by USMS or its contractor for pre-forfeiture storage, subject to current USMS Complex Assets Unit procedures. This is an operational route for eligible assets, not a guarantee that every token can be stored or sold through USMS.
3. Maintain custody and valuation records
Custody management involves more than holding a wallet. Officials need reliable records of what was seized, who controls access, and how much the assets are valued at. The DOJ Office of the Inspector General’s 2022 report found that, during its audit scope of fiscal years 2017 through 2021, USMS used supplemental spreadsheets because CATS lacked functionality for daily cryptocurrency inventory management. The audit identified inaccurate spreadsheet records, gaps in written procedures and edit controls, and a lack of periodic reconciliation. It also noted shortcomings in recording custody and valuation and the absence of an established process for recording new assets created after a cryptocurrency fork.
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Those are historical audit findings, not proof that the same weaknesses remain today. The OIG also found that USMS had adequate safeguards over the storage of, and access to, cryptocurrency in its custody. The report said DOJ had managed nearly 200 cryptocurrency seizures as of June 2021; it valued those assets at about $466 million in September 2021. Neither figure is a current government-wide inventory.
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The seizing agency may not be the asset’s long-term custodian. Under DOJ’s Justice Manual, USMS has primary management and disposal authority over assets in its custody under DOJ enforcement; Treasury custodians handle relevant Treasury assets. Which custodian applies depends on the agency and the asset.
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Seizure places property under government control while the case proceeds. It does not establish that the government has finally forfeited the property. DOJ policy generally prohibits Department personnel from using property held under seizure and pending forfeiture, including for official use, before a final order of forfeiture issues.
Can the government keep or sell seized cryptocurrency?
The government cannot treat a pending seizure as money it can spend. If forfeiture becomes final, disposition is an executive-branch decision governed by the applicable statute and case. DOJ guidance describes sale and other legally available methods. The forfeiture order is generally drafted to forfeit the property to the United States for disposition according to law, while recognized third-party claims are addressed.
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Proceeds from forfeited property enter the Assets Forfeiture Fund under the applicable statutory framework. The Fund pays specified program expenses, which can include authorized asset management and disposal costs as well as victim compensation. This does not mean every forfeited cryptocurrency asset is sold, or that all proceeds in a particular case go to victims.
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Do victims get seized cryptocurrency back?
Possibly, but a seizure alone does not guarantee reimbursement. DOJ’s remission process is discretionary and governed by 28 C.F.R. Part 9. It may compensate qualifying victims using assets forfeited from perpetrators, but eligibility depends on the crime connected to the forfeiture. DOJ states that the Assets Forfeiture Fund is not a general victim-compensation fund.
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DOJ guidance also describes distributions or transfers that can include payments to eligible victims and equitable sharing with participating state, local, and tribal law-enforcement agencies. Payments to owners, lienholders, certain regulators, and victims take precedence over federal official use and equitable sharing. The applicable law, recognized claims, and decisions in the specific case determine the eventual distribution.
A pending case illustrates the difference between seizure and recovery
In a June 18, 2025 release, updated July 30, 2025, DOJ described a civil forfeiture complaint against more than $225.3 million in cryptocurrency allegedly connected to laundering proceeds from cryptocurrency investment fraud. The release said investigators believed more than 400 suspected victims had lost funds and quoted officials describing an eventual return of funds as an objective. The complaint’s account was an allegation, not a final forfeiture judgment or proof that victims had been compensated.
Why one case does not predict another
The result turns on several case-specific questions: the jurisdiction and governing forfeiture route; whether the asset was self-custodied or held by a domestic or foreign provider; which agency seized it and which custodian manages it; whether USMS can process that token; whether forfeiture has become final; and whether victims or other third parties have recognized claims. A process or outcome in one case should not be treated as a promise about another.
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