The Blubber

The U.S. Marshals Service (USMS) is responsible for managing assets seized by law enforcement during criminal investigations, including real estate, cash, jewelry, antiques, and vehicles. It is also tasked with handling cryptocurrencies, such as the billions of dollars’ worth of Bitcoin (BTC) seized from the Silk Road marketplace by the FBI in 2013.

However, the USMS appears to have no clear idea of how much crypto it actually holds. In fact, the agency is struggling to estimate even its Bitcoin reserves, a source familiar with the matter told CoinDesk.

This could pose a significant issue, especially in light of White House Crypto Czar David Sacks’ recent announcement that the U.S. government is exploring the creation of a national crypto reserve. This initiative could mean halting the liquidation of seized digital assets—or even purchasing additional cryptocurrencies.

"When you're talking about reserves, you need to understand the unique properties of these assets—like forks, airdrops, and constant volatility," said Les Borsai, co-founder of Wave Digital Assets, a firm specializing in digital asset management. Borsai, whose company was not selected for a USMS contract, told CoinDesk that federal agencies need to either educate themselves on crypto or work with professionals who can manage these assets properly.

Even if the U.S. crypto reserve never materializes, the USMS still plays a critical role in managing and liquidating seized digital assets, as asset forfeiture helps fund the Department of Justice (DOJ).

But according to Chip Borman, vice president at Addx Corporation, a company that provides technology solutions to the U.S. government, the USMS is handling its crypto operations in an alarmingly outdated manner.

"As far as I know, the USMS is currently managing all of this with individual keystrokes in an Excel spreadsheet," Borman told CoinDesk. He observed the agency’s processes firsthand in 2023 and warned, "They’re one bad day away from a billion-dollar mistake."

A Troubled History of Crypto Mismanagement

Issues with the USMS and crypto asset management are nothing new. Timothy Clarke, CEO of ECC Solutions and a former special agent at the Department of Treasury, said the agency has faced longstanding criticism from both public and private sectors over the years.

As recently as 2019, the USMS was only handling a handful of cryptocurrency assets—fewer than 10, Clarke told CoinDesk. This meant that other government agencies had to manage their own seized crypto, instead of having the USMS act as a central repository.

Clarke also described alarming security lapses in how the USMS handled Bitcoin deposit addresses. When agencies needed to send seized crypto, the USMS would take weeks to provide an address—and when they finally did, it was simply sent via unencrypted email with no verification process.

By contrast, agencies like IRS Criminal Investigation (IRS-CI) use much stricter security protocols—including video calls, encrypted read-only attachments, and follow-up verification calls—to ensure that crypto wallets are handled securely.

"It was very, very unsecure," Clarke said. "It’s just shocking that nothing happened during all the years they operated like that."