US Officials Allegedly Don’t Know How Much Bitcoin They Hold – Here’s More Allegations of Mismanagement

The United States Marshals Service (USMS), which is responsible for managing assets seized in criminal investigations, is struggling to account for cryptocurrency holdings, raising concerns over potential government plans for a national crypto reserve.

The USMS manages a variety of seized assets, including real estate, cash, jewelry and vehicles. But when it comes to cryptocurrencies like Bitcoin (BTC), worth billions of dollars seized from the Silk Road marketplace in 2013, the agency appears to lack an accurate estimate of its holdings. Even rough figures for Bitcoin holdings are elusive, according to people familiar with the matter.

This omission is particularly concerning after White House Crypto Chief David Sacks announced that the US government is exploring creating a national crypto reserve. Such a reserve could mean that the government could stop liquidating seized crypto assets and even start hoarding them.

Understanding crypto nuances like forks, airdrops, and price fluctuations is important when managing reserves, said Les Borsai, co-founder of Wave Digital Assets. “Institutions need to be adequately educated or work with professionals who understand how to help them achieve their goals,” he said.

Even without a national reserve, properly tracking and liquidating seized crypto assets remains important because it plays a key role in funding the Department of Justice (DOJ). But some experts argue that the USMS’ current tracking system is outdated and error-prone. Chip Borman, vice president of Addx Corporation, a technology solutions provider for the US government, claimed that the agency used an Excel spreadsheet to manage its crypto assets, calling it “one bad day away from a billion-dollar mistake.”

Concerns about mismanagement go back years. Timothy Clarke, CEO of crypto consulting firm ECC Solutions and a former Treasury special agent, noted that as recently as 2019, the USMS only managed a handful of crypto assets, forcing other federal agencies to manage their own custody. Clarke also explained that the USMS took weeks to provide BTC deposit addresses and sent them via unencrypted email, a practice he described as “very, very insecure.”

Other agencies, such as the IRS Criminal Investigation (IRS-CI), implement stricter protocols for the transmission of such sensitive information, including encrypted attachments, video calls, and multi-step verification processes.

In 2022, the Office of Inspector General (OIG) released a report warning that the USMS lacked adequate policies for cryptocurrency storage, tracking, and liquidation. It also found that the agency did not have a system in place to track forked assets, which could lead to the loss of income from cryptocurrencies like Bitcoin Cash (BCH) and Bitcoin Satoshi Vision (BSV).

Additionally, in November 2022, the USMS announced that it had lost control of two Ethereum wallets following a software update. The agency acknowledged that it was unclear whether the issue was caused by an incorrect private key or a wallet malfunction.

Adding to the concerns, Addx COO John Millward claimed that a single employee is currently managing the disposal of crypto assets in an “individual account.” Despite the significant financial responsibility, the role reportedly lacks senior oversight, further raising alarms about potential mismanagement.

*This is not investment advice.