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Biden Administration Wants To Make It Easier To Seize Crypto Without Criminal Charges

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Buried deep in 61 pages of recent articles report The Biden administration called for dramatically expanding the federal government’s ability to seize and hold cryptocurrencies, according to U.S. Attorney General. It would strengthen both criminal forfeitures, which require a conviction, and civil forfeitures, which do not require a conviction or even criminal prosecution.

In particular, the release of the report publication of the new Digital Asset Coordinator Network. This nationwide network is staffed by more than 150 of his federal prosecutors trained in “Drafting Civil and Criminal Forfeiture Cases.”

Because virtual currency is pseudonymous, it may be considered immune to government confiscation. However, the reality is quite different. Last year, the U.S. Marshal, who is the Justice Department’s foreclosure administrator, said:managed About 200 cryptocurrencies worth $466 million were seized.

Since Fiscal Year 2014, the FBI, Secret Service, and Homeland Security Investigations have collectively seized There is approximately $680 million worth of cryptocurrency (value at time of seizure) and hundreds of investigations related to digital assets are still underway. But even these amounts pale in comparison to the IRS Criminal Investigation. confiscated From 2018 to 2021, we reached a staggering $3.8 billion in cryptocurrencies.

Nonetheless, the Justice Department claimed that the crypto “revealed the limits of the forfeiture tools used” by federal law enforcement agencies and recommended “updating some existing laws.” First, the Attorney General wants to expand the most abusive forms of civil forfeiture that occur without independent or impartial judicial oversight.

In “administrative” or “non-judicial” confiscation, the seizure agency, not the judge, decides whether to confiscate the property. The federal government can use administrative forfeiture to confiscate almost anything except real estate and assets worth $500,000 or more.

That $500,000 limit currently applies to cryptocurrencies, but the Attorney General wants to “raise the $500,000 cap for cryptocurrencies and other digital assets.” This removes one of the few restrictions on administrative forfeiture. Even if Congress refuses to act, the Treasury Secretary can easily end the cap by adopting new regulations, thanks to a law enacted last year.

This proposal is of great concern. Administrative forfeiture offers surprisingly little protection for property owners. After seizing property, the government only needs to send a notice of administrative confiscation. If the owner fails to promptly file a claim on his property, the property will be automatically forfeited.

Because seized property may be the owner’s most valuable asset, the owner often does not have the means to fight back.Still, even if a claim is filed, the owner may not be able to spend a day in court. report According to the Justice Institute, federal agencies have dismissed more than a third of all claims filed for seized cash as “shortages,” with most claims being dismissed for “technical reasons.” I’m here.

Unsurprisingly, administrative forfeiture cases are much easier for the government to win, so administrative forfeitures account for nearly 80% of all forfeitures conducted by the Department of Justice, and the majority of forfeiture activity by the Treasury Department. accounted for 96%.

The Justice Department praises administrative forfeitures for being “efficient” and reducing the “undue burden” on the court system, but in reality, administrative forfeitures do nothing wrong. It has burdened the lives of thousands of victims who did not.

Please try to hear Ken ColanAfter moving to the United States from the Middle East, he opened a small convenience store in Greenville, North Carolina. But in June 2014, an IRS agent broke into his store and told Ken that he had a warrant to seize $570,000 and had already seized every penny in his bank account ($153,907.99). . That money is Ken’s lifelong savings, earned from nearly 20 long years of running the business.

Less than three months later, Ken’s bank account was administratively confiscated. Without those savings, Ken was pushed to financial breaking point, covering the line of credit he had to borrow to support his family, pay off the mortgage, and keep the store running. I had a hard time doing it. Ken has never been charged with a crime.

“I couldn’t believe this was going to happen in America,” lamented Ken. “I don’t understand how the government in this country can take an honest businessman’s entire bank account without proving that he has done something wrong.”

Fortunately, with the help of the Institute of Justice, Ken later submitted “Petition for remission or relief” (basically a pardon for confiscated property). After a media ruckus, in February 2016, the IRS agreed to return all the money he received unjustly from his Ken. He lost fiat currency, not virtual currency, but as Ken’s story shows, administrative forfeiture doesn’t need to be easy to use at all.

In addition to expanding administrative forfeitures of cryptocurrencies, the Justice Department said it would “welcome amendments to give criminal and civil forfeiture powers for commodity-related violations.” Allowing the confiscation of criminals after conviction of fraud or manipulation in crypto markets can be a valuable tool for cracking down on fraudsters.

Currently, most cryptocurrencies are consideration Commodities, not securities. As such, under federal laws governing commodities, prosecutors can “prosecute fraud and manipulation in the cryptocurrency market.” However, unlike securities, these laws “do not allow forfeiture of ill-gotten gains from criminal activity involving commodities.”

but extended Civil Forfeiture casts too wide a net, making innocent owners much more likely to lose their crypto for governmental forfeiture. No judgment requirement. Additionally, there are direct financial incentives for federal agencies to file forfeiture proceedings. When property is confiscated (either civil or criminal), the seizing federal agency can retain up to 100% of the proceeds.

Unfortunately, the proposed expansion of asset forfeitures is part of a broader attack on cryptocurrencies, including an attack on financial privacy that cryptocurrencies could otherwise offer. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is currently rule This is the same reporting requirement that the IRS seized Ken’s cash, and would extend the intrusive reporting requirement to custodial wallets (i.e., those controlled by a third party).

If adopted, the wallet host will send FinCEN a detailed report of all transactions over $10,000 with non-hosted wallets, including personal information such as names and addresses of both parties involved in the transaction. is needed. Blockchain is inherently public, so his one report on one transaction is effectively a digital skeleton key, allowing the federal government to snoop on all other transactions in the wallet.

This is going in exactly the wrong direction. Whatever the midterm elections, Congress must reject the proposed crackdown on cryptocurrencies and curb civil forfeitures.

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