The U.S. government’s massive stockpile of Bitcoin seized from busting criminal activity has served as a revenue generator to pay victims of fraud, but the timing of its sales have been dubious and officials often struggle to keep up with the criminals on the cutting-edge technology.
“The government is usually more than a few steps behind the criminals when it comes to innovation and technology,” former federal cybercrime prosecutor Jud Welle told CNBC.
“This is not the kind of thing that would show up in your basic training.”
It is a constant struggle to stay ahead, particularly with the Bitcoin and cryptocurrency designed on the very premise of evading detection from law enforcement, he added.
“There will be manuals edited and updated with, this is how you approach crypto tracing, this is how you approach crypto seizure,” he told CNBC.
The government has needed the private sector to assist with handling the Bitcoin seizures, handling, and sales. The latter is held by auction.
“It could be 10 boats, 12 cars, and then one of the lots is X number of Bitcoin being auctioned,” Internal Revenue Service’s Cybercrime Director Jarod Koopman told CNBC.
While all the seizures generate positive flow, it is a costly operation, and different to time in the notoriously volatile industry, according to the report.
“We don’t try to play the market,” Koopman told CNBC.
The 500 bitcoin sold for $5 million to Riot Blockchain in 2018 would now be worth north of $23 million, while 30,000 bitcoin that went to billionaire venture capitalist Tim Draper for $19 million in 2014 would be more than $1.3 billion today, according to CNBC.
“You basically get in line to auction it off,” Koopman told CNBC. “We don’t ever want to flood the market with a tremendous amount, which then could have an effect on the pricing component.”
