Seized crypto safe with US Marshals Service? Not so much, new audit reveals

Regulation

The Office of the Inspector General (OIG) for the United States Department of Justice conducted an extensive audit of the cryptocurrencies seized by the U.S. Marshals Service (USMS) — revealing the dire need for the federal agency to revamp its existing crypto management and policy systems.

OIG’s audit on the seized cryptocurrencies found the USMS implementing adequate safeguards over its storage and access. However, the agency was found to be using spreadsheets to maintain track of the inventory owing to the inability of the existing system, Consolidated Asset Tracking System (CATS), for daily management of crypto assets.

OIG’s audit disclosed the lack of documented policies and practices related to the management of seized crypto assets — especially related to the use of inventory spreadsheets— adding:

“Current USMS seized cryptocurrency management policies are inadequate, absent, or in some instances provide conflicting guidance related to asset storage, quantification, valuation, and disposal.”

Having the knowledge about USMS’s intent to outsource the management of seized cryptocurrencies, the Justice department’s OIG laid down seven recommendations to help improve the management of the same, starting with implementing a property management system ”that logs edit history to prevent fraudulent alteration of the inventory records.”

In addition, the OIG recommended establishing fresh policies related to the proper security and handling of the spreadsheets used for tracking crypto seizures. This includes moving the data from the spreadsheets into the CATS inventory.

Other key recommendations include introducing a sufficient number of decimal places to ensure fractional accuracy and implementing policies catering to blockchain forks and physical control over assets seized by the USMS, “including pertinent USMS wallet keys.”

The report also revealed that USMS concurred with all the seven recommendations and will be closed upon evidence of its total implementation.

Related: SEC boss worries crypto bill undermines financial protections

CoinShares’ weekly Digital Asset Fund Flows report highlighted the off-loading of digital asset products worth $101.5 million amid anticipation of “hawkish monetary policy,” stating:

“What has pushed Bitcoin into a ‘crypto winter’ over the last six months can by and large be explained as a direct result of an increasingly hawkish rhetoric from the US Federal Reserve.”

The report also highlighted that the total assets under management for Ether (ETH) funds fell from their peak of $23 billion in November 2021 to $8.7 billion as of June 10, 2022.

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