Can the U.S. Government Seize my Crypto?
While current attention is focused on whether cryptocurrencies are securities, investors should also appreciate the risks if their digital assets were mixed with the proceeds of criminal activity.
If you crack a rotten egg into a bowl of fresh ones, there’s no way to tell which eggs are rotten and which ones are not — that is the essence of fungibility.
And nowhere is fungibility a more understood concept than when it comes to money.
For all intents and purposes and at the risk of splitting hairs, money in its various forms, whether it’s cash or a bank deposit, is fungible — that means the law doesn’t distinguish between one dollar from another.
To be sure, cash money has serial numbers, and law enforcement routinely makes it a point to seize bills that have been involved in criminal activities, but outside of these exceptions, money is generally accepted as fungible.
And with fungibility comes vulnerability — a susceptibility to being seized by authorities, when deemed as having been used to facilitate the laundering of criminal proceeds.
Under U.S. law, money identified to have been the proceeds of criminal activity can be seized even where comingled with legitimate funds.
But U.S. law doesn’t stop there.
In situations where the legitimate funds somehow facilitated the concealment and laundering of criminal proceeds, even the “clean money” can be seized as well.
Whose account is it anyway?
U.S. law provides for civil forfeiture under 18 U.S. Code § 981 and criminal forfeiture under 18 U.S. Code § 983, which allows for the seizure of all property that was involved in the offense.
The legislative history to 18 U.S. Code § 981 makes clear the term “property involved” is intended to be expansive and include the money or other property being laundered (the corpus), any commissions or fees paid to the launderer, and any property used to facilitate the laundering.