Seize and Desist podcast

S&D E14 - Fact vs. fiction: asset seizures in the news

Author
Lo Furneaux
Marketing - Associate

“No one's taking action without a court order.”

In this special episode of Seize & Desist, we explore the complexities of cryptocurrency seizures with Joanna Summers, our SVP of Client Relations and resident seized asset specialist, after an extended introduction from David Tyree, our US Compliance Officer and former Resident Agent in Charge at the DEA.

Aidan and Joanna unpack the latest asset seizure headlines and discuss the nuances of dealing with seized assets, including the legal and operational challenges of maintaining their value for eventual disposal or return.

They also touch on the speculative nature of cryptocurrency, the ongoing debate around privacy coins, and the potential future of cryptocurrency seizure and management policies.
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Don’t forget to register for Asset Reality’s seized asset webinar on Thursday, 29th August, at 3pm BST (10am ET) to join us as we review the latest industry best practices and discover practical ways to enhance asset seizure, management and disposal processes in the public sector.

Register to secure your spot today: https://us06web.zoom.us/webinar/register/8517238163281/WN_8AkKbl-LQEm-xLkS3kksGg 

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Timestamps

00:00 - Special Announcement - Register for Asset Reality's Seized Asset Webinar

01:00 - Extended Introduction from David Tyree

06:00 - Aidan's introduction

07:00 - Joanna's background

08:30 - Asset seizure processes

11:00 - Government use of seized assets

16:45 - US attitudes to privacy coins

25:30 - Civil forfeiture vs criminal forfeiture

29:00 - Safely disposing of cryptocurrencies

37:40 - social reuse of seized assets

39:45 - Extended outro from David Tyree

Resources Mentioned

About our Guest

Joanna Summers is the Senior Vice President of Client Relations and resident seized asset specialist at Asset Reality.

As the former Assistant Chief of the Asset Forfeiture Division Complex Assets Unit at the U.S. Marshals Service (USMS) Joanna led her team to build the USMS Cryptocurrency program, beginning with the landmark Silk Road Bitcoin seizure.

Under her guidance, the program oversaw the custody, management, and disposal of all ongoing business and complex financial instruments that are subject to forfeiture, evolving from conducting sealed bid auctions to implementing a streamlined liquidation process via cryptocurrency exchanges.

‍Disclaimer

Our podcasts are for informational purposes only.  They are not intended to provide legal, tax, financial, and/or investment advice. Listeners must consult their own advisors before making decisions on the topics discussed.  

Asset Reality has no responsibility or liability for any decision made or any other acts or omissions in connection with your use of this material.

The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by Asset Reality employees are those of the employees and do not necessarily reflect the views of the company. 

Asset Reality does not guarantee or warrant the accuracy, completeness, timeliness, suitability or validity of the information in any particular podcast and will not be responsible for any claim attributable to errors, omissions, or other inaccuracies of any part of such material. 

Unless stated otherwise, reference to any specific product or entity does not constitute an endorsement or recommendation by Asset Reality.

Transcript

Speaker: Lo Furneaux

Hi. I'm Lo Furneaux, one of the producers behind the Seize and Desist podcast. I have a special announcement for you before we get into this week's episode. Asset recovery has recently been designated as a top priority for the financial action task force. However, managing these seized assets continues to be a challenge for agencies worldwide. Join us for a special webinar on Thursday, August 29th at 3 PM British Standard Time or 10 AM Eastern Time as we review the latest industry best practices and discover practical ways to enhance asset seizure, management, and disposal processes in the public sector. In this webinar, you will discover the persistent challenges faced by industry practitioners worldwide, proven strategies to overcome these hurdles, and actionable insights to improve asset forfeiture and recovery processes. You won't wanna miss it. Visit our website to secure your spot today. Please note this webinar is intended for approved participants from government and law enforcement agencies. You need to use your official email address during the registration or you may not be accepted. Let's get into the episode. 

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Speaker: Aidan Larkin

Why doesn't the government just take all of the crypto assets and put it in a treasury reserve style fund? Or why don't they do x, y, or zed? 

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Speaker: Joanna Summers

There's a lot of good ideas out there, but I think some of them are half baked. When it comes to the government selling any asset, you have to do this through a court order. No one's taking action without a court order. You have to wait until there's either a final order of forfeiture or an interlocutory sales order, or there's the defendant goes free and you have to return the assets to the defendant. So until one of those three things happens, the government does not own those assets. It's in a holding area until there's actually a final court order addressing the case. The government can't move anything that would be sitting in, like, a seized asset deposit fund over to a national reserves or anything like that until there's a final order. And I'm not saying it's impossible. I'm just saying some legislation would need to change to make that happen. It's that it's not as simple as just moving something over. You have to follow a process, especially working with the federal government. 

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Speaker: David Tyree

Welcome to Seize and Desist. I'm David Tyree, United States compliance officer at Asset Reality. So I have over twenty five years of experience in following the money. Bulk cash seizures to running money through bank accounts to now the newest and greatest challenge is cryptocurrency. Although there are several tools out there to trace that money movement, it's really challenging for law enforcement to understand a totally different way of money movement, to keep up with criminal organizations that are better funded and have the time, access, and ability to exploit the blockchain as a mechanism to launder criminal proceeds. It's so critical when we think about, from a law enforcement perspective, who is our customer? Well, it's the community. And from a narcotics investigators perspective, I always looked at who was making a profit off the addicted in our community, who I would gently proffer are some of the most vulnerable. And to see individuals making so much profit off of their addiction and the misery and the overdose death, that drives me, compels me to be better than they are in tracking, seizing, and removing criminal proceeds from the hands of criminals. It's so critical because if we can inhibit their ability to exploit financial industry as a function of their criminal activity, we've effectively taken out their incentive to commit crime, which, again, I believe is so critical to the communities we serve. In the realm of forfeiture, speaking from the United States perspective, there's a lot of daylight between seizing an asset and proving beyond a reasonable doubt or whatever that burden might be, could be preponderance to the evidence, that that asset seized is actually subject to forfeiture. Because one, the government is dispossessing one of its citizens of something that they have. And it's the burden on the government to demonstrate that that asset seized can be traced to criminal activity. And absent that, we put ourselves in a position as the government of looking almost draconian and not that we're there because we're serving our communities. So I think it's critical when we're thinking about asset forfeiture that just because we've seized an asset, there's a lot of work. I believe when the asset is seized is truly when the investigation begins. Unfortunately, to many in law enforcement, they believe that at the time of asset forfeiture, perhaps the investigation is now concluded. And that to me is a red flag for investigators because we have to be we have to be thinking thoughtfully. We have to be willing to be transparent about what we're doing, how we've done it, and what that evidence is to support what is truly a legal theory. Following that money, continuing to bring in different tools to assist in the investigation are critical to asset forfeiture. Because I can tell you from experience, just seizing an asset and then having to return it because the courts ordered it because your investigation was not thorough, it's a very heavy jacket to wear as we say in law enforcement circles. In this special episode, we explore the nuances of dealing with confiscated digital assets with Joanna Summers, our resident seized asset specialist. Aidan and Joanna dive into the legal and operational challenges of handling seized digital assets and maintaining their value for eventual disposal or return. They also touched on the ongoing debate around categorizing privacy coins as contraband and the changing nature of cryptocurrency seizure and management policies. 

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Speaker: Aidan Larkin

Joanna Summers, how are you? 

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Speaker: Joanna Summers

Good. How are you doing, Aidan? 

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Speaker: Aidan Larkin

Wonderful. This is a bit of a different Seize and Desist podcast. This is a bit of a one off special, and I couldn't think of a better guest than one of us Asset Reality’s own because we've seen everything in the last two to four weeks, especially. We've seen so many articles, so many commentaries, so many newscasts and podcasts talking about seized Bitcoin, crypto being moved. We've got blockchain analytic companies tracking the movement. We've got governments being criticized for crashing the market, and you have probably the most famous, infamous, however you want to badge it, sort of politician and mister Trump talking about what he's going to do and this looming Bitcoin announcement. And I thought it'd be worthwhile us just unpacking what actually happens to seized Bitcoin or crypto for that matter or, frankly, any asset that comes into contact with a government agency. And perhaps you and I can just run through some of the absurd through to the sensible things that we've seen, and maybe treat this as a bit of a fact checking, verify, myth busting episode. But to kick off, it'll be useful just to remind people what your background is and why you are especially qualified to talk about what governments can do with seized crypto assets. 

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Speaker: Joanna Summers

Sure. So prior to joining Asset Reality, I ran the US Marshals Service asset forfeiture division complex assets unit. So my team in particular was responsible for all ongoing businesses and complex financial instruments that were subject to federal forfeiture. And not too long after I started, that included Bitcoin and cryptocurrency as well, starting with the Silk Road case. So I had a really unique experience of being able to fold a new asset class into the program and help build the cryptocurrency program for DOJ. 

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Speaker: Aidan Larkin

Just a couple of things then to unpack there. But, yeah, basically, you were the person then. It was you and your team was responsible for what is, I still think, the largest collection of seized crypto assets in the world ever by volume because there was just so many of them. So let's run through some of the things. What prompted this podcast was me being continually tagged in different news articles and things being sent to me saying, hey. Have you seen this thing? Why doesn't the government just take all of the crypto assets and put it in a treasury reserve style fund, or why don't they do x, y, or zed? Could you share us a bit of the rundown on the legalities on what actually has to happen with an asset that is seized and why some of these things that are being thrown out aren't as straightforward as they might seem. 

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Speaker: Joanna Summers

Yeah. It's really interesting to see all the news articles coming out about this lately and then couple that with Trump and other presidential nominees either speaking at the Bitcoin conference in Nashville or just speaking about it in general. And there's a lot of good ideas out there, but I think some of them are half baked. When it comes to the government selling any asset, you have to do this through a court order. No one's taking action without a court order. So you have to wait until there's either a final order of forfeiture or an interlocutory sales order, or there's the defendant goes free and you have to return the assets to the defendant. So until one of those three things happens, the government does not own those assets. It's in a holding area until there's actually a final court order addressing the case. So the government can't move anything that would be sitting in, like, a seized asset deposit fund over to a national reserves or anything like that until there's a final order. And I'm not saying it's impossible. It I'm just saying some legislation would need to change to make that happen. For example, with cash, you can't just move cash to official use. We don't do that. You can move a car to official use to have a police department maybe put that into rotation if they're short on vehicles. But there's a lot of paperwork involved. It has to meet certain criteria and has to go through the process. I think that that's one big thing that's being missed right now in a lot of these articles is that it's not as simple as just moving something over. You have to follow a process, especially working with the federal government. 

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Speaker: Aidan Larkin

Yeah. And it is also, like, separating this sort of clickbait articles on, you know, again, you know, picking on the big headline grabber Trump, and what he's gonna do with Bitcoin, but it's representative of conversations that are taking place all around the world. It's like, which of the things are you talking about? When I read these articles, I look at them and think, okay. You're covering, like, twenty different things here. Which is it? If we're talking about Trump becoming president and buying Bitcoin as a digital asset, like, sort of just a general business strategy, that's the same as buying gold or buying silver. That has nothing to do with the world of seized assets or asset forfeiture. That's just a decision from a treasury perspective. But then you look at it and say, they wouldn't buy artwork. They wouldn't buy classic cars. They wouldn't buy luxury watches that are known to appreciate. So BART being a bit of no political clickbait, it's an interesting financial thing that would have to be considered. But let's park the acquiring for government because I think that's a very separate issue. It's not in our world. So let's imagine then that someone has seized Bitcoin. And as you said, they can't just use it because as the US has seen so many asset forfeiture headlines about abusive process. Just to be absolutely clear, you'd mentioned, like, the government put in a car back in the rotation. But, actually, from the day that the vehicle was actually seized, am I right in saying it could be months or years until it's actually assigned that there's probably a person who's claiming their innocence or a third party. And it's only after the asset is finally forfeited that it can then governments could say, hey. We were gonna buy a truck. We'll take this truck instead from the agency, and we'll credit the agency because we were gonna use the van like that for surveillance. Am I right in saying from day one when the car seized, cops just can't drive around in the car? Day one? 

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Speaker: Joanna Summers

From day one, when the asset's seized, it's sitting in a storage facility with a contractor overseeing it. They're checking the mileage. They're doing maintenance on the car. It's not to be used for any purpose until it is completely adjudicated. So to your point, it would need to have anyone trying to make a claim, any court process that's needed. That all has to be completed before someone can just drive that car off the lot. 

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Speaker: Aidan Larkin

And also people forget that sometimes these assets are actually assigned as evidence. It's like the big cash seizure. If there's disputes over the fingerprint on the asset, a lot of the times, most governments around the world have a rule that until there's a final forfeiture, that means someone's found guilty. And the appeal period has lapsed, which in the UK, that can be five, six, seven years. It's a nonstarter as a conversation. Like, they literally cannot do anything at that stage. And I've seen people, you know, ask, the governments are sitting on billions. Why don't they stake the asset? Why don't they take something like Ethereum and generate yield off it? And I think that's an in that's a more interesting conversation because that's not just as absurd as the government just taking it and using it. Because I'm right in saying in your in your time, in your previous role, and certainly in my previous role in the UK, there were certain things you were allowed to do to maintain the value of the asset. So I could put a racehorse and run it in races to maintain its potential future stud value. I can pay for maintenance to a yacht. Do you think we'll head towards a position where you're allowed to do things with an asset management hat off to maintain the value or generate Yeedi, or do you think that'll be a nonstarter? 

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Speaker: Joanna Summers

I think a lot of that will be a nonstarter when it comes to financial assets, any type of brokerage account or cryptocurrency. It's a little different for a boat or a house. You know, as you said, you need to do a level of maintenance so that you can sell it at the right price. And if you let it fall to pieces, you're not gonna get the same value for it. But when you start to do something like that with cryptocurrency, you're really moving into speculation and playing the market, and that's one thing that all asset forfeiture units avoid. For one, these assets could be victim cases. This could have to go back to a victim at the end of the day, so you can't just play around and potentially lose the asset. If you look at the Bitfinex case, law enforcement seized over three point six billion in cryptocurrency linked to that hack. It was more than ninety four thousand stolen Bitcoin recovered. So that's an example where those funds might need to go back to Bitfinex as the victim in the case, and that's obviously a lot of money that couldn't just be moved right over into strategic reserves until the case is adjudicated. 

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Speaker: Aidan Larkin

That's a really important part you hit on is that most asset seizures, if you track back through it, and you'll know this better than anybody, you track back through the asset seizure document. Usually, the wording in any freezing order is we're taking control of this asset to maintain the value, i.e. stop a suspect running off with it or a third party. So you're able to do certain things because it's within the court order that was stamped at court that day. But if I take the classic car and I start hiring it out without anyone's permission to make money off the asset that's sitting still, then I'm in no longer in maintenance category or maintenance territory. As an interesting side note, I think the reason this debate is coming up is because some asset management agencies do have interesting legislation. The French asset management agency, the Legrasse, it is allowed to, I believe, fund the agency off the interest it earns of frozen bank accounts. But, again, that was policy cabinet law. Like, that was not something that was done quickly, and it was also a clearly defined asset where you still have debates in America around and all around the world around what a crypto asset even is. We still haven't figured out what's security and what's not, and that debate still rages on. So it sounds to me like we're a long way off any of these actually being a realistic conversation. 

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Speaker: Joanna Summers

Yeah. The debate rages on on commodities or securities and how to classify this, but I agree. I think you're you're moving a step too far when you start making decisions for yourself about how you're going to use the asset versus what the court order says, which is maintain the value, you know, make sure you can audit it, and be ready to sell it or return it when we tell you. If you veer off course there, you're really in uncharted territory. And I do hope some of what we're seeing with the presidential nominees talking about cryptocurrency helps drive that policy and regulation conversation forward. Now that this is really a front and center political issue, I'm hoping we get more clarification on some of what you just said about us not really being totally sure on what cryptocurrency is yet around the world and having that common definition. 

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Speaker: Aidan Larkin

Yeah. And I think that's always been the biggest challenge with crypto. Even we're saying crypto. Crypto digital asset, virtual currency, virtual asset. I mean, we can't even agree as a global community what it's actually called. So I think one of the good things that will come from this is that if it's being debated at the most senior levels, it will force some decisions to be made. Tell me this. One of the UK articles recently talked about the realization of some seized crypto assets and interestingly including privacy coins. Again, privacy enhancing tokens, privacy coins, whatever you wanna call them, the Moneros of the world. And they've been part of a massive debate as to whether or not they are contraband or they're not. What are you seeing in the US in terms of the attitude towards these sorts of assets? And how does one deal with that in a seized asset from an asset forfeiture perspective? Is it a case of destroy it the minute it comes in the door because it's unholy? Or is it a case of it's held forever? Well, what normally happens? 

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Speaker: Joanna Summers

So normally what happens is it is held until there's a final order of forfeiture, and then to your point, we're not really sure if this is going to be contraband or if we're going to sell it, what we're going to do. We have a preliminary process in place where it is basically considered contraband. But as we know with cryptocurrency, things change so quickly, you can't just make one decision and expect to rely on that decision, like, five years down the line. I think initially there was discussion about it being a contraband type of asset where after a certain period of time, it would be sent to a burn address. Two people would sign off on it, and you basically just write it off as a worthless asset. And that's because it's anonymity enhanced. You don't know who you're selling it to. There's not really a legitimate market for it. But things like that can change. Right? So I think you can't just take that approach and apply it years down the line. What if it's a substantial amount of Monero and it's a victim's case? 

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Speaker: Aidan Larkin

Good point. 

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Speaker: Joanna Summers

I think that might be a situation in which you'll the policy and say, hey. We have victims we need to make whole here. Maybe we can come up with a creative workaround where instead of just selling it, we actually hold our own option and buyers are willing to be vetted. You know, maybe they're willing to forego some of that security to buy the Monero. I haven't seen that happen in the US yet, but I do think it's something that would be considered if it were a victim's case. But, yeah, I think a lot of that just gotta look at it on a case by case basis. Even though there is some policy and procedure in place, nothing can really be set in stone until you look at it case by case. 

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Speaker: Aidan Larkin

For me, it's one of the most interesting and valid debates when we separate our governments just taking crypto and doing what they want with it. And we'll get on to blockchain analytic tracking of seized assets because I think that's just a novelty because you can actually track the asset. No one knows when the government moves a car around the compound because they don't get to see behind the large fence. The difference is we see it all, and we'll talk about that in a second. But on the privacy enhancing coins, interestingly, I had a post on LinkedIn recently. I'm just literally within twenty four hours of recording this podcast. One of the folks from Crypto UK, and they sort of have a, you know, a policy steering committee. They had talked about members that agreed that seizures should be going to the exchequer and form some part of strategic government stockpile rather than being destroyed. I agree with the holding it and waiting to see how the law evolves because to your point, I heard a expanded version of this at an event recently. What if you have a criminal that has some sort of Ponzi scheme, hundreds of millions of dollars of victims' money? You've got someone like Erin West in Operation Shamrock tracking this thing down, and you've got this enormous pot of assets, and they've converted it all to Monero. If the government doesn't have a position, you've got a real tricky position. What if there's an insolvency practitioner or a receiver, an FTX style appointed over the company that collapsed, and you've this pot of privacy assets? Because if I'm a victim, I'm gonna sue the receiver or the government, and I'm gonna say, why the hell aren't you converting my asset? I want my dollar back. I want my pound or my euro back. I mean, I shouldn't be punished here because the government hasn't made a decision. The UK, for example, issued guidance saying it intends to, but that's not the law right now. And it's a case of if you call it contraband, well, then it's cocaine. And no one would turn up and say, hey. This guy stole all my money. They have a million dollars worth of cocaine. I demand you hit the streets. Get that sold and get me my money back because it's just gone. It's lost forever because it's illegal. And let's not forget, my first ever auction of seized crypto assets was Monero because way back in twenty eighteen, twenty nineteen, there was no such decision. Right. And it was a case of, can we find, exactly as you say, can we find individuals that wanna buy this as a speculative asset class who are willing to not sit behind any sort of anonymity? If they come forward and confirm their utility address, their passport, their driving license, and all of those things, then there is a way to realize it. So I agree with you. Asset forfeiture doesn't move quickly. I would much rather have a billion dollar stockpile of privacy enhancing coins waiting to see what happens. And then maybe that would force governments to say, okay. We gotta make a decision on this. And if there is a route that you can convert them and get people their money back in some reputable way, just like selling stuff at an auction. If you sell things in an auction without any KYC or AML checks, those breach in money laundering and money launderers could buy those assets. But if you set a pretty high barrier, don't allow shell companies to bid. There is a way. How did the US deal with regular assets? What happened when you had something like, you know, a big diamond or a gold bar or, you know, piece of art work, something that was a traditional high risk money laundering asset. How did you deal with that in the past? 

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Speaker: Joanna Summers

Well, to your point, there was KYC. I mean, buyers are checked. Yeah. So whoever the winning bidder is is agreeing to go through a vetting process to ensure it’s not going back to a relative of the defendant or something like that. And you're also signing off that you aren't related to the defendant. So there is, like, a legal KYC check. 

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Speaker: Aidan Larkin

You're making a declaration to law enforcement that can get you arrested if you get this wrong. And people forget as well. You're forced to pay in USD from a verified bank account. So, yeah, we were happy that we were able to get around the risk. It's whether or not as an asset category what you can do next with it. But, again, the argument is if I sell you a Rolex tomorrow, I don't get to see what happens next to that Rolex. Yep. I'm selling in good faith. If you wanna hop on a plane and you wanna fly to Marbella and sell that for cash to some random drug dealer who wants to launder proceeds of crime, it's kinda gone at that stage. So why are we getting so obsessed with privacy tokens? If we do everything we need to as a government to make the victim whole, we can't prevent people carrying out money laundering offenses. 

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Speaker: Joanna Summers

Yeah. Once you sell it, that's then another step to have to go back and check whoever the next buyer was and who it went to, and then multiply that by all the assets in the world. It's just not feasible. You have to hope that that's not going to happen, and if it does, you prosecute at that time. But with the privacy coins, I think it's great to take a beat and try to figure it out before we just make a blanket declaration that it's all going to be contraband. But I do think that there's something to be said for making a decision too. You don't want everything to drag on forever. And to your point, when you start to see that stockpile build and build, that's a really good time to help put pressure on everyone to say, okay, we have to come up with some sort of policy here. And I think people look at the policies a little too black and white, like, okay, it's set, that's it, it can't ever change, when it needs to be, this is the policy, and then as these different cases and these different scenarios arise, we'll revisit it and make a decision at this time. But, you know, no policy is gonna capture a hundred percent of every situation. It's always gonna be, you know, high nineties, and then there's gonna be a case here and there where you need to talk things over and think about it a little bit differently. So I see both sides. Like, you wanna set a policy. You don't want something just sitting around forever once it's been forfeited. Best practice is you move it through the process and you dispose of it. But, you know, you have to kinda take a minute when it's something that's newer, like a privacy coin, and that there's other considerations like victims. 

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Speaker: Aidan Larkin

It's something we talk about ad nauseam at Asset Reality. It's bespoke asset disposal strategies. Every crime doesn't have the exact sentence. The sentence is often reflective of the individual circumstances, the country they're in, prisons they have, the processes, the procedures. So I think we'll probably find there will just have to be in that small bucket, those percentage of assets that do need to be treated a little bit differently. And also not forgetting just, like, good old fashioned common sense. If you're a criminal wanting to launder proceeds of crime, you are not going to turn up at a government auction with the most vetting, the most scrutiny to buy your assets that you're being told. Your name will be run through a criminal record database. We will actively and with the blockchain, you can proactively monitor all their wallets. You wouldn't just put your head above the parapet. For that sort of thing, I find that once we put in those high barriers in my last job, like, immediately, the number of registrations just drove off a cliff because people were like, no to hell with that. And it meant the people left behind were like, I'm legitimate. I'm happy to take part in this auction. I've nothing to hide from the government. 

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Speaker: Joanna Summers

Absolutely. That's a great point. And I think that furthers the point on civil forfeiture, non conviction based forfeiture too. If you have to come forward and claim it, do that if you're a criminal. So it helps expedite the process. 

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Speaker: Aidan Larkin

Yeah. Just to unpack that a bit for people that don't know, can you explain that a little bit about the analogy we always use about attempted crypto accounts or a big bag of cash or a bag of gold bars? What is the process around that? 

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Speaker: Joanna Summers

In civil forfeiture, it's particularly helpful if a defendant is deceased or they're a fugitive or they're from a country where maybe we don't have extradition privileges in the US. It forces you to come forward and claim your asset. So it's a non conviction based forfeiture. 

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Speaker: Aidan Larkin

Whereas in the past, there had to be a body effectively. There had to be a person dependent to you. And if you have one of these overseas fraud cases, you're never gonna find the individual Right. But you might find their nest egg. 

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Speaker: Joanna Summers

Yeah. You'll find the asset. So you're bringing the case against the asset itself, and then some person behind that asset needs to show up in court to claim it, which most people are willing to just walk away from if it's a situation where…

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Speaker: Aidan Larkin

Claim your asset and get twenty years. And people don't realize that. That's why so many crypto cases are successfully using civil forfeiture. And in a future episode of this podcast, we'll be having Steph Casella, well known as the sort of godfather of asset forfeiture in the US. I should say that not as a criminal, by the way. Not that he was no. He was the one that actually came up with the laws. 

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Speaker: Joanna Summers

Yes. He's actually the one who wrote the laws. 

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Speaker: Aidan Larkin

Yeah. It makes him sound like a cartel member or some mafia member. But, like, people sometimes forget that that's one of the inherent and this is the reason we talk about why we see so many big crypto seizures. Because with something like the blockchain, the asset is immutably tarnished. And, like, what I mean by that is that there's no denying. If I have a Rolex watch, it's difficult to prove that that Rolex was used in a crime unless I've got the serial number, or it's difficult to prove it was proceeds of crime unless I can pin the exact serial number to the exact watch to the exact transaction, and then the money launderer, it's a bit more complicated. Whereas if I turn up and they have civil forfeiture and they have an expensive watch, and I say, prove that you had the money to buy that watch, I can use civil forfeiture. If they have a crypto account and they have no legitimate income, or they have a crypto account that's linked to dark web transactions, as an officer, I can say, I suspect that there'd be proceeds of crime or money laundering. You prove to me that it's not. And as you said, no one turns up in court and says, hey, I committed all the crimes. That's my assets. I'll take the twenty years, but just give me my three Bitcoin back. And I think that's why we see so much civil forfeiture, but you made a point about being able to see this stockpile. That brings me on to my other point that I want to discuss today. What on earth is going on with crypto and the fact that everyone has a commentary to make? Companies like Arkham Intelligence commented on every crypto transaction and all of this wild, frankly, unhelpful speculation. Every time a boat moves, I don't see somebody going, oh my god. The government's gonna sell the boat. Maybe they're gonna sell the boat. Prices of boats are gonna go down. What is going on? And is it just the inherently transparency of the blockchain? Because the author's opinion here is they think that it's really unhelpful speculation because you can confirm this for us, but stuff moves around all the time internally that has nothing to do with the final forfeiture. Could you give us a bit of an average day in the life of sort of seized assets? 

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Speaker: Joanna Summers

An average day in the life is especially with crypto, you don't wanna move it too frequently, but it might move. It might move from an agency controlled wallet to a martial service controlled wallet. It might move back to a defendant. Part of the case might get adjudicated. You might need to return some of the asset while other parts of the case are still going on. It's hard to say definitively exactly what's going on, but I do agree with you. It's really unhelpful speculation. I guess it's just the intrigue behind it being billions of dollars being moved and if someone's tagged it, they just wanna follow it and see what's going on. But I agree it's not really helpful. I guess the point they're trying to make is that so many government agencies are getting it wrong and that around the world they're tanking the price of Bitcoin. 

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Speaker: Aidan Larkin

So let's unpack that because I agree with that. I do agree that with the inherent transparency of the blockchain and the fact that people can see these government controlled wallets because they can see the address it was seized from because they can find that in the court order. So a good open source investigator can quite quickly see criminals account. On the day that the doors were kicked in and the press release went out, all of the funds are moved into a different wallet. And all of a sudden, Southern District in New York is saying, hey. We've had a seizure case today. Or sometimes it'll even be named in the court order. So it's no one's trying to hide the fact that these are government wallets. No. It's the unhelpful speculation that every move must be it's an imminent liquidation, which then moves the market. But on the flip side, should governments do more because they are now aware that there are companies whose whole job is to track and there's there's Twitter accounts that their whole job is to track what's happening. If they then have a liquidation situation, should they be a bit more organized? And maybe tell them for those that don't know, like, what we saw in Germany, where there was huge, huge amounts dumped onto the market. I think it was twenty four, twenty five percent by the end of the day. They lost in value. I mean, how should that be handled, a large, like, disposal like that in your opinion? 

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Speaker: Joanna Summers

I think some of the criticism around the way Germany handled it was legitimate because they did you can see that the price dropped. They did affect the market with what they did, and it didn't help that they did it last month around a US holiday as well. So regular markets, I don't even think were open at the time that they did this. But that was a situation where I think you need to stop and have a pre seizure planning session or a game plan of what you're going to do once the assets are forfeited, especially something that large of an amount. The same way on a brokerage account, if you had a ton of stock in something, you wouldn't just dump it all. You would work with an industry specialist to say, how much can can we liquidate today? What should the plan be over the next few months? How long will this take to liquidate without affecting market? And I think that's something that we're really good at in the US because we've already handled every other asset class that way. We've already reserved the right in auction on a house, let's say, to not sell the house if someone comes in at half the value of the house just because they know the government's selling it. Well, you don't want to affect the two homes on either side of you who did nothing wrong by taking half the value. So maybe you recoup, maybe you don't sell it at that point in time. And that's the same thing with the cryptocurrency auctions too or or any liquidation. You don't have to sell it all at once. You don't have to sell it all in a day. When I was working on a lot of the liquidations, I would reset the trading floor every fifteen to thirty minutes so that I was watching the market all day and I knew that I wasn't affecting price. And if it starts to dip, you can just say, we're gonna close-up shop for the day. We're gonna stop here. We'll revisit this in another day or two. 

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Speaker: Aidan Larkin

Start again tomorrow. Yeah. 

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Speaker: Joanna Summers

You know, I think in the US, we've seen them continue with that because even in the sentencing memorandum for the Zong case that came out in March of twenty twenty three, there was a point in there about of the Bitcoin forfeited in the Ross Ulbricht case, there was about forty one thousand four hundred ninety Bitcoin left. And they made a point of saying the government understands this is going to be liquidated over four more batches over the course of the calendar year. So clearly, there was a plan in place that they weren't going to dump it on the market. They were going to slowly sell all of that to not affect market. I think there's always room for improvement. I think you should always have a bench of exchanges that you're looking at and working with, and you should always have a plan in place before you liquidate that much. But I think the US is doing a pretty good job at it, especially compared to some of those news articles. Whereas, I think in the Germany example, they lacked a lot of the necessary planning to not affect market. 

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Speaker: Aidan Larkin

They didn't have a Joanna on their team, I think, advising them as the simple way to describe it. It is true. Look at with hindsight, it's easy. And we're not criticising, but it has to be lessons learned from other countries for other countries. Because that's one of the things with crypto. It is unforgiving. I mean, if you undersell a painting or you undersell a gold bar or a diamond, that's not unlikely to make a news headline unless some investigative journalist digs into it. But the minute you empty a famous wallet. From a well known case that has been broadcast all over the Internet, all of a sudden, if you're the prosecutor or you're the judge or you're the law enforcement agency involved in that case, you're the gonna be the one that's gonna have your name and your face splashed all over the Internet about that. 

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Speaker: Joanna Summers

I agree. I mean and it's also very unforgiving. It's out there for everyone to see, and the numbers are black and white. Price drops, you can pretty easily show you did affect market. There's not really any room for discussion on it. 

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Speaker: Aidan Larkin

And it's already bad enough because people never let the truth get in the way of a good story as the I'm always reminded in the media. 

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Speaker: Joanna Summers

Hundred percent. 

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Speaker: Aidan Larkin

When I sold Bitcoin for the UK government, the market price that day was three thousand dollars. But there's no doubt about it. If you look at that, you know, and we got around three thousand dollars. We're very happy that we achieved market price. But if you look back now and go, oh, five years ago, you sold, you know, two hundred Bitcoin for x. It's like, what? So it's already difficult enough to manage the narrative in those cases. And that then brings us on to the big debate about when do you sell crypto? Because if you go in and you see someone's assets today, and you convert their assets today, if it then goes and rockets over the next five or six years, and at the point their case is heard, they're not guilty, and they're due to get their assets back, then you're in a position that you might face a legal challenge that you sold their assets cheaply. How is that dealt with in the US? Is that a moot point because you guys wait until after forfeiture? Like, you wait until you're home and dry? Is that what happens in the US? 

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Speaker: Joanna Summers

I mean, it's a moot point because you're covered by a seizure order. There was a court order in place that legitimized the seizure itself. So you have that. And then you also have the chance before the final order of forfeiture if defense would like the assets to be liquidated. Some of the larger cases I worked, they were afraid the market would go down, so they said, you know, we'll enter into an interlocutory sales order to let you sell them. Okay. Fine. You know, let's say that doesn't happen, you do lose the case and it does change in value and all that. Yes. It's time that you could have been trading or made more money on the asset, but you're covered under that initial seizure order. So, hopefully, everything will remain okay there because like you said, there's hindsight's twenty twenty. It's really easy to look back five years later and go, oh, why didn't you do it this way or why didn't you do that? Or can you imagine what the price of Bitcoin is now if you just held on to all of those original Silk Road Bitcoin. 

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Speaker: Aidan Larkin

It's a Bitcoin pizza over Reagan? 

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Speaker: Joanna Summers

Yeah. Exactly. Exactly. But that's not the point of the court orders. The best thing you can do is follow the process the same way every time. And with final order of forfeitures, there should be just a period of time where, you know, you're gonna sell it within thirty days or within sixty days. The more any government can show they followed the same process over and over again and that they were consistent in how they handled it, the better off they're going to be. And that's not to say you should take the same approach with five Bitcoin as you would fifty thousand, but document what you're doing, why you're doing it, have a plan in place, and that really helps mitigate a lot of that damage. It's it's when people do exactly what you said where they go rogue and they say, well, I really think the Bitcoin's gonna go up in value. So even though we have a forfeiture order, I'm just not gonna sell it. I'm gonna hold it and wait a year. Well, you didn't do that with any of the other assets. So now how are you going to justify you just did it with that one? 

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Speaker: Aidan Larkin

It's like your great point that sort of summarizes this whole talk, I feel, is that it's management, not speculation. Mhmm. I mean, it's not the position to speculate that I think that I know of cases in the EU where assets were seized. They were converted due to their inherent volatility. 

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Speaker: Joanna Summers

Sure. 

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Speaker: Aidan Larkin

And the same agency normally sells cars the minute they get the car in because the value will depreciate. And this exact situation occurred. Couple of years later, the defendant is released and says, I want my assets back. What do you mean you sold all my Bitcoin? I'm going to sue the government. He lost his court case because the government was able to prove, one, he was put on notice that the assets were being sold at the time in line with their procedures of depreciating or volatile assets or assets that are difficult to store. And two, they achieved market value. And the commentary from the judge around the case was it works both ways. If the government had sold the assets, converted them, and let's say they achieved a hundred thousand euros, and five years later, if he'd been found guilty or not guilty if or sorry. If he'd been found guilty and the actual court know that the assets would have been worth half a million, they're not gonna come after him for the shortfall either. It's like and similarly, if they'd have cashed out, put the money in an interest bearing bank account, and the market had collapsed, he still would have got the 100K with no matter which way it goes. So as you say, I think consistency, but having a plan in place and not treading into that world of speculation. It's not even governments. It's receivers, and solvency practitioners, trustees, and bankruptcy. It's anybody tasked with managing the asset. 

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Speaker: Joanna Summers

Absolutely. 

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Speaker: Aidan Larkin

Yeah. To wrap up, let's finish on a positive note around when assets can be used by governments. What are your thoughts on things like social reuse? I have some thoughts on EU and and across Africa and the Balkan countries. Is that something that happens a lot in the US where thinking about those assets that either are unclaimed, if they're not forfeited back to a central agency, are they used? We've seen great examples across the EU where properties that couldn't be sold because they were really related to mafia, for example, were then turned into orphanages or turned into libraries or turned into drug rehabilitation centers. Is that something that we see in the US? 

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Speaker: Joanna Summers

Absolutely. And that's one of my favorite uses of the program is to be able to see what you've forfeited be put back into a more favorable setting using a home to maybe change it into an orphanage or have, like, a drug rehab facility. Any of those projects that just make your community better. They can also be used to rebuild roads, fund new schools. I think all of those are really great uses for the program, and then it really gives that positive public image as well. 

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Speaker: Aidan Larkin

And that ultimately is I mean, that's what this is all about. This is what asset recovery is all about. It's about getting money back to, you know, victims in society and funding law enforcement and awareness campaigns. And that can hopefully neatly round off this one off special is that we don't need to do weird and innovative and novel things with crypto assets just because they're new. There's plenty of existing mechanisms for governments to redeploy assets and covert operations, which we've seen with firsthand experience of being involved in. All of these mechanisms exist. What we don't need is just no pointless speculation that aren't grounded in policies or procedures or processes. God knows there's enough of those already in government. But for the avoidance of doubt, you can't just seize Bitcoin and use it whichever way you want. Joanna, thank you very much for taking the time out to talk to us today. This was a bit unscripted last minute in response to all of the speculation we're seeing online, and no doubt this will be the first in many conversations we have like this. 

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Speaker: Joanna Summers

I agree. I love a good last minute podcast. Thank you, Aidan. 

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Speaker: Aidan Larkin

Alright. Good. Now get back to work. Okay. Thanks so much. Cheers, mate. Bye bye. 

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Speaker: David Tyree

Well, thank you very much, Joanna. Thanks for sharing your experience. I did wanna expand just a little bit on asset forfeiture with the Drug Enforcement Administration. Right now, we're in sixty six different countries working with our drug liaison officers. In those countries, we're embedded with the shared vision of taking out the economic incentive for criminal activity. And it's not just drugs. It's transnational organized crime. It's counter threat financing, counter proliferation, terrorist financing, and everyone's sharing the same vision that all of that money sees for criminal elements. How can that money be then redirected into our communities, whether it's for rehabilitation, drug court, creating opportunities for the disenfranchised. We have to message to the community, this is why it's important. This is what we're fighting against. And we've drawn a line in the sand. I hope you've enjoyed today's conversation. If you did, please like and subscribe to the Seize and Desist podcast on your preferred platform and leave a comment and any suggestions for guests you'd like to hear from in the future. By the way, speaking of the future, it'll be me next week. I'll be speaking with Aidan to explore the fundamentals of seizing physical assets. We'll explore the process of seizing, maintaining, and liquidating assets ranging from luxury cars, jewelry, and yachts to unique treasures like Star Wars memorabilia, which I have in my attic, and exotic pets. We might even describe what a Wallaby is. 

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Speaker: Lo Furneaux

I hope you enjoyed this week's episode. Don't forget to register for our seized asset webinar on Thursday, August the twenty ninth. We'll be exploring the persistent challenges facing asset seizure management and disposal practitioners and sharing actionable insights to improve these processes in the public sector. Visit our website to secure your spot today. Please remember to use your official agency email address during the registration process as this webinar is intended exclusively for government and law enforcement professionals, and you may not be accepted without it. Our podcasts are for informational purposes only. They are not intended to provide legal, tax, financial, and or investment advice. Listeners must consult their own advisers before making any decisions on the topics being discussed. 

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