Victims Claiming Seized Cryptocurrency
What happens with a federal agency seizes cryptocurrency stolen from a victim? If the government is awarded the cryptocurrency as part of criminal forfeiture, the victim might file an ancillary claim. If the government seizes the cryptocurrency for a civil asset forfeiture proceeding, the victim may have standing to file a verified claim and answer.
Sometimes the amount seized is enough to make all the victims whole, and sometimes it is not. The victim might be encouraged to skip filing a verified claim so the court can award the seized property to the government. The victim might be encouraged to file a petition for remission or mitigation so that the government can decide what happens to their recovered property instead of the courts.
In some cases, the victim will recover more of their property if they file a claim instead of a petition.
The problem with filing a petition, especially if there are not enough funds to make all the victims whole, occurs when they receive only a portion on a pro rata basis based on the government’s determination of the known and unknown victims. As a result, the government might end up keeping a substantial part of the seized property (that would otherwise have gone to unknown victims who are never identified), often without explaining how that determination was made, even to the known victims who cooperated with the investigation.
Another problem occurs with the way the government addresses changes in the value of the cryptocurrency while the forfeiture proceeding is pending. Under 28 C.F.R. § 9.8(c), when the government seizes assets connected to criminal activity, the amount that may be restored to victims is limited to the value of the property at the time of criminal loss. If the value of the crypto increases after the seizure, that appreciation is not passed onto the victim. For example, if you lose 10 Bitcoin to a fraudster in 2014 (worth only $6,000 at that time), then government return the $6,000 and keep the $90,000 worth of appreciation in 2025. As a result, victims miss out on the financial gains they would have earned if they were not the victims of fraud.
When the government files a complaint for forfeiture, it must typically serve any victims identified in the complaint with a notice to potential claimant, explaining the victim’s rights to file a claim to recover their cryptocurrency when it can be traced to what was seized by the U.S. Government.
When Victims Receive a Notice to Potential Claimant
How does the victim know their cryptocurrency was seized by a federal agent? The government is required to send the victim a “notice to potential claimant.” The notice might provide:
This Notice is intended only to advise you of your rights, and your receipt of this Notice is in no way intended to imply that the United States believes that you have a valid claim to any property subject to forfeiture.
You are being noticed pursuant to Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions as a person or entity who may have an interest in the property set forth in the Verified Complaint for Forfeiture in Rem, enclosed herewith.
A copy of Rule G is attached to this Notice for your reference. If you believe you have a right, title and/or a legal interest in or to the property, you must file a verified claim with the United States District Court within 35 days after the date this notice was sent to you.
The date that this notice was sent may be determined by the mailing date stamped onto the envelope by the United States Postal Service. Your verified claim must state the case name and number found on the Verified Complaint, and comply with the specifications set forth under Rule G(5), which is attached for your reference.
[The notice will tell you the address where the verified claim must be filed.]
If you have not yet retained an attorney, you may wish to seek counsel to assist you in filing a verified claim. However, you are not required to hire an attorney to file a verified claim
In the event you choose to file a verified claim, you or your attorney should refer to Rule G(5)(a)(i) of Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, which addresses the requirements as to the form and content of a verified claim. Please note that Rule G(5)(b) requires a claimant to file a verified answer to the Verified Complaint or a motion under Rule 12 within 21 days after filing a verified claim.
The notice might also include a copy of “Rule G. Forfeiture Actions in Rem.”
The government’s complaint for forfeiture will request that the court:
- Issue a Warrant of Arrest in Rem, in the form submitted with this Complaint;
- Direct any person having any claim to the Defendant Cryptocurrency to file and serve their Verified Claims and Answers as required by 18 U.S.C. § 983(a)(4) and Supplemental Rule G;
- Enter judgment declaring the Defendant Cryptocurrency to be forfeited and condemned to the use and benefit of the United States; and
- Award such other and further relief to the United States as it deems proper and just.
