What to Do if Your Cryptocurrency is Frozen or Seized: A 5-Step Guide

What happens if Tether tells you that your USDT is blacklisted or frozen at the request of a federal law enforcement agency in the United States? In other cases, cryptocurrency might be frozen at an exchange like MEXC, Binance, or Coinbase, because the exchange was served with a seizure warrant issued by a law enforcement agency in the United States.

The government often uses “freeze first, ask questions later” tactics. To protect your property and your rights, you must act strategically within the first few days.

First, consider stopping all communication with the government. If an agent from the FBI, IRS-CI, or DHS reaches out to “ask a few questions” about a transaction, it might not be in your best interest to provide a statement without an attorney present. Anything you say about your knowledge of the funds can be used to defeat your Innocent Owner Defense later. It may not be in your best interest to attempt to “explain away” a complex transaction or a “circular transfer” yourself. These technical events might require a forensic expert to explain it properly.

Second, determine the government’s theory showing the “nexus.” At Sammis Law Firm, our civil asset forfeiture attorney can ask the agency or the prosecutor assigned to the case for the Seizure Warrant or the Tracing Summary. The government’s case requires showing a “nexus” between the criminal event and the cryptocurrency seized. We can help you understand how the government makes mistakes, particularly concerning:

• Clustering: Is the government claiming your wallet is part of a larger “criminal cluster”?
• Peeling Chains: Are they claiming the money was “peeled” away from a larger illicit payment?

Third, consider hiring an experienced forensic CPA focused on tracing cryptocurrency seized by law enforcement. Traditional accountants are rarely equipped to handle a crypto seizure. You need a Forensic CPA who focused on tracing tainted crypto to determine if a nexus really exists. We can help you retain a forensic CPA to perform a “Parallel Reconstruction.” If our expert can show that the government’s “cluster” is a false positive or that the “taint” was severed by an exchange, the government’s legal basis for the seizure disappears.

Fourth, if you are in “innocent owner.” let us help you assert that defense. Under 18 U.S.C. § 983(d), an innocent owner can asset a defense. The innocent owner defense requires proving you were a “Bona Fide Purchaser for Value” and had no reasonable cause to suspect the funds were illicit. Making this showing might be the best way to recover seized crypto, even if the government’s tracing is technically accurate.

Conclusion

If your cryptocurrency has been frozen or seized by law enforcement officers in the United States, time is of the essence. At Sammis Law Firm, we represent individuals and businesses in federal asset forfeiture cases.

Read more about the problems with how law enforcement traces cryptocurrency for seizure or forfeiture.

The civil asset forfeiture attorneys at Sammis Law Firm focus on the seizure of cryptocurrency for forfeiture. We work with the top forensic experts in Florida to challenge government tracing and fight for the return of your property.

Call us today at (813) 250-0500 for a confidential consultation.