Digital Asset Seizure and Recovery Flashcards

What is a multi-signature (multisig) wallet and how does it complicate cryptocurrency seizure?

Answer: A wallet requiring multiple private keys to authorize transactions; seizure requires obtaining all required keys from potentially different parties

A multisig wallet requires M-of-N private keys to authorize any transaction, meaning investigators must obtain all required keys — often held by different individuals — to move the funds.

In the context of seized cryptocurrency, what is a 'government-controlled wallet'?

Answer: A cryptocurrency address controlled by a law enforcement or government agency used to hold seized digital assets pending disposition

A government-controlled wallet is a cryptocurrency address managed by a law enforcement agency (e.g., DOJ or USMS) used to custody seized digital assets until they are auctioned or forfeited.

What is 'depreciated value risk' in the context of cryptocurrency seized pending forfeiture proceedings?

Answer: The risk that highly volatile cryptocurrency prices may decline significantly while the government holds the assets during lengthy legal proceedings

Cryptocurrency's extreme price volatility means seized assets may lose substantial market value during the months or years of legal proceedings before final disposition.

What role does a blockchain analytics firm (e.g., Chainalysis, TRM Labs) play in a cryptocurrency seizure case?

Answer: Providing transaction tracing and attribution analysis that helps investigators map fund flows and identify exchange accounts holding target funds

Blockchain analytics firms provide specialized tracing services that map transaction flows and attribute addresses to known entities, helping investigators identify where seized funds originated and where they went.

What is a 'dusting attack' and how might it be relevant to seizure investigations?

Answer: Sending tiny amounts of cryptocurrency to target addresses to deanonymize wallet owners by tracking how the dust is subsequently moved

A dusting attack sends minuscule crypto amounts to target addresses; when recipients move the dust, it links their addresses together and can reveal wallet ownership.

After cryptocurrency is legally forfeited to the US federal government, where do the auction proceeds typically go?

Answer: Into the DOJ Assets Forfeiture Fund, with portions shared with cooperating agencies and potentially directed toward victim restitution

Federal forfeiture proceeds flow into the DOJ Assets Forfeiture Fund, which distributes funds to cooperating law enforcement agencies and may fund victim restitution programs.