Capitol Gains: The US seized $15B in bitcoin. What comes next?

The US government has seized nearly 130,000 BTC — worth almost $15 billion — marking the largest forfeiture action in history and spurring discussions of what this could mean for the newly-created strategic bitcoin reserves. 

Experts warn that the road ahead is lengthy. 

The actual seizure of the assets is only the first step, though. Should the court find that the assets were illicitly obtained, investigators will then have to go about finding and compensating victims. 

“Yes, they’ve seized the assets, but that doesn’t mean they own it. It means they’ve laid a claim to it,” Aidan Larkin, co-founder and CEO of Asset Reality, said during a keynote address at DAS London Wednesday. 

Larkin continued: “It could take five years, seven years, ten years. But the good news is there is a greater focus on asset management, because the next big concern is, historically, we don’t do well as a global society managing seized assets.”

Per President Trump’s March executive order establishing a strategic bitcoin reserve, it’s expected that whatever funds remain after victim compensation will be held by the US government. 

The US government already holds between $15 billion and $20 billion in forfeited bitcoin, Treasury Secretary Scott Bessent said in August. 

The process of asset recovery itself doesn’t differ much depending on the asset, Larkin said. For governments, recovering physical goods or cryptocurrencies comes with the same steps: find, recover and secure. The challenges with crypto asset recovery come with the management. 

“If I’m the Lazarus group, and all of a sudden I’m seeing government agencies all around the world managing billions of dollars of seized crypto, I know where I’m going next to try and exploit,” Larkin said. 

As part of the alleged money laundering scheme, the DOJ says Zhi and co-conspirators combined illicit funds with newly-mined bitcoin from their China-based mining operation, Lubian. During the time it was active, Lubian was the sixth-largest mining company in the world, prosecutors say. 

Onchain sleuths are now speculating about when, exactly, the US government may have taken control of the seized bitcoin. 

Blockchain analytics platform Arkham reported last month that Lubian was hacked in December 2020 for 127,426 BTC — worth $3.5 billion at the time. 

Crypto data and compliance firm Elliptic now says that, according to the wallet addresses listed in the indictment, the assets the US government seized appear to be the same ones that were “stolen” from Lubian back in 2020. 

According to a person familiar, it’s possible that the US government did seize the assets in 2020. This investigation may have only been recently announced, but it’s been underway for years, the person added. 

Elliptic cofounder Tom Robinson agreed, telling Wired that it’s possible the US government itself hacked Lubian. He added that there’s also a chance that there was no hack at all, and Lubian faked it as part of the money laundering scheme. 

The DOJ did not announce when it gained control over the assets or when the investigation started and did not return Blockworks’ request for comment.

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