In a recent review, the Treasury Inspector General for Tax Administration found that the Internal Revenue Service’s Criminal Investigation unit took custody of about $8 billion in digital assets tied to criminal probes by late 2023 but did not properly log or track those seizures.
The watchdog report, released this week, shows missing and incorrect details in official records and calls for better systems and training.
Investigation Finds Lapses
The TIGTA inquiry covers seizures made between December 2023 and January 2025. Investigators checked whether the IRS-CI followed its own rules for seizure memorandums.
These memos should note wallet addresses, seizure dates, amounts and chain details. The report shows that many memos were never prepared or lacked key information.
Also Read: US Govt Looses Bitfinex Seized Funds Worth Over $20M To Suspicious Address
Missing Data in Seizure Records
Across hundreds of cases, TIGTA spotted gaps. Some memorandums had the wrong date or left out the amount of crypto seized.
In one instance, wallet addresses were mixed up between two unrelated cases. Without clear records, it is hard for IRS agents to track assets or prove they hold them lawfully.
Calls for Better Tracking
The watchdog made several recommendations that the IRS-CI agreed to implement. The agency will train its staff on seizure rules and set firm deadlines for preparing memorandums.
It will also build an inventory system to record the exact amount of digital assets and ensure consistent handling of all seized tokens.
Hardware Wallets Gone Missing
Beyond paperwork errors, the report raised alarms about missing hardware wallets. Three wallets handed over by the FBI could not be found in IRS storage. Without them, the assets they contain may be lost or hard to recover.
TIGTA urged the IRS to improve its physical controls and chain of custody procedures for all digital and physical evidence.
Growing Stakes in Seized Crypto
The handling of digital assets has gained weight after past efforts to set up a national Bitcoin reserve. Under former administrations, officials floated the idea of pooling seized crypto for federal holdings.
While that plan did not move forward, it shows why clear tracking and accountability are vital for public trust and for lawful asset management.
Wider Impact and Oversight
The report adds to other probes into how U.S. authorities manage confiscated crypto. Lack of proper records can delay court cases and complicate asset sales or forfeiture transfers.
It may also expose the IRS to legal challenges from defendants seeking to reclaim their holdings. Lawmakers and oversight bodies will be watching how quickly the agency fixes these flaws.
The TIGTA report makes it clear that the IRS Criminal Investigation unit must step up its game in the digital asset era. As more law enforcement agencies seize crypto in fraud, money laundering and other cases, precise record keeping and secure storage are critical.
Also Read: US Strategic Bitcoin Reserve Will Involve Buying $BTC, Not Just Seized Assets, Says Jan3 CEO