IRS Wins Green Light to Seize 24 Crypto Wallets Tied to Dark-Web Vendor
Court Hands IRS Green Light to Seize Crypto Wallets
In a ruling that could reshape how federal agents chase hidden crypto fortunes, a federal judge in Washington just gave the IRS the legal muscle to seize twenty-four cryptocurrency accounts tied to an alleged tax-evading dark-web vendor. The decision matters because it marks one of the first times a court has explicitly approved the use of civil forfeiture to grab digital wallets even when the owner tries to stay anonymous.
The case began when IRS agents traced roughly $1.8 million in bitcoin flowing through mixers and tumblers to accounts linked to narcotics sales on the dark web. Instead of charging a person, prosecutors filed an in-rem action against the wallets themselves, arguing the coins were proceeds of crime and subject to forfeiture. Defense lawyers countered that the IRS lacked probable cause, that the seizure violated due process, and that civil forfeiture was the wrong tool to use against digital assets that could belong to unknown third parties. Judge Dabney L. Friedrich rejected every argument, holding that the government’s blockchain evidence was enough to show the wallets were more likely than not connected to illegal activity. She also ruled that the wallets themselves—rather than any individual—were the proper defendants, a move that lets agents freeze the coins first and sort out ownership later.
The win tilts power toward regulators. Because the accounts sit on public ledgers, the IRS can now treat each wallet address as its own legal target, lowering the bar for future seizures and raising the risk that exchanges or DeFi protocols could see customer funds swept up in broad forfeiture sweeps. Traders who rely on mixers or layered wallets just absorbed a fresh compliance headache: every hop on the blockchain can now be mapped and potentially used against them in court.
The ruling underscores that crypto’s pseudonymity offers little shelter once the government decides to follow the coins.
