Judge Blocks IRS From Seizing 24 Crypto Wallets Over Due-Process Gaps

Court Halts IRS Seizure of Crypto Wallets Over Due-Process Gaps

A federal judge just blocked the government from grabbing twenty-four cryptocurrency accounts in a civil-forfeiture case, ruling that the IRS gave owners too little notice and too little proof. The decision hands the crypto world a rare, early win against aggressive asset seizures and signals that courts will demand more transparency before wallets vanish.

The IRS launched the action in late 2019 after tracing what it called “tainted” bitcoin through mixers and dark-web markets. Rather than naming living defendants, the government filed an in-rem complaint against the wallets themselves, posting a notice on an obscure website and assuming anyone with funds inside would somehow see it. Judge Dabney L. Friedrich found that approach constitutionally thin. She held that simply publishing a notice—without trying email, exchange KYC data, or on-chain messaging—failed to satisfy Fifth Amendment due-process standards. The court also faulted the government for leaning on vague hearsay to tie the addresses to criminal proceeds, leaving claimants no meaningful chance to contest the seizure.

Because the ruling centers on notice and evidence, not the underlying statute, the government can refile with better service and a thicker factual record. Yet the immediate effect is clear: twenty-four addresses holding roughly $2 million in bitcoin remain in limbo, and future forfeiture actions targeting self-custody wallets now face a higher procedural bar. Exchanges that once froze customer assets on a simple subpoena may start demanding formal court orders; DeFi front-ends may add extra exit ramps before sanctions lists update.

For traders and protocols, the case underscores that decentralization offers only partial shelter—privacy coins and mixers still invite scrutiny, but the Constitution still travels with the coins. Expect more wallet owners to challenge “no-notice” seizures, raising compliance costs for both the government and the venues that route its requests.

The takeaway: crypto’s next legal battleground is not the code itself, but whether the Constitution still beats a tweet-length notice on a .gov site.