IRS Can Seize Crypto Wallets by Default, Court Rules
U.S. Judge Green-Lights IRS Seizure of Crypto Wallets
Federal agents just won the right to keep millions in digital assets seized from suspected tax cheats—without ever proving the owners broke the law. The ruling hands the IRS a powerful new enforcement tool and signals that crypto anonymity is no longer a shield against tax collection.
The case began when IRS agents traced unreported income flowing through twenty-four cryptocurrency accounts tied to dark-web marketplaces. Rather than charging individuals, the government filed an in-rem civil forfeiture action against the wallets themselves, alleging the digital currency represented proceeds of tax evasion and money laundering. The account owners never appeared in court. Instead, the government asked Judge Dabney L. Friedrich to issue default judgments that would permanently transfer the coins to the United States.
Judge Friedrich granted every request. She ruled that the IRS had shown probable cause linking the wallets to criminal proceeds and that the absence of any claimant left the coins “judicially abandoned.” The court rejected arguments that cryptocurrency’s pseudonymity made traditional forfeiture notice inadequate, holding that on-chain publication and internet notices satisfied due process. In practical terms, the government now owns the seized tokens outright and can liquidate them at will.
The decision lowers the bar for future IRS crypto seizures. Agents no longer need to indict a person; they can target wallets, publish a notice, and—if no one steps forward—claim the assets. Exchanges and DeFi protocols that freeze or flag accounts at the government’s request now have clearer legal cover, while users who ignore subpoenas risk permanent loss of funds.
For traders and protocols, the message is blunt: treat IRS document requests as seriously as criminal subpoenas, because silence can equal surrender.
