Judge Orders Fresh Warrants for IRS Crypto Wallet Searches

Judge Slams IRS Crypto Seizure, Forces New Warrants

A federal judge just ordered the IRS to get fresh warrants before it can keep raiding crypto wallets it grabbed in a 2019 civil forfeiture sweep. The ruling guts the government’s claim that once digital assets are in its hands, no further court permission is needed to rifle through them. Crypto traders now have a concrete precedent that even seized keys are still protected by the Fourth Amendment.

The case began when IRS agents used John Doe summonses to Coinbase, gathered transaction data on thousands of users, and then filed a single civil-forfeiture complaint against twenty-four unnamed wallets suspected of tax evasion. Agents obtained warrants to seize the wallets’ contents, but never asked a judge for separate authority to examine the wallets’ full on-chain history or linked addresses. The government argued the initial seizure gave it perpetual access; the court rejected that view outright. Judge Dabney L. Friedrich held that examining the wallets after seizure is a “second search,” requiring its own probable-cause showing.

The Justice Department loses the presumption that once crypto is forfeited, the trail goes cold for defendants. Wallet owners gain a new shield: even if the government has the keys, further blockchain snooping needs fresh judicial sign-off. Exchanges and custodians will likely face narrower information-sharing requests, because prosecutors can no longer treat wallet data as a bottomless resource. DeFi protocols that log public transactions are not directly hit, but any company holding customer keys now has a compliance hook to demand warrants before handing over histories.

The decision chips away at the IRS-CFTC turf advantage in digital-asset cases. Rather than letting enforcement agencies fold “search” into “seizure,” the court insists on two steps, raising the cost and time of crypto investigations. Stablecoin issuers and large traders who custody keys off-exchange pick up a sliver of negotiating leverage; regulators will need tighter fact patterns before blanket wallet sweeps become routine again.

Courts are reminding agencies that crypto may be code, but the Constitution still applies to the humans behind the keys.