IRS seized $3.5 billion in cryptocurrency this past year, agency says

On Thursday, the agency announced that nearly all of the funds seized by the Internal Revenue Service’s Criminal Investigation Unit were in cryptocurrency — a strong indication of how common it is in the criminal world.

The unit seized $3.5 billion of cryptocurrency in non-tax investigations over the past fiscal year, making up 93 percent of the total seizures on October 1, 2020-September. 30, 2021.

The report marks a sharp shift toward bitcoin and other cryptocurrencies in favor of the IRS, with digital money quickly becoming the dominant form of payment in criminal cases where the agency forfeits funds.

Jarrod Koopman, acting executive director of the agency’s Division of Electronic Services and Forensics, said large crypto-seizures have become the new normal for IRS criminal investigations.

“It’s a huge, huge number,” he said. “We are certainly seeing a shift in our investigative work.”

While bitcoin initially had its heyday nearly a decade ago as the currency of choice for buying black market goods online, it has since become a major investment vessel for some of the world’s most powerful financial institutions.

But bitcoin and other cryptocurrencies still play a major role in cybercrime, thanks to the ease with which they can send payments directly from one person to another anywhere in the world.

Bitcoin remains especially popular among hackers who break into computer systems and then demand a ransom. An October investigation from the Treasury Department’s Financial Crimes Enforcement Network found that $590 million in Bitcoin ransomware payments totaled in the first six months of 2021 alone.

Much of the $3.5 billion figure comes from a few high-profile issues and the fact that the value of Bitcoin has skyrocketed in recent years.

More than $1 billion of that money came from the more than 69,000 bitcoins left from the Silk Road case, the first major law enforcement campaign for a dark market. The IRS has hired crypto-monitoring firm Chainalysis to track and confiscate bitcoins that have been hacked and stolen from this site by an unidentified person. In November, the agency confiscated it and is now storing access to it offline so it can be auctioned off to the public.

Those bitcoins were worth about $237 each when Silk Road founder Ross Ulbricht was convicted in 2015, totaling just over $16 million.

An additional $10 million of the withheld funds came from Volodymyr Kvashuk, a former Microsoft employee who was sentenced last year to nine years in prison for stealing virtual gift cards, then selling them for bitcoins which he then tried to launder.

Koopman said that the IRS criminal investigations may take over more cryptocurrency in the coming year.

“We expect that to remain somewhat in that range, based on some of the investigations we’re currently working on that are very large in terms of size and scope,” he said. “Maybe we’ll top that number next year.”

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