On September 17, a group of officials led by U.S. attorney Tracy Wilkinson have filed a civil complaint in the United States District Court for the Central District of California claiming that they have identified four digital wallets holding more than 9.8 million Tether (USDT) that was involved in wire fraud, computer fraud and money laundering. According to court documents, the legitimate owner of the funds is a California resident who in April 2021 got swindled out of more than 200 Bitcoin (BTC) by someone impersonating a Coinbase employee.
Customer support goes awry
As described in the claim, the unidentified victim was contacted by what appeared to be Coinbase customer support shortly after purchasing some 200 BTC to their Coinbase Pro account on the exchange.
The alleged representative of the platform claimed that the victim’s account had been frozen due to the size of the purchase and that a transaction limit increase was needed for the funds to go through. The fraudster also suggested that the victim upgrade their account to Coinbase Prime.
Once the victim had granted the fake customer support representative access to their account via a remote desktop tool, the swindler initiated a transaction that saw approximately 206 BTC being transferred to what they purported to be the victim’s new Prime wallet.
Along with several smaller transactions that were executed within the next few hours, the value of digital assets stolen from the victim’s Coinbase account exceeded $11.5 million.
Follow the money
The claim goes on to detail how the digital assets transferred from the compromised account were “broken up and moved through multiple smaller transactions” before being concentrated in the four suspect wallets.
At this point, the government is asking the court to allow it to seize the assets for the time of the civil forfeiture proceeding.
Daniel Davis, a partner at law firm Katten Muchin Rosenman LLP, explained to Cointelegraph that the federal government will have to prove that the funds are subject to forfeiture. If the plaintiff prevails, the proceeds will be forfeited to the United States before they can be returned to the legitimate owner. Davis further commented:
This action is one of a growing trend where the federal government is attempting to use its civil forfeiture authority to obtain custody of digital assets. […] One can expect that as interest and trading in digital assets grows, civil forfeiture actions like this one will grow if the government identifies assets it believes were part of illegal activity.
David Silver of law firm Silver Miller, who is involved in the Cryptsy class action that Cointelegraph covered earlier this week, believes that the Department of Justice utilizing a forfeiture action in a civil case should be exciting news for everyone in crypto who wants to see crypto hit the mainstream. Silver noted:
Stolen digital assets is one of the biggest problems in the space, and recovering stolen cryptocurrency is a much-needed solution. I would expect to see more actions like this both from law enforcement and civil litigants.”
As Cointelegraph reported in July, the U.S. Marshals Service, or USMS, tapped digital asset platform Anchorage Digital to custody and service the digital assets subject to civil forfeiture. Some estimates suggested that between 2014 and July 2021 USMS had seized north of 185,000 BTC linked to federal crimes.