The United States secret service (USSS) posted an official notification today stating the confiscation of funds in the amount of $13,138.12 in lieu of bitcoin on June 3rd, 2016 from a Coinbase account.

The account holder was identified as  Richard Paul Underwood of San Francisco, CA who has approximately 60 days form the date of confiscation to contest the action by filing with the US District Court on or before September 5th, 2016.


330-2016-017-0001, $13,138.12 in U.S. Currency in Lieu of 25.0001538 Bitcoins from Coinbase Inc. Account in the Name of Richard P. Underwood valued at $13,138.12 seized on June 03, 2016 in San Francisco, CA from Richard Paul Underwood

The notification lists civil forfeiture pursuant to 18 USC § 981-984 (civil forfeiture) and 19 USC § 1602 which could be the result of various things from violating money transmission laws to fraud to money laundering and the specific of which United States Codes were violated are unclear. 

Cash In Lieu of Bitcoins

Coinbase, Inc. is listed in the notification, one thing to be clear on is that bitcoin itself was not confiscated by the USSS. The value of the bitcoin in cash was confiscated that was not stored under the sole custody of Underwood. It was in an Coinbase account where Coinbase was the custodian. 

Anytime large amount of bitcoin are converted into cash, under federal law Coinbase is required to report the transaction as well as monitor the account for suspicious activity which is defined in their terms of agreement just as it is in any prepaid card or access, bank account, and other financial services offered by various companies and financial institutions. 

Failure on the part of Coinbase to do this can result in both civil and even criminal penalties. Like most financial institutions and companies in the financial services industry, it is safe to assume that Coinbase would rather not assume the cost and risk associated with this regulation, however, it is federal law and they do not have a choice.

This is not to endorse any of the actions or involvement of Coinbase in any matters of this kind and many people have complained about Coinbase being intrusive to their personal affairs, however in this particular case given the surface appearance of the notification of which contains very little detail at all, there appears to be nothing on behalf of the company to indicate anything outside of regular procedures of operation that have been required of all companies in all industries for the past 46 years.

Common Sense

Bitcoin stored on the blockchain where the private key is known only by the owner, the own is the sole custodian and could not be confiscated without the owner's permission or willingness to disclose that private key. 

Although there are come wallet services that claim the inability to access your wallet, Coinbase, like most of the larger providers most certainly do and once there, it is no longer under your control anymore than your money is under your control when in your bank account. 

Moral of the story? Well first and foremost do your best to refrain from illegal activity and second, use caution when storing bitcoin online. 

Article by Dale Henry
Banner Image by dinbits staff

The opinions expressed by authors of articles linked, referenced, or published on do not necessarily express, nor are endorsed by, the opinions the of or its affiliates.

Post a Comment

Powered by Blogger.