IRS Seized $3.5 Billion of Cryptocurrencies in 2021 Over Fraud

According to the Internal Revenue Service (IRS) report issued on Thursday, the department seized $3.5 billion worth of cryptocurrencies in the fiscal year 2021. This accounts for almost 93% of all the assets which the department seized last fiscal year.

More cryptocurrency seizures can be seen in 2022

Jim Lee, the IRS criminal investigation chief, noted the fiscal year 2022 can see even more seizures related to cryptocurrency. The currency is getting involved in a number of cybercrimes with the passage of time.

The biggest seizure was against the Silk Road, a Bitcoin exchange forcibly closed in 2013. Silk Road continued its clandestine operations, which ultimately helped the IRS in seizing $1 billion worth of cryptocurrencies. 

Last year also saw the first-ever conviction related to cryptocurrency crime. This happened when a former Microsoft employee was sentenced to a nine-year jail term for his involvement in a $10 million theft involving bitcoin fraud.

Volodymyr Kvashuk, a Ukrainian citizen, defrauded Microsoft by stealing “currency stored value” (CSV) while working at the company. Ultimately he resold that value online to achieve massive gains, which he used to fund his lavish lifestyle.

He coated the theft in such a way it became difficult for prosecutors to find the actual criminal within the company. After performing the whole activity, he filed bogus tax returns, claiming the bitcoins were gifted to him from one of his relatives.

The US will sell recovered bitcoins to compensate investors

The recent passage of the infrastructure bill has empowered the IRS, regarding the prosecution of cryptocurrency crimes. Now the department has more authority for cryptocurrency surveillance, under which it can make crypto-brokers report transactions to the IRS.

Not only this, but the agency is also likely to get $80 billion in funding from the upcoming social spending legislation to enhance its crypto-policing.

At the beginning of the last fiscal year, authorities seized almost $1 billion of cryptocurrencies by launching a crackdown against a banned entity, Silk Road. The said organization remained involved in selling drugs, credit card information, and target killers on the dark web.

Despite getting banned, US authorities noticed the company was involved in the transaction of almost 70,000 bitcoins, which ultimately led the IRS to take necessary action.

In 2015, the Silk Road creator, Ross Ulbricht, was sentenced to lifelong imprisonment for his alleged involvement in hacking and money laundering; however, the whereabouts of the illicit money remained unknown.

The final assault against the company helped the IRS in grabbing the illicit money.

Recently, the United States also seized $56 million worth of cryptocurrency in an online Ponzi scheme case. The Justice Department said it was the largest single seizure to date, which has warned other Ponzi schemes as well.

As the administration moves forward to sell the recovered coins, it has promised to compensate the investors who put their money into the scheme. According to the reports, the fraud stripped people of $2 billion, which is considered the biggest crypto scam to date.