Buy $100 worth of crypto and get a bonus $10

  • Trade crypto and digital assets
  • Significant sign-up bonuses
  • The most trusted finance platform

Disclaimer: eToro USA LLC; Investments are subject to market risk, including the possible loss of principal. Your capital is at risk. This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) &USA (by eToro USA LLC) which is highly volatile, unregulated in most EU countries, no EU protections & not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal.

  • Home
  • >News
  • >Ask CryptoVantage: Can the FBI Repossess My Bitcoin?

Ask CryptoVantage: Can the FBI Repossess My Bitcoin?

Last month the US Department of Justice announced that the FBI was able to seize $2.3 million in bitcoin. The bitcoin was used to pay the ransomware attackers who shut down the Colonial Pipeline and caused supply chain issues on the United States east coast.

In this article we explain how, in some cases, it is possible for the FBI to repossess stolen bitcoin, and what you can do to protect your bitcoin from being seized by even the most powerful attackers.

Is it possible for the FBI to confiscate your crypto?

Ransomware Attacks

As the price of bitcoin continues to rise, more and more ransomware attackers are demanding to be paid in the digital currency. Many people believe that bitcoin is untraceable and un-seizable, which would make it an ideal form of money to receive ransom payments in. This is not the case, however. Because all bitcoin transactions are stored on a public ledger, known as the bitcoin blockchain, it is possible to link bitcoin transactions and addresses together.

The Department of Justice has not yet released details on how they managed to seize the bitcoin, but sources familiar with the case claim the FBI had access to the physical device that was storing the bitcoin private keys. The FBI traced the public transactions sent from the ransom bitcoin address and discovered where the funds were being stored. Supposedly, the FBI had already seized a device containing the bitcoin private keys required to spend the funds in an entirely separate case. This would have allowed the FBI to seize the funds since they were already in control of the attacker’s wallet.

What Can the FBI Do to Seize Bitcoin?

If you have your bitcoin stored on exchange accounts, the FBI can easily force the exchange operators to hand over your bitcoin. To read about this and other risks involved with using exchanges, see “What are the Risks Involved with Bitcoin Exchanges?”.

If your bitcoin private keys are stored on a computer or hardware wallet, then the FBI could seize those devices and take your bitcoin unless you have taken proper safety measures. Some people store their bitcoin in a “hot wallet”, meaning the funds are stored on a computer that is connected to the internet. In this case, the FBI would just need to infect your computer with malware to be able to repossess your bitcoin.

What Can’t the FBI Do?

The FBI cannot seize bitcoins if they are stored correctly. They cannot “break into” your bitcoin or “crack” your private keys. Instead, they must rely on the methods mentioned in the previous section, such as confiscating your computer or seizing bitcoin you have stored on an exchange.

Key Takeaways

  • Ransomware attacks demanding bitcoin are becoming more popular as the price of bitcoin increases.
  • The FBI has successfully seized bitcoin from ransomware attackers, including those responsible for the 2021 Colonial Pipeline hack.
  • The FBI is a very powerful organization capable of legally coercing bitcoin exchanges into giving up your bitcoin.
  • The FBI can legally confiscate your computer or hardware wallet, which might potentially let them repossess your bitcoin.
  • To protect your bitcoin from even the most powerful attackers, make sure you understand the best practices for storing large amounts of bitcoin.
Article Tags
CryptoVantage Author Billy Garrison

About the Author

Billy Garrison

Billy Garrison focuses his research and writing on Bitcoin and the Lightning Network. He is interested in the technical details that allow these technologies to survive and grow without the need for a central authority. Billy also loves helping people learn about Bitcoin which led him to start the Halifax Bitcoin Meetup.

Back To Top