U.S. Marshals Service moves ahead with plan to hire a contractor to custody, sell seized crypto

The U.S. Marshals Service (USMS) is seeking a contractor to help it retain and sell the cryptocurrencies it seizes.

Part of the mission of the USMS, a law enforcement agency, is to manage assets seized from criminals. The agency periodically lands on the radar of bitcoiners thanks to its public auctions, the most recent of which saw it sell more than 4,000 bitcoins in February.

Perhaps its most attention-grabbing auction was that of 30,000 BTC, all of which were snapped up by Silicon Valley venture capitalist Tim Draper in 2014.

Last spring, the USMS made crypto headlines when it put out a request for information regarding a possible contract focused on the custody and disposal of cryptocurrencies. At the time, the agency said it wanted more information on the topic, but indicated that its information request would lead to an eventual request for such services.

Now public records show that in late April it finally put out that request, publishing a detailed set of documents outlining its desire for "the full range of virtual currency management and disposal services." The U.S. government's SAM database indicates that it had an original offer deadline of May 21, with an updated offer deadline of June 10, or two days from now.

As for the services in question, the solicitation page notes:

"This includes but is not limited to such activities as accounting, customer management, audit compliance, managing blockchain forks, wallet creation and management, private encryption key generation and safekeeping, backup and recovery of private encryption key material, airdrops, etc., as well as future actions associated with the virtual currency forfeiture process."

The above text indicates that the USMS isn't merely looking for someone to hold onto some bitcoins. It accounts for possible network forks, token airdrops and other specific events that may crop up during its period of custody.

An Evaluation Factors for Award (EFA) document hones in on three areas for the determination of a contractor: technical capability, past performance and price. It outlines how the USMS is seeking highly specific information on how a prospective contractor would take possession of cryptocurrencies from the government, how it would protect those holdings and how it would dispose of them in a compliant fashion.

The below list of questions, drawn from the EFA, illustrates the degree of specificity the USMS is seeking:

"D. STORAGE i. Provide a detailed explanation of how virtual currency will be stored, controlled, and documented. ii. Provide a detailed explanation of how the contractor would manage and support hard forks and airdrops. iii. Describe in detail the criteria and standards that the contractor would require to handle a new type of seized virtual currency. iv. Describe how the contractor would control access to the data by users, systems, and services. v. Describe how the contractor would log and control access to the virtual currency and case file system by the contracted and subcontracted support. vi. Describe the methodology to protect data and/or PII. vii. Explain how the data will be tracked, exported and managed individually and in bulk to meet record management requirements; detail any limitations that would prevent full compliance."

The EFA notably calls for information about the proposed contractor's insurance support, stating: "The contractor shall provide proof of insurance commensurate with 50% of the approximate value of the inventory quarterly." Elsewhere, a pricing schedule indicates that a hired contractor would be paid in two ways: through monthly management fees as well as commissions for cryptocurrency sales. 

A question-and-answer document further illustrates the USMS's thinking behind the request. For example, one question addressed whether the agency might use futures or options to protect the value of the assets it has seized. In response, the USMS said it wants liquidations to occur "as forfeiture orders come in."

The USMS "may request to view offline storage locations." The document also indicates that a prospective contractor can leverage services that already exist rather than building wholly new ones.

To date, the USMS has conducted nine different bitcoin auctions. As outlined below, the bulk of sales activity took place in 2014-2015.