US Bitcoin at Risk: Insider Theft Exposes Custody Vulnerabilities
The U.S. government's Bitcoin holdings are under scrutiny following a shocking revelation of insider theft. Allegations claim that a staggering $40 million in seized cryptocurrency was stolen through unauthorized access by an insider at a federal custody contractor.
Blockchain investigator ZachXBT exposed the breach, identifying a person named "Lick" (believed to be John Daghita) who gained access to government-controlled wallets. Daghita, the son of CMDSS President and CEO Dean Daghita, allegedly siphoned funds from wallets linked to the U.S. Marshals Service (USMS).
The incident revolves around Command Services & Support (CMDSS), a Virginia-based firm contracted by the USMS in October 2024 to manage seized digital assets, including those not supported by major exchanges and tied to high-profile criminal cases.
One concerning transaction trail reveals a government address receiving $24.9 million in Bitcoin linked to Bitfinex seizures. Further analysis indicates around $20 million was removed from USMS-linked wallets in October 2024, with most funds recovered within a day, except for $700,000 that passed through instant exchanges.
ZachXBT estimates potential thefts exceeding $90 million, with some funds still in compromised wallets, raising fears of further losses. Neither the USMS nor CMDSS has issued a public statement.
This incident sparks renewed criticism of the U.S. government's crypto management, especially its Bitcoin. David Bailey, CEO of Nakamoto, calls for immediate action, urging the Treasury to secure private keys from the Justice Department.
The U.S. government holds a massive Bitcoin reserve, estimated at 198,000 BTC or more, valued in the billions. The alleged theft highlights vulnerabilities in current custody practices, prompting questions about the security of the government's Bitcoin reserves.
Previous reports revealed the Marshals Service's reliance on manual tracking and challenges in providing precise estimates. CMDSS's contract award faced protests, raising concerns about potential conflicts of interest.
Adding to the controversy, journalist Frank Corva's investigation suggests prosecutors may have sold Bitcoin from the Samourai Wallet case, potentially violating President Trump's Executive Order 14233. U.S. officials denied the sale, but the incident underscores ongoing debates about the U.S. government's handling of seized Bitcoin.
The case highlights the need for robust security measures and transparency in managing the nation's Bitcoin reserves, leaving the public and experts alike demanding answers and reforms.
