Topic: Seizing Bitcoins Despite Having your Own Private Key. How this Work? (Read 335 times)

For every illegal transaction that occurs and it is worth millions of dollars, the government will mark and continue to monitor the movement of the wallet.
When a wallet has been marked he will not move freely. wherever the last stop of the Bitcoin asset will certainly be known.

But usually, they (the scammers) use Mixer services to censor the transactions they make, but the government certainly has strong authority to be able to find out who is behind the illegal transaction.

Many perpetrators have been arrested related to hacking Bitcoin on the Exchange or other places.
Blockchain provides all data and is transparent, all traces will be recorded, and there is no hiding place for criminal acts.

And no one will be able to seize your Bitcoin if you don't expose your Bitcoin ownership publicly.
It can still be anonymous but it won't fully work.

I think we have multiple levels/scenarios for censorship resistance.

In an extreme situation, yes, Bitcoin is 100% censorship resistant because if you refuse to hand your PKs to someone, even under a head pointed gun threat, you may die, but the agressor won't take your Bitcoins (not while you're alive, let alone if they kill you). I'm assuming you have your PKs in your head only. We are talking on the premesis of an extreme scenario. But as been said, you're "agreeing" with the consequences (the event of being killed).

However, if you have your PKs saved somewhere, or if your OpSec was not prepared to such scenarios, then, you may or may not say that Bitcoin is 100% censorship resistant and it may also depend on the acceptance of the consequences you are willing to take!

Then, there is another scenario and here, I also have my own questions. In previous situations where Bitcoins were used for illegal actions, it's said that those Bitcoines were marked and that if those Bitcoins are moved again, thhey can be traced back to whhoever is moving them. This usually happens in hacks from exchanges so that authorities can eventually come to the perpetrator! I have no idea how these Bitcoins "are marked" but it kinda contradicts the censorship resistance that is inherent to Bitcoin!

This is not the common use of the phrase.  You have a rather unique usage.

I understand "self-custody" as: "I am the only person who possesses the respective keys".

- If you debit yourself in some CEX, it's not self-custody.
- If a hacker compromises your device, and accesses your keys, then it's not self-custody.
- If you use a closed-source software to generate the keys, then it's not self-custody unless proven otherwise.

Correct.

Weird analogy, but yeah, I suppose. If we agree that you can't be a driver unless driving a vehicle at the moment.

Well, yeah, but the moment they find the keys, it stops being self-custody. As long as you're careful with the hiding spot your keys are located, nobody can take them away from you. Resilient to confiscation pretty much means that; inability to figure out where the property is.

That's an unusual use of the phrase self-custody.

Typically when people say "self-custody" they mean that you are NOT using a custodial service, but instead rather you are taking responsibility for attempting to secure your private keys on your own.

If you simply mean that you still have exclusive control over your bitcoins, then I suppose once you lose control you no longer have "self-custody"? (In the same way that you can be the "driver" of a vehicle moments prior to crashing into a tree, but you can not be the driver that "crashed" into the tree, because once the vehicle crashed into the tree, it was no longer being driven).

Awareness does not imply permission or consent.

Exactly my point.  They can seize your car (if they can find it) without your consent or permission, even though you were made aware that they were going to do so.  They can ALSO seize your Bitcoins (if they can find the private keys or seed phrase) without your consent or permission, even if you are made aware that they are going to do so.

Due to the fact that I'm being quoted, I want to clarify this part of mine that you must have probably skipped:

When someone has custody of your coins, it's not self-custody.

Also, It's pretty much obvious that someone can trick you into handing over your cash without knowing, or simply be careless with your keys, but for the sake of simplifying the context, "seizure" is supposed to happen with your awareness. Government for example will notify you for the consequences of not paying your car dues, before seizing your car. And it will, even if you don't give permission.

Well, several people argued in the context of government seizure of bitcoins (as per the OP's reference) that in general they wouldn't bother hacking the owner's device to seize the owner's bitcoins without permission, in fact they could coerce anyone with the authority to get the owner to give permission like or not. This is a more practical way than waiting for the owner to carelessly store the privatekeys in random places.

Correct.  However, several people in this discussion have tried to say that it can only be done with the permission or consent of the original owner, for example:








So my point is that your bitcoins CAN be taken, spent, or frozen WITHOUT your permission if you are careless with your private keys and/or seed phrases.

This is a direct consequence of the statement not your keys therefore not your bitcoins. In practice, who has the keys and will be the first to use the ability to send bitcoins from some address is the one owns the bitcoins at this address de facto. If you are too careless and allow the loss of absolutely complete control over the keys, then someone may seize the opportunity first. Aside from the moral aspect, it is always important to remember that any ownership of bitcoins is possible only with absolute possession of the keys to access it.


The government got the keys and became the de facto owner of bitcoins.

This is not entirely true. It is true that the person moving the bitcoins MUST have access to the private key. However, if the original owner of the bitcoins is careless with their storage of their private keys, then access to that private key may be gained without permission or consent. If the private key (or seed phrase) is written on a piece of paper, or if it is stored unencrypted on a piece of digital media, or if it is stored encrypted with a weak password on a piece of digital media, or if it is stored unencrypted or weakly encrypted "in the cloud", and the attacker gains access to that storage (without the permission or consent of the original owner), then the bitcoins can be moved without the owner's permission/consent.

However, if those funds ever move you are in a world of shit.
If you don't think those addresses and you are not going to be watched for a really long time then you are kidding yourself.

see here: https://www.justice.gov/opa/pr/man-sentenced-stealing-over-712-bitcoin-subject-forfeiture

Which is followed by: https://www.youtube.com/watch?v=Z2-1wcJYrWA&t=28s

Not related to BTC but there have been many people over the years who have thought that they are no longer being watched and tried to move money that they claimed they did not have access to who wound up getting caught. It's a public ledger, the minute those coins move, you are going to have a nice visit from team Fed.

-Dave

I get it now. I thought that an individual's bitcoin can be frozen or seized without their permission or by just having their bitcoin wallet address. Now I know that it is impossible as the owner must grant permission/ consent before that could happen. And the only exception where this can happen if is the person stores their bitcoin in a custodial wallet. Thanks all.

With Bitcoin, censorship only occurs when you broadcast your transaction which needs to be confirmed by miners. Some mining pools can try to do censorship, filter transactions and reject to confirm it for you.

Like Marathon miners.

If you store your bitcoin in your non custodial wallet, no one can freeze it from the Internet. If they want to seize it, they have to arrest you to get access to private key and that wallet.

By yourself, you can freeze some of your address to avoid dust attack, like this in Electrum wallet.
Dust Attack, what it is, why it is dangerous and how to prevent falling to it

They arrested those guys and gained access to keys, wallets and coins.

Can you give an example of such cases? What do you mean by external wallet? If it refers to a hot wallet that needs a login/password (and they can access your wallet without it) to access your money, then you should never use them in the first place. I don't think there is a case where somebody can access other wallets without knowing their seeds etc. If that is possible you'd see more complaints and that wallet will likely die soon.

I suppose one common reason is the possibility of mitigating the sentence or avoiding additional charges. By cooperating, individuals may hope to receive more favorable treatment from the court. Additionally, refusing to comply with such orders could result in being charged with contempt of court, which carries its own legal consequences.

Yes, it's true the only one who can move the coins out of the wallet is the one who has the private key but the good old ways of threatening people to give up their private key work for the authorities. The sheriff knows you, and your information eventually they can conspire with your banks or your city officials and deny services to you. Or what about authorities conspiring with your hardware wallet? 

With the adoption, this could be very common one day and its crime org will be doing this to any holder on social media.

Without stating the specific scenarios, it is impossible to explain how they are possible. In general, bitcoins at an address cannot be moved without the private key, so it is more likely that your information is incomplete and there is no contradiction.

You can't seize coins without the owner's permission. Simple as that. Even in $5 wrench attacks permission must be granted by the owner. Given that you do self-custody obviously.

How does this work? Like, what if I pretend I've forgotten my passphrase? I was reading about some wallet whose owner was refusing to give permission to the feds, and they simply couldn't get the money.

The government / courts can 'force' you to provide passwords / unlock devices / and so on.
No real $5 wrench attack needed. If it's a legal court order and you don't obey it, it's a crime.

So even if you are not guilty, and what they want to to unlock would prove you are not guilty, if you don't do it, you are now guilty of disobeying a legal order of the court.

Obviously, this is all dependent on where you are in the world and your local laws. But it seems almost everywhere, the courts (judges) really don't like people not listening to them.

-Dave

yes, rat03gopoh is right. Having control of your private keys generally provides you with more autonomy and censorship resistance, but it doesn't mean that you are immune from legal actions or consequences. Law enforcement agencies can trace crypto transactions on the blockchain and figure out who's involved. If they find evidence that those funds were used for illegal stuff, they can take legal action to seize and confiscate them. They might go after centralized exchanges or other custodians holding the assets and get a court order to freeze or take control of the funds. In some cases, when law enforcement agencies conduct investigations, they may seize physical devices and media records, both offline and online, that could potentially contain wallets and preivate keys. One example is the ChipMixer case, where the police confiscated bitcoins because the private keys were likely stored on servers in an unencrypted form.

When you're ordered under duress (any threat) to reveal your private key or to force-send your bitcoins, you have only 2 choices: you do it and you're (likely) free from threats, or let it remain secret but you accept the consequences (the threat will be realized) .

You misunderstood the meaning of "free from censorship", that means when you make an onchain transaction, nothing will prevent or block the transfer of bitcoins, it will still arrive at the destination address.

It has already been established that only people who are in control of their own private keys have control of their bitcoin and that the individual may be free from censorship. However, I am learning that it may not be totally true as it is still possible to freeze bitcoins that are held in an external wallet. Certainly I have read stories of the US Governments seizing bitcoins suspected to have been used for criminal activities. I would be happy if someone explains how this actually works since it is contradicts my first statement of an individual being free from censorship when they have control of their private keys.