US Government’s $28 Billion Bitcoin Reserve Faces Credibility Test After Alleged $40 Million Theft
For nearly a year, the U.S. government has been trying to engineer a historic turnaround with its Bitcoin holdings, moving from a chaotic, case-by-case inventory of confiscated cryptocurrencies to a strategic national reserve. The ambition, often referred to as a “digital Fort Knox,” is now facing a credibility test following allegations that around $40 million in cryptocurrencies were siphoned from government-linked confiscation wallets.
While the reported loss is small compared to the roughly $28 billion in Bitcoin the U.S. is believed to control, the episode touches on the core premise of the new stance. It raises doubts about whether Washington can manage a government-sized Bitcoin balance sheet with reserve-level security and verifiable controls.
The Alleged Insider Breach
Over the weekend, blockchain investigator ZachXBT claimed that more than $40 million worth of cryptocurrencies were seized from confiscated wallets linked to the US government. ZachXBT linked the alleged theft to John Daghita, popularly known as Licks, who he said has family ties to the leadership of Command Services & Support (CMDSS), a private company contracted to support crypto seizure operations of the US Marshals Service (USMS).
Company records show Dean Daghita serves as president of CMDSS. The company is based in Haymarket, Virginia and is contracted by the USMS to manage and dispose of certain categories of confiscated cryptocurrencies. ZachXBT said he was able to link John Daghita to the alleged theft after engaging in a “tape-by-tape” dispute on Telegram in which two people attempted to prove their wealth by comparing wallet balances.
Fragmentation Creates Risks
In the popular imagination, the U.S. government’s roughly $28 billion in Bitcoin holdings sounds like a single stash lying behind a single set of controls. However, the operational reality of these assets is far more fragmented. The custody arrangements for seized cryptocurrencies are a patchwork of authorities, legal status and storage solutions. Funds can be at different points in the expiration pipeline, and “US holdings” are not a single ledger entry but a complex operating system.
This deviation is important because security in an interagency network depends on process discipline, consistent standards, and the rapid migration of funds from temporary confiscation folders to long-term cold storage. This is because a single custodian can be defended with fortress-like protocols. However, a system with multiple providers and handoffs behaves differently. It relies on the consistency of controls across every node in the network, including the people and contractors who touch the process.
The Contractor’s Hard-Tail Vulnerability
Contractors like CMDSS are central to understanding this risk profile because they are located where the government’s custody system becomes most complex. A March 2025 Government Accountability Office (GAO) decision confirmed that the USMS awarded CMDSS a contract to manage “Class 2-4 cryptocurrencies.” The GAO document distinguishes between asset classes, which explains why contractors are important.
Class 1 assets are generally liquid and can be easily supported by standard cold storage. In contrast, Class 2-4 assets are described as “less popular” and require specialized handling, often involving bespoke software or hardware wallets. This is the hard tail of crypto custody, the long list of assets that are not just Bitcoin and a handful of other liquid tokens, but the messy holdings that accrue through seizures.
Is the US Ready to Bow?
The risk of these operational gaps has increased as U.S. policy changes. The White House has decided to create a strategic Bitcoin reserve and a separate stockpile of digital assets, with instructions to the Treasury Department to manage custodial accounts in which Bitcoin “may not be sold.” This policy change shifts the government’s role from a temporary custodian, historically associated with auctions and evidence disposal, to a long-term holder.
For years, crypto markets viewed U.S. government stockpiles as a potential supply surplus, a source of latent selling pressure if confiscated coins were liquidated. However, the strategic reserve framework shifts the perspective as the central issue becomes the credibility of custody. If Bitcoin is to be treated as a reserve asset analogous to gold, standard investors will implicitly demand vault-level security, clear custody, consistent controls and auditable procedures.
Crypto analyst Murtuza Merchant said: “If criminals believe that seized funds can be withdrawn from government funds, they may view the loss as a temporary inconvenience rather than an end point, especially when money laundering routes exist through exchanges and cross-chain hops.” For more information, visit https://cryptoslate.com/is-the-us-government-28-billion-bitcoin-reserve-safe/
