Wave Digital Assets has formally requested a comprehensive investigation by the Department of Justice Office of the Inspector General into the U.S. Marshals Service’s (USMS) management of seized cryptocurrency. This action stems from persistent concerns regarding procurement failures, unresolved audit findings by the OIG, and a general lack of transparency surrounding the handling of digital assets.
The complaint highlights credible allegations that over $40 million in seized U.S. government cryptocurrency has been unlawfully transferred from government-controlled wallets. These claims point to significant and unaddressed failures in the USMS’s processes for procurement, contractor selection, and oversight of cryptocurrency custody. Wave argues these deficiencies not only allowed for the alleged loss but also continue to expose government-held digital assets to foreseeable risks.
“Since its inception, Wave Digital has adhered to established regulatory guidelines and processes. In the context of financial instruments, these frameworks exist to protect consumers and secure assets. It became evident that the USMS gave insufficient consideration to the fundamental laws governing the proper handling of these assets,” stated Les Borsai, co-founder of Wave Digital Assets. “The rationale for its position is documented in the denial of our agency protest and reinforced by the clarity of the GAO’s decision. We will continue to pursue reform of this process, not for self-interest, but for the long-term integrity of digital assets.”
Wave was involved in the USMS’s procurement process, which began in 2023 after two previous attempts since 2019 failed to yield a stable solution. Previous contract awards to BitGo and Anchorage were rescinded, signaling ongoing challenges within the program. Wave asserts it achieved the highest evaluation scores in the most recent procurement, offering superior technical capabilities, a lower cost, and a structure built on licensed, regulated fiduciaries and auditable internal controls, aligning with federal expectations for safeguarding high-risk assets.
Wave Digital Assets operates as an SEC-registered investment adviser. Its proposed custody solution involved BitGo Bank & Trust, a federally chartered digital asset bank regulated by the Office of the Comptroller of the Currency and subject to SEC oversight. This arrangement, Wave contends, would have provided clear accountability, segregation of duties, personnel vetting, and enforceable compliance obligations.
“At its core, the Investment Advisers Act of 1940 is an anti-fraud statute,” commented Nicole Trudeau, General Counsel of Wave. “It was enacted to prevent insider abuse and the misuse of entrusted assets—precisely the conduct now alleged. The facts emerging here read like a textbook illustration of why Congress put those safeguards in place. When fiduciary controls are disregarded, fraud risk is not theoretical—it is predictable and preventable. The serious question here is why the government declined to apply the very protections it mandates for the public when it assumed responsibility for safeguarding these assets on behalf of its own citizens.”
In contrast, Wave notes that Command Services & Support (CMDSS) and its proposed subcontractors lacked comparable regulatory licenses, fiduciary duties, and supervisory regimes, yet were ultimately awarded the contract. Wave’s subsequent protests at the agency level and with the Government Accountability Office (GAO), along with ongoing litigation at the U.S. Court of Federal Claims, aim to address these concerns.
Wave’s protest filings raise several critical questions:
* Whether the awardee possesses the necessary regulatory licenses and registrations for managing, custody, and disposing of cryptocurrency assets.
* Whether the USMS improperly awarded the contract to an unregulated and unqualified entity.
* Whether the USMS failed to properly evaluate Wave’s proposed structure, where Wave would act as the Registered Investment Adviser.
* Whether the USMS improperly disregarded the use of a qualified custodian and institutional-grade software and data providers as a system of checks and balances.
* Whether the evaluation process exhibited material inconsistencies, including unexplained changes in Wave’s scoring.
* Whether organizational conflicts of interest were adequately disclosed, reviewed, and mitigated.
Wave had emphasized the importance of checks and balances in managing seized digital assets, proposing a structure where it would serve as the Registered Investment Adviser, supported by BitGo as a qualified custodian and an independent software and data provider. This provider would have offered continuous, independent monitoring of asset inventories, wallet locations, and transaction activity, adding a crucial layer of security. The USMS, however, rejected this approach, reportedly viewing the mandate primarily as a technology function and awarding the contract to a vendor with an existing relationship, a strategy echoing the structural weaknesses identified in the 2022 OIG audit.
**FOIA Transparency Concerns**
Concerns regarding transparency and public accountability have also been amplified by Wave and cryptocurrency consulting firm ECC Solutions through Freedom of Information Act (FOIA) requests. On January 27, 2026, ECC Solutions filed a FOIA appeal with the USMS, seeking transaction-level records of cryptocurrency dispositions since November 5, 2024. The USMS reportedly referred the request to another DOJ component, which indicated it would only process records originating from that component.
The FOIA appeal argues this referral is procedurally improper and could obstruct the disclosure of essential transparency records. It highlights long-standing operational deficiencies within the USMS Complex Assets Unit, many of which remain unaddressed since the 2022 OIG audit. The appeal has been submitted to the Office of Information Policy and the USMS Director.
During its legal proceedings, Wave obtained a stay on asset liquidations, consistent with a Presidential Executive Order. Wave was subsequently informed of potential fines of approximately $1 million per month for obstructing the awardee’s progress, with liability for frozen liquidations only to be lifted if liquidations resumed.
Wave has submitted a detailed letter outlining these concerns to the Department of Justice Office of the Inspector General and is filing this letter with the U.S. Court of Federal Claims.
**About Wave Digital Assets**
Wave Digital Assets LLC is a Los Angeles-based, SEC-registered investment advisory firm providing institutional and private wealth digital asset management solutions. The firm specializes in yield generation through private funds, customized managed accounts, and treasury management services for the digital asset ecosystem. Wave bridges traditional finance with digital assets, offering services such as the creation of the world’s first bitcoin-backed bond, alongside digital asset training and software solutions for government agencies. SEC registration does not imply endorsement or recommendation of the firm’s activities.
**About BitGo**
BitGo is a digital asset infrastructure company offering a suite of services including custody, wallets, staking, trading, financing, stablecoins, and settlement through regulated cold storage. Since 2013, BitGo has been dedicated to facilitating the financial system’s transition to a digital asset economy. The company operates globally with multiple regulated entities, including BitGo Bank & Trust, National Association, a federally chartered digital asset bank. BitGo serves thousands of institutions, including prominent financial institutions, exchanges, platforms, and millions of investors worldwide.
Original article, Author: Jam. If you wish to reprint this article, please indicate the source:https://aicnbc.com/16660.html
